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THINGS THAT YOU SHOULD KNOW ABOUT PR BUDGET
(1). The alternative budget by the Pakatan Rakyat which they claimed to illustrate its economic policies, advocates dismantling of monopolies and tougher anti-trust laws -- but still -- be a deficit budget.
In terms of numbers, the 2013 alternative budget projects a deficit of 3.5 per cent against the 4.3 per cent, with expenses of RM234 billion exceeding revenue of RM197 billion.
However, BN already come up with plan to reduce the deficit over the period of five years with the target of 3.5 per cent by 2015. Their target for 2013 is 4 per cent.
You just can't have such drastic cut down or extreme austerity budget to cut the deficit to 3.5 per cent next year when the global economy is facing slowdown. Instead you need to spend on certain areas to stimulate the domestic economy in order to cushion off the global impact.
In fact, Malaysia is among the several countries that were recently being praised by international financial community for two prone strategies to stimulate its economy and maintain growth up to 5 per cent.
Even PR admitted in their alternative budget that they just can't have surplus budget next year despite condemning the current debt level.
(2). Pakatan Rakyat (PR) also said that it will tackle the issue of affordable housing by establishing a National Housing Board to undertake “massive” affordable housing projects around the country.
Not only that, PR said it would shut down several key projects and agencies initiated by the Najib administration such as the development of the Rubber Research Institute land in Sungai Buloh and strategic development agency 1MDB.
PR proposed to merge 1MDB with Khazanah, saying that it was “wasteful” to have two agencies with the same objective apart from imposing a RM2billion minimum dividend policies on Khazanah.
However, if you study carefully, PR’s effort to have NHB is actually done by the current government through 1PRIMA which is part of the initiative to provide better and more affordable housing to lower income group.
PR budget seem to be not realistic when they want to shut down the development RRI land in Sungai Buloh and 1MDB.
In Klang Valley, where the land is scarce, one of the way out for government to provide affordable housing by releasing more government land to build houses. There is no more government land left in Klang Valley except RRI.
Should such development being shut down, how would thousands of new houses, I mean those under the bracket of RM500, 000 can be built?
Another flaw is how you want to encourage the competition should 1MDB and Khazanah being merged?
The very reason for the 1MDB being set up is to encourage competition between Khazanah and 1MDB as the competition can stimulate the efficiency and performance to bring better return to the government.
(3). PR also stated that it would increase oil royalty to 20 per cent to Oil-producing states.
On paper, it is easy to be said than done. Not many people realised, in any business dealing, once the contract is being signed – it is binding regardless of the outcome. Unless both side agreed for such agreement being terminated which is based on mutual understanding.
State governments currently get 5% from oil royalties, a result of an agreement made over 40 years ago.
The allocations through the payment of petroleum products to the federal and state governments were set according to a Production Sharing Contract (PSC).
This contract was signed between PETRONAS and its (foreign) PSC partners such as Shell, ExxonMobil and so forth.
Amending the product rate, it would mean that there would have to be a re-negotiation between PETRONAS and its PSC partners. Moreover, the contract was enforced for a certain time period and any attempt to amend its criteria would destroy the interests and confidence of these foreign oil companies.
Not only that, many didn't realise that Malaysia, through its national oil company PETRONAS has one of the most fair and efficient oil production sharing contract.
PETRONAS PSC is the best with its progressive volume-based (PVB) fiscal terms. This allows PSC contractors to aggressively enhance their efforts and commitments in revitalising and maximising potential from the oilfields.
Over the years, PETRONAS has improved its agreements by the risk sharing contracts (RSC), departs from the production-sharing contract (PSC) first introduced in 1976.
Starting last year, PETRONAS revised the agreement as the enhanced oil recovery (EOR) PSC which ramps up recovery rate from 26% to 40%.
As a performance-based agreement, it is developed in Malaysia for the Malaysian people and private partners to both benefit from successfully and viably monetizing these marginal fields.
Should you want to increase the royalty that would mean you need to go back to relook at all the existing agreement which already work in best of our benefits.
(4). Pakatan wants to lower the auto duties be lowered by 20 per cent next year from the current levels of between 65 and 105 per cent.
We need to understand the background to our national car policy. This is because of the huge amount of taxes on cars; it will be foolhardy, dangerous and highly disruptive to remove all of this in one go.
It has to be done gradually -- either done under a set schedule or as and when the Government decides.
Any immediate adjustment to a zero tax regime would cause utter disruption to the market place with car prices in some cases plummeting to less than half of their current values.
It would be more reasonable -- is to bring down the tax rate gradually over a period of time. No doubt it is going to be painful but sometimes there is simply no gain without pain.
Let said, over period of 10 years with aims to reduce all duties from cars over that period to 10% from current 85% (for national cars) with average 7.5 percentage points a year.
A national car costing RM50, 000 now will therefore in a year cost about RM2, 000 less. That would cause minimal disruption to both new and second hand car markets and the fall in the value of cars would be easier to take for car owners.
Not 20% immediate cut as suggested by PR. If 20% immediate cut, can you imagine how much disruption to both new and second hand car markets? Your car value will just drop by 20% overnight.
(5). PR also proposed to review on all MRT-related contracts with the intention of reallocating expenditure to expand the bus network to complement the existing LRT and future MRT lines.
It said it would emphasise the Bus Rapid Transit (BRT) as it is “a more financially efficient alternative public transport solution”, noting that it had been implemented in Bogota, Columbia and Johannesburg, South Africa.
However, what PR did not realised is that in these cities, they have combination of bus and rail system. Even in the other model cities for public transport such as Tokyo and Zurich, they have placed rail as the main feature of their public transport systems.
The implementation of BRT -- has actually already started since 2009 under the GTP for public transport. BRT lane has been created from several Satellite towns toward KL using the dedicated bus lane either in highland or existing road.
The latest BRT initiative is the KL ECO bus system serving two routes in the KL city centre.
( source : kanzheli.wordpress.com )