Sunday, January 25, 2015

You are cute, YB Ong Kian Ming

When I read MP Serdang YB Ong Kian Ming's press statement which was picked up by the media - How can PM Najib convince sceptics about his budget revisions when he himself can’t get the figures right? - I knew for sure that this can't be true. Ministry of Finance has one of the best line up of Government officials in the service. Malaysia’s Treasurer General, Tan Sri Irwan Serigar, is well known for his eye for details and extremely alert when it comes to numbers, fiscal policies, public documents and the Prime Minister's speech.

First, YB Ong claimed that PM was inconsistent in his Special Address on Budget 2015 version 2.0 when he said "PM Najib announced that development Expenditure of RM48.5 billion for 2015 will be maintained and spent. This statement by PM Najib is highly confusing since in his 2015 Budget Speech, the development expenditure was announced to be RM50.5 for 2015."

I believe YB Ong was overexcited to "say something" till he overlooked the details. The Development Expenditure (DE) can be broken down into 5 parts:

Development Expenditure (DE) 2015
RM  billion
General administration

Total DE budget and expected to be spent


Total DE plus contingency

The Prime Minister was not wrong when he said that the DE budget of RM48.5 bil that has been allocated will be spent. This allocation has been earmarked and allocated to be spent on key projects that will generate growth.

It is important to note that the contingency budget under DE allocation is only meant for contingency situations, something I believe that the Prime Minister cannot openly say “it will be spent!” at this point in time. Just for YB Ong's sake, here's the Oxford Dictionary's definition for contingencies - "A future event or circumstance which is possible but cannot be predicted with certainty".

The commitment given by the Prime Minister, Ministry of Finance and the Economic Planning Unit that economic, social, security and other projects under the Development Expenditure will be spent should be lauded. It is a sign that should be taken positively because the Government is not sacrificing economic development in these challenging times.

Next, YB Ong went on to say that Treasury's Estimates of Government Revenue 2015 document calculated oil price at USD 105 per barrel however the Prime Minister used the figure USD100 per barrel in his Special Address/Budget 2015 version 2.0 on Tuesday. I doubt Tan Sri Irwan Serigar will make this blunder so I checked the documents. Let's compare the two:

Estimates of Government Revenue 2015 by Treasury (Page 7, Item 31)
…. Anggaran yang lebih rendah disebabkan jangkaan purata harga minyak mentah (Tapis) yang sederhana daripada USD110 setong pada 2014 kepada USD105 setong pada 2015….

PM's Special Address/Budget 2015 version 2.0
In 2014, Dated Brent reached its highest level at USD115 per barrel on 19 June. Global crude oil prices have since plummeted by more than 50%. Consensus among economists is that the forecast price of USD100 per barrel used in the 2015 Budget is no longer realistic. They now estimate the average oil price in 2015 to range from USD40 to USD70 per barrel. The Government has therefore revised downwards its forecast for the average baseline oil price to USD55 per barrel for 2015.

This is a case of using Brent vs Tapis blend oil prices.

It seems to me that the Prime Minister was being consistent in his speech when he used Brent crude oil estimates (USD100 per barrel) which is normally 6% to 7% lower than the Tapis blend (USD105 per barrel) as used in the earlier 2015 Treasury document.

So why did YB Ong decided to mislead the public into thinking that our Prime Minister and the Ministry of Finance failed to get the figures right? Is this a case of “must say something, no matter what” or “any publicity is good publicity”? You are cute, YB Ong.

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