Populism at all cost

UMNO oh UMNO when can you wake up?

NOV 26 - Normally, when in a hole you stop digging. But not in Malaysia.

The Umno-led Barisan Nasional (BN) coalition government continues to ignore economic and political reality despite its recent worst-ever electoral defeat.

Its present state of affairs is due to keen campaigning in factionalised party elections scheduled for March 2009.

And since the electoral popularity of Umno is at a historical nadir, party politicians are using the levers of government in a grubby populist grab for votes.

Not only does this populism show up Umno as a party in decline, it also carries long-term negative repercussions for the whole economy.

Umno remains unsettled despite Prime Minister Datuk Seri Abdullah Ahmad Badawi's agreement to relinquish top party and government posts to his deputy, Finance Minister Datuk Seri Najib Razak in March 2009.

Except Najib, all other party warlords face long, drawn-out contests for Supreme Council positions. The campaign has already turned into a vicious little war that takes no prisoners.

Unlike before, Umno today has no culture of democratic contests premised on rational socio-economic and other policy arguments.

This culture was destroyed by former PM Tun Dr. Mahathir Mohamad during his 22-year presidency. Thus, Umno currently is a self-serving vehicle of grubby feudal-minded politicians persuaded largely by 'money politics'.

The on-going election campaign has already seen numerous allegations of vote-buying being aired in the press.

Dr. Mahathir recently lamented in his blog that if Umno is unable to eradicate 'money politics', it risks losing the next general election.

However, Dr. Mahathir is not a mere partisan observer. He too is campaigning for his own factional loyalists who are pitted against those aligned to outgoing PM Abdullah Badawi.

Consequently, both sides are now resorting to populist measures via the levers of government power to pump-prime their electoral chances, albeit in the name of pump-priming the economy in 2009 to offset the global downturn.

Except that, with the 2009 budget, Malaysia will see its 12th year of continuous budget deficits. And despite previous promises about balancing the budget, things somehow seem to have gotten out of control with total government debt rising inexorably.

What is disturbing is the insufficient information about how this Umno-led government is going to spend the 2009 budget. Foreign Minister Najib did not disclose much when he wound-up the parliamentary budget debate earlier this month.

Indeed, too many unknowns exist since the original budget figures assumed high global commodity prices (including petroleum exports) on the basis of a strong ringgit.

Since then, commodity prices have crashed, the ringgit has slumped against the dollar and FDI outflows have increased. This has up-ended the original budget estimates.

But the budget has not been revised. Instead, Mr. Najib added a further RM7 billion economic stimulus package to the already huge budget.

The 2009 deficit like in 2008 thus remains stuck at a jittery 4.8 percent of GDP.

But is this overall deficit figure even credible when the government won't come clean with realistic budget figures to parliament?

There seems to be a lot of fudging going on with the government preferring to remain obscure over financial and economic figures for reasons best known only to them.

Yet, despite being vague, Najib promised to disburse the entire 2009 economic stimulus package by March.

Does this not ring a loud bell in the light of all the vicious factional campaigning in Umno?

As well, domestic prices of petrol and diesel have come down significantly since two months ago. The government promptly announced - to everyone's surprise - that at current prices, the government is not subsidising fuel costs anymore.

Also announced was the adoption of a 'managed floating mechanism to fix petrol and diesel prices'.

This gives the impression that the government is financially prudent.

Unfortunately, no other details were divulged leaving all in the dark about what really is going to happen. Many also want fuel prices even lower, not least some Umno politicians on the die-hard campaign trail. But how helpful is this?

Yet, nobody knows how all this supposed fuel subsidy savings are going to be deployed within the budget. Will it now be used to target key value-added areas of the economy like upgrading the quality of healthcare, improving education and up-scaling industrial expertise to enhance economic competitiveness?

Or will it go straight into pork-barrel projects to assist the electoral chances of certain Umno loyalists or will it help bailout certain 'loyal' Umno cronies hit by the economic downturn?

Unfortunately, there is presently no policy debate within Umno about strategies to ensure the long-term health of the economy.

Instead, the dominant talk within Umno is the going price of a delegate's vote during the elections, currently estimated at RM20,000.

Consequently, this Umno-led government is suffering a severe confidence deficit. The government's inability (or unwillingness) to divulge accurate information about its finances and the economy is really a reflection of the dismal state of Umno politics.

After all, being vague allows for better political patronage, no?

Somewhere down the road, the economy is going to pay for all these political shenanigans. Reforms are needed. But will Umno face up to reality?

Najib only agrees partial reforms are needed. He acknowledged his hands will be full once he takes over.

But given his own political baggage and a 'change-resistant' Umno bent on preserving its ethnic supremacist ideology, is he being realistic? - IDEAGLOBAL