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A review of Pakatan Rakyat’s manifesto

March 6, 2013

FMT LETTER: From Joshua Phua Pei Xing, via e-mail

Pakatan Rakyat‚Äôs promise of a comprehensive package is an oxymoron because their ‚Äúcomprehensive package‚ÄĚ is vague as they promise one million new job opportunities but do not tell which sectors are going to have the increase in demand.

Moreover, the most fundamental flaw in this promise of one million new job opportunities is that Pakatan Rakyat promised to slash Malaysia’s civil service workforce by more than half, immediately putting a million civil servants out of job.

Equitable productivity sharing through Minimum Wage

Raising minimum wage to RM1,100 is a populist move and is not feasible as it will be tough to be implemented in all small and medium enterprises because not all businesses have sufficient revenue to cover the immediate jump in overhead costs.

More critically, if implemented, the butterfly effect of this will increase the production costs of goods and also services, directly contributing to overall price increase of goods and also services. This will result in skyrocketing inflation rates and the middle-wage earners in the economy will be directly affected because their wages are not impacted positively by the implementation of the minimum wage.

Small Medium Enterprises will be affected and those which cannot sustain will be forced to close down.

This minimum wage policy also will not be extended to include foreign workers and will force local employers to fire and stop hiring local workers and go for foreign workers. This will cause massive unemployment among local workers and will push production cost to a new peak.

Foreign Direct Investments will decrease drastically because foreign investors will shy away from Malaysia when labour and production costs skyrocket, taking away Malaysia’s competiveness among her counterparts.

Education

Despite all that have been promised in the Pakatan Rakyat manifesto to enable better education, they have overlooked Chinese and Tamil vernacular education by not having a single allocation for them in this manifesto or the one in 2008.

Not only that, all those schools and promise of free education have yet to be implemented in their five years of rule in the four states governed by them, no wonder they have surplus in Penang as they fail to use the money to benefit the Rakyat.

Pakatan Rakyat’s promise of free education for all will cost the rakyat RM45 billion per annum and will fund everyone including underserving students. It is unfair to taxpayers that such a huge amount will have to be used to fund not only the deserving students but also the underserving, mediocre and downright lazy students. This will encourage students to do badly as free things will often be taken for granted.

A country’s education policy has to be in tandem with the country’s economic development stage. At early stages of development, if parental human capital levels are low, free access to basic education may provide the only chance to leave poverty. In contrast, at advanced stages of development, if parental human capital is high, the availability of free public education crowds out private educational investments, increases fertility and may be detrimental for growth.

We must ask ourselves, at which stage of development do we want Malaysia to be in? Malaysia being a developing nation, in order to become a developed nation must never go back to using economic models fit for third world countries.

In a developing nation like Malaysia, once the necessarily high level of our society’s human capital is achieved, an appropriate public education policy should substitute away from free public education regime and concentrate on improvements in the productivity of private educational investments. The failure of which will result in a society that is dependent on free education and a certain bankruptcy of the country‚Äôs finances.

Sustainable economy

In this section, Pakatan Rakyat promises to halt operations of the Lynas rare earth processing plant in Gebeng, Pahang but they seem to be ignorant of the actual reason why Lynas decided to set-up its processing plant here. The fact is this, the reason Lynas decided to have its processing plant here is the same reason why Apple products are manufactured in China – for Economic reasons.

Besides, the latest update is that Lynas has publicly declared that they will send the waste/by-products of their plant elsewhere if there are no viable places to dispose of them in Malaysia. Lynas is the only rare earth processing plant out of China. China has more than 95% of the world’s rare earth’s processing plants apart, with only the United States of America and Australia as the other partakers in this lucrative business.

The Lynas processing plant in Gebeng is the first of its kind outside of China because USA and Australia realise that China has been having an iron-grip on the world market’s prices of microchips due to the aforementioned phenomena and therefore Lynas is their first attempt to break China’s monopoly on rare earth processing plants. The economic viability of Lynas far outweighs the cons as the waste from the plant will be transported out as agreed in the terms of the Temporary Operating Licence.

Not only that, Pakatan Rakyat is being a hypocrite as the Penang state government recently approved of the BOSCH solar panel plant in the island state. The said solar panel plant has more dangerous toxic wastes as compared to the Lynas plant.

Besides that, scaring away foreign investors like Lynas in which plants like these will be the forerunners of the technology-age will only result in Malaysia being less competitive in the world economy.

Pakatan Rakyat ‚Äúpromises‚ÄĚ to reform all existing legislation related to logging and will regulate logging activities but they themselves are being hypocrites because of DAP‚Äôs Ngeh Koo Ham scandal where he obtained 10,000 acres of logging land from the Kelantan government in exchange for the Menteri Besar’s post for PAS.

R&D investments to reach 5% of GDP

To a layman, all this may look tantalising but to the economically-sound intellectual, Pakatan Rakyat‚Äôs ‚Äúpromises‚ÄĚ are sacrificing inflation (skyrocketing) for growth while China did the total opposite just last year.

Growth is not wrong but the kind of unregulated growth promised by Pakatan Rakyat will have its cost and by compromising growth just for the sake of looking good on paper, Pakatan Rakyat has overlooked the danger of uncontrolled and uncalculated inflation rates. Skyrocketing inflation rates caused by this unmitigated risk will only devalue our Ringgit.

Looking back at the China‚Äôs example of curbing inflation last year, the People‚Äôs Republic sacrificed a negligible percentage of growth. Pakatan on the other hand are going for ‚Äúgrowth‚ÄĚ at the expense of more inflation.

PR‚Äôs ‚Äúpromises‚ÄĚ to abolish tolls and tax on cars will not justify the growth on paper because as long as they continue to cut FDI (by chasing away foreign investors), they will only be able to trade internally and continue to devalue our Ringgit further.

By reducing or abolishing of additional car tax, they are not increasing the value of our Ringgit because they are just merely cutting off a crucial source of GDP.

Not only that, by the sudden increase of Ringgit available to the Rakyat as a result of abolishing car tax will only cause Bank Negara Malaysia to increase its fractional reserve and drive loan interest rates higher than ever before because of the additional money in circulation. Those higher interest rates will have a butterfly effect on the economy as prices of other goods and services will increase to a new peak as an indirect result.

Inflation is the surest way to ignite social unrest given that the poor spend almost every penny of their income on basic essentials and it is ironic that PR has used sold the promise of reducing prices as compared to BN being likened to Barang Naik.

At the end of the day, PR may reduce the price of cars but with a weaker Ringgit caused by skyrocketing inflation, we still will be buying more expensive foreign cars than ever before.

Tax adjustment to promote equity

Pakatan Rakyat says that the super rich in Malaysia pay the same tax bracket as the rest of the taxpayers and plan to revamp the tax bracket but at the same time, it is ironic and contradictory that they increase the 26% tax rate from the RM250k bracket to RM400K.

They claim that this move is to make allowance for actual living expenses incurred by the people but this is their own claim after increasing the tax bracket from RM250k to RM400k. This only means they are not taxing those earning in excess of RM250k enough (26%) when they promise to tax the rich more.


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