Pua also expressed concern over the rise of government debts, which have almost doubled in the last seven years.
There had been high expectations, he said, that Najib would put the various reform pledges he made in the budget into action, including the cornerstone of his policy blueprints – the New Economic Model (NEM), Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP).
“Najib has left much to be desired, as there is little change beyond tweaking from the previous financial year. Perhaps the most worrying is that Malaysians are like the proverbial frog in a hot soup – where the frog does not realise the soup is slowly but surely reaching a boiling point.
“We may not yet be facing the crisis of Greek proportions, but Budget 2012 is doing very little to avert such an eventuality, leaving the Malaysian economy nakedly exposed to the inevitability,” Pua warned.
What was worrying, he added, was that the federal government debt had increased rapidly from RM242 billion in 2004 to RM456 billion in 2011.
“That represents a marked 88.4 percent increase in debt over the past seven years. It is also an increase of 25.6 percent, or nearly RM100 billion, over two years.
“The increase in debt has increased the reigning pressure on our budget deficit, as our annual debt service commitments will increase to RM20.5 billion next year, from only half the amount five years ago, in 2007,” he said.
Pua, an Oxford graduate, warned that the federal government debt-to-GDP ratio at 53.8 percent was close to the levels of Spain and Ireland, which recorded 64 percent and 67 percent respectively.
“Both Spain and Ireland are facing economic turbulences of their own,” he said, adding that Malaysia’s debts would only worsen in the next few years as the nation embarked on record levels of infrastructure spending, such as the RM53 billion Klang Valley MRT project.
Rise in wages and pension expenditure
Pua also pointed out that the budgeted expenditure for wages and pensions for 2012 was a whopping RM64.1 billion, which represented an increase of RM6.2 billion or 10.8 percent compared with last year’s figures.
“The increase is even more worrying when contrasted against the budgeted RM36.9 billion in 2007, a 73.7 percent increase in just five years. Our public sector expenditure is increasingly mirroring that of European countries, with ballooning civil service obligations,” he said.
Pua said while the GTP promised a more efficient and cost-effective government, what the people were seeing in the new budget was the placing of more debts their children, the entrenching of structural problems and very weak expenditure controls.
He also expressed concern that Malaysia’s export sector only grew a miserly 2.7 percent in 2011, compared with 13.2 percent the previous year.
“However, we should be further alarmed by the fact that the growth was the result of increased contributions from exports of rubber, paper, textiles, clothing and shoes, which grew in excess of 15 percent, and petroleum products by 9.3 percent.
“Our electrical and electronics sector, which constitutes 26.4 percent of our total export industry, shrunk by 4.9 percent in 2011,” he said.
Outlook on the economy too optimistic
There also appeared to be a shift away from higher value-added export sectors to the primary products industry sectors of rubber, wood, textiles and crude oil.
“This is the exact reverse of what we are trying to achieve via the ETP.”
Pua said despite a 4.2 percent growth in the first half of 2011, the global economic slowdown has resulted in Malaysia facing another potential economic crisis.
“The government has retained an unrealistic growth assumption of five to 5.5 percent. To meet the target, Malaysia’s economy will have to grow by at least 5.7 percent in the second half of the year, which is highly optimistic, to say the least.”
“The federal government’s unrealistic expectations, coupled with a budget that has failed to demonstrate Najib’s substantive reforms and political will for change, makes the 2012 budget highly disappointing.
“It puts serious doubts on our ability to become a high income nation as aspired in Najib’s New Economic Model, which he had been harping on,” Pua added.
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