Thank you Tan Sri Speaker

Frankly, I am disappointed with the Budget tabled by the Prime Minister on Friday 23rd October 2009. Although the Prime Minister declares that he cares for rakyat and the slogan “People first” is repeated several times in his presentation, the budget that he has tabled is suffused with many macro-economic policies that are going to cause problems to our people.

Attracting FDI or Direct Foreign Investment to Malaysia has been put forward by the Prime Minister as one of the main drivers of the Malaysian economy. Lets take a closer look at this policy.

How are we to attract FDI to Malaysia given the intense competition among other countries in the region for FDI? Our government appears to have adopted the following several approaches to ensure then profitability of investments made by the foreign investor including the following three

One – a low basic wage
Two – measures to weaken unions
Three – steps to water down the existing legal safeguards for workers.

The government has allowed the importation of approximately 3 million migrant workers. They have flooded the labour market, and are a major factor depressing workers’ wages in Malaysia. At present Tan Sri Speaker, the wage for an ordinary factory worker in Sg Siput is about RM 450 per month unless the worker puts in overtime.

RM 450 a month is not a living wage that can sustain the expenses of a family. It is just pocket money! But this is the wage regime that our government maintains in line with its “business-friendly” stance.

As I mentioned earlier, our government has been dismantling some of the protection that workers in this country used to enjoy. Let me give an example, Mr Speaker. Section 30 of the Industrial Relation Act allowed a worker who could prove to the Industrial Court that he had been unfairly dismissed to claim compensation for the entire period it took to settle his case. In some cases this has taken 6 years, and workers have been able to claim compensation for the entire period.

However two years ago, the government amended this section to limit the amount of compensation that can be claimed to only 24 months no matter how long the case takes to be settled. This has reduced the costs for a company that wishes to expunge active union leaders from their work-force, and thus has weakened the union movement.

The reluctance of the Minister of Human Resources to refer cases to the Industrial Court is another factor that has weakened the labour movement. In Malaysia, Workers have to get the permission of the Minister to file their case in the industrial Court. Over the past 1 year, the Minister of Human Resources has turned down 75% of the applications to file in the Industrial Court.

These are just some of the steps taken by our government to make Malaysia the preferred destination for FDI. But in doing so the government is mortgaging the rights of workers to appease and attract foreign investors.

This is why I am disappointed with the 2010 Budget. The slogan is nice to hear. “People First”! As a socialist I like the slogan. But the walk does not reflect the talk. The walk proposed in the 2010 Budget is going to disadvantage the ordinary people of Malaysia.

The other major strategy in the government’s drive to get foreign capital to invest in and stimulate the Malaysian economy, is to liberalise the economy.

Tuan Speaker, I agree that liberalization might grow the Malaysian economy in the short term. But the benefits of this growth will not accrue evenly to all layers of society. The richer groups will tend to benefit while the middle income and the poor families will find their situation even worse because of this liberalization.

Allow me to take up some specific proposals in the Budget tabled on 23rd October to show why I am saying liberalization will affect the poorer 60% of the Malaysian population adversely.

Lets take the issue of Health Tourism. It is public knowledge that the quality of care in the government hospitals is deteriorating and that the main cause of this is the relative lack od experienced doctors in government service. Despite the fact that about 70% of admissions are to government hospitals, only 30% of all the specialists in Malaysia are in the government sector. This is the main cause of the dropping level of health care.

Health tourism will expand the business of the private hospitals, and this will definitely accelerate the brain drain, and exacerbate the shortage of doctors problem in the government hospitals. So, whose interest is served by this policy of promoting Health Tourism Tuan Speaker – the peoples’ or the interest of the GLCs now owning the private hospitals?

In his budget speech, the Prime Minister said that the government will reduce in stages its involvement in the economy especially in sectors where it is now competing with the private sector. He added that the Government will begin by privatizing profitable entities owned by the Ministry of Finance.

I wish to draw the attention of the House that the Institut Jantung Negara (IJN) is also a company owned by the Ministry of Finance, and it is running well. Although the PM did not specify which entities are on the list for privatization, we must not remember that the IJN was almost privatized to Sime Darby last year – and that too very hurriedly!

Sime Darby owns the most developed Cardiology unit in the private sector. If it is able to acquire the by far best cardiology unit in the government sector as well, it would have a virtual monopoly of cardiology services. If this were to happen, whose interests are being served? The peoples? Or those of Sime Darby?

The third point that I would like to touch on is changes to the tax regime. In the 2010 Budget Proposal tabled by the PM, the uppermost tax bracket for personal income tax is reduced 1% to 26%. This may not seem like much, until you take into cognizance the fact that the personal and company taxes have been reduced progressively over the past 20 years. In 1988 company tax was 40% of profits. It now stands at 26%.

