Keeping the rating agencies satisfied

  • Business
  • Saturday, 29 Sep 2018

EVERYONE’S talking about it and there are, at last count, at least three books on the Greatest Heist of the 21st Century.

Tan Sri Michelle Yeoh is even thinking of producing a movie on the exploits of the former Fearless Leader and his trusty sidekick, the Bulging Bandit, now living in self-imposed exile somewhere in China.

Many generations hence, Malaysians will scarcely believe that such a thing actually happened. “And was all our money gone?” a startled questioner might gasp. The right answer: No, it just went into other people’s pockets.

It’s enough to make cynics of us all. “Don’t ever steal,” a grandfather might advise his grandchildren. “That used to be the government’s job.”

Having consigned the goods and services tax to the dustbin and having replaced it, three months later, with a sales and service tax, Finance Minister Lim Guan Eng was staring bleakly at a whopping financial hole large enough to steer eight Scorpene submarines through.

That might be why he told Bernama that his 2019 Budget would be “difficult”. Did that mean the budget would be as austere as a Siberian winter’s night? Indeed, it could very well mean a budget that would live below one’s yearnings.

Actually, Lim was feeling a little bitter about the banks. They had installed a new app in Lim’s office that showed him the government’s financial balance at any one time. The minister appreciated the service but felt that the “LOL” appended at the end of the statement was wholly unnecessary.

It wasn’t easy to come up with a credible budget these days, thought Lim bitterly. During the time of the previous administration, the budget seemed to simply be a schedule to get us into debt systematically; an orderly means of living beyond one’s means even if one had to borrow money for the privilege.

And it seemed to work. Malaysia’s growth was one of the most robust in the region and the rating agencies all seemed to like us, although their generally roseate endorsements were qualified with grumblings about “lack of governance.”

The agencies liked the-then Malaysia because the former Fearless Leader had gotten rid of subsidies and introduced the GST which, admittedly, was the most equitable tax around.

But it also pushed up the cost of living, made two-job holders yearn for a third job and, ironically, sowed the seeds for the government’s electoral downfall on May 9.

Now governance is back; the anti-corruption agency has never been busier; and the rule of law is no longer a meaningless cliché confined to the Rukun Negara.

So you’d think the rating agencies would be happy. But they aren’t because fuel subsidies are back and the GST has been abolished. Thankfully, however, the country’s growth has held and the agencies have recognised that a turnaround will take time – at least three years in Lim’s estimate – and so have refrained from downgrading Malaysia.

That’s capitalism for you. What’s good for the people isn’t necessarily good for the rating agencies. Or as Bill Gates once noted: “Capitalism is still the best system. Anyone who does not agree is free to migrate to North Korea.”

The trick would be to keep growing the economy. That way, the budget deficit will remain in check and the rating agencies will be off our backs.

But we shouldn’t take the economists in the agencies too seriously. They are the same ones who invented ASTROlogy so that, in comparison, their predictions seem like serious science.

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