A journalist asked me if i could respond to this speech from PM Dr M. He asked 'Is the PM's target realistic and is the national debt really that big of a problem?'
I am always serious to journalist's question put forward to me. Here is my reply:
First, the public has to understand the nature of so-called national debt. According to the Economic Outlook published by MOF, the Federal government debt is estimated to reach RM725.2 billion or 50.7% GDP, where 97% are domestic debt. What are the components? Treasury bills, Malaysian Government Investment Issues (MGII), Malaysian Government Securities (MGS) and Government Housing Sukuk. MGII and MGS are the two most prominent sources, took 95% of all domestic debts. These are the capitals that the government raised for public spending and infrastructure development, and the investors are for the returns. As long as the government understands that they have a duty to repay on time the interest accrued due to these capital investment, and make sure their fiscal policy is sound and prudent, do not continue raising capitals unsustainably and go waste or splurge, then the fiscal position is under control. No one is asking the government to immediately repay the whole debt, instead we should ask the Prime Minister Dr Mahathir what does he actually mean by 'recover from past administrative, financial problems in three years' and 'we will be able to settle out debts'? To what extend? What is the target or measurement yardstick? The debt sum that he quoted 'RM 1 trillion', I presume that he has actually included the contingent liabilities especially the loan guarantees to GLCs and Statutory Bodies (RM179 bil and RM60 bil, respectively in 2017).
Second, many countries (including advanced economies) do have a norm to have consistent budget deficit and reasonable high debt. For example Singapore has 112.2% government debt to GDP ratio, it is not the measure or reflection of fiscal health. The PH government's priority should be ensuring the public spending and investment are adequate to address the current needs of people, and future.
Third, cutting down the expenditure, especially the mega projects, is the obvious way to go, but the government has to consider the options carefully. Most mega projects are infrastructure development projects, they are normally borne by GLCs. For example, the MRT projects are developed by MRT corp; LRT projects are by Prasarana , both are GLCs under MOF. Cutting cost, if it is by cutting corner (ie. compromising the quality of delivery and user friendliness), this will not bring returns to the companies. One should not think negatively about the capital raised (ie. debt) to fund these public infrastructure projects, because when they are done properly, they will be 'assets' in the company books, many are often conveniently overlooking this fact. Even in the context of cost-cutting, the government has to make sure by the time when the projects are completed, this brings maximum values to the public. If the public and communities are not utilising the infrastructure, it will be even bigger losses suffered by the GLCs (and the government) when operating and maintaining the assets and services. A cantonese idiom often reminds us not to, 'just because you wanna gain a candy, you burn down the whole factory' (“给你一粒糖，烧掉整间厂”)