Tuan Speaker, a government must have its revenue to administer the country and provide services to the public. The issue here is the source of this revenue. Is it coming mainly from the richer individuals and the corporations, or is it going to be squeezed out of ordinary folks?

The “business friendly” approach that our government has adopted has led to the shifting of the tax burden to the poorer 60% of the population.

In the 2010 Budget Proposal, the PM says that the government is in the final stages of fine-tuning the Goods and Services Tax (GST) prior to its implementation.
Please allow me to read an extract from page 9 of the STAR Biznews dated 29/10/09 which reveals how the corporate sector views this initiative

“The Goods and Services Tax will stabilize the government’s finances in the long run says Ernest & Young. XX, one of it’s partners suggested that the strategy would be to start low and pull up the rate every few years. As in most countries with the GST in place, a reduction in corporate and personal tax will follow suit he said.”

Whose interests are being advanced Tuan Speaker? The ordinary rakyat or that of the rich and corporate sector. But the PM’s slogan was catchy wasn’t it? “People First”

Tuan Speaker, the experience of other developing countries is that liberalization of the economy leads to
- Deterioration of the income and quality of life for the bottom 60% of the population.
- A deterioration of the Gini Coeffecient.
- Rising costs and shortages in the essential items including food.

And in all of this the poorest 20 % suffer the worst deterioration in living standards.

Tuan Speaker I now wish to refer to the recent experience of India. Please permit me to read a few extracts from an article that was carried in the New Straits Times on 19/10/09 titled “India Story is back as foreign money pours in” .

“Foreign investors have been racing to put their money in Asia’s third-largest economy drawn by a slew of upbeat economic indicators.

The benchmark Sensex index is already up nearly 80% so far this year – ranking it among the top 10 performers globally – as foreign investors have pumped in US $ 13.6 billion into stocks.

Corporate profits are expected to log an average 23% growth this fiscal year.”

In page 17 of the same paper, and on the same day there is another article on India titled “It’s the stick for India as it gets tough on Naxals” which says –

“A fierce battle is raging between the Manmohan Singh government and the votaries of Mao Zedong.

The Naxals’ rise has been phenomenal in the last 5 years. Attempts to build roads and set up industries have fuelled resistance. Poor handling has stirred conflicts.

One government estimate suggests the extremists have pockets of influence in 20 states. Extremist violence affects 223 of India’s 625 districts.”

Are these two trends completely unrelated you think? On one side we see corporate profits soaring and FDI funds flooding in, while on the other we witness the armed rebellion of poor farmers and the tribal people under the tutelage of the Naxalites.

I believe that these two trends are causally connected. The marginalisation of poorer sectors by the neoliberal trajectory of growth is, to me, the main cause why the Naxalites have been able to rally so many of India’s poor into an armed insurrection against the State.

We do not have an armed insurrection in Malaysia. But we can already see the symptoms of marginalization and social exclusion in our society – the Mat Rempit phenomenon as well as the emergence of Indian youth gangs. Our streets are no longer safe, and violent crime rates are soaring!

The 2010 budget calls for more police personnel and better enforcement. But the truth of the matter is that social justice is the best guarantor of our safety from violence in the streets. If the form of development continues to exclude and marginalize a significant proportion of the poor among us, then the anger will spill out in the streets, and no amount of sloganeering like “People First” will be able to stem that anger.

Having more police to catch the youth and building more jails to hold them is not the way to solve the problem of the rising crime rate. WE need to implement a more balanced economic policy – one in which ordinary workers get a decent wage which enables them to obtain all the basic necessities and services that they and their families need. A just development will build social solidarity which is a much better preventor of street crime then well-armed policemen!

We have many well read and intelligent economists working in the EPU and the Ministry of finance. I really can’t understand how these intelligent economists can help craft a strategy that will disadvantage a large sector of our population.

To these economists in the EPU and Ministry of Finance, may I suggest that you do some research on the effect of liberalization on the Gini Coeff of countries in Africa and South America. Look also into the impact of liberalization on food security in Haiti, Colombia, Egypt and other countries.

I would also strongly recommend an article by Prof Martin Hart-Landsberg in the September 2009 issue of Monthly Review which addresses some of the above issue at greater depth. A copy of this magazine can be found in the Parliament Library. Do take a little time to read and digest the analysis.

Tuan Speaker, I agree 100% with the PM’s slogan that the People should come First. But this is not going to happen in an economic strategy that puts the interest of corporations in the forefront.

This is why I am disappointed – only the slogan is acceptable. The policies and approaches contained in the 2010 Budget are going to worsen the economic hardships that the poorer 60% of our population are already facing.

I am sorry, but I cannot support a budget such as this.

Thank you.