Role of a Budget

The annual budget should be an instrument of unity to unit Malaysians

(Speech by the Parliamentary Leader, DAP Secretary-General and Member of Parliament for Petaling, Lim Kit Siang, in the Dewan Rakyat on the 1981 Budget on October 22, 1980)

The finance Minister, Tengku Razaleigh, in his 1981 Budget, prides himself for presenting a ‘smallman’s budget’

Compared to previous budget, the 1981 Budget has given more thought to the plight of the smallman, for which I commend the Finance Minister. However, the 1981 Budget has not gone far enough to give the smallman his rightful place under the Malaysian sun.

Land reforms in padi sector

The Finance Minister, for instance, announced increase of the subsidy to padi farmers on the purchase of padi by the way of coupons by raising the coupon value from $2 per picul to $10 per picul. The Finance Minister said this increase, which is equivalent to an increase in the price of medium length padi grains from $28 to $38 per picul and for long grains from $30 to $40 per picul, will take effect from 16th July 1980. It will cost about $128 million for this year, and $328 million for the whole of 1981.

Clearly, the demonstrating farmers of Kedah in Alor Star in January this year, whatever the cause and effect, or the legal right and wrongs, have achieved results in forcing the government to be more sympathetic to the hardships and poverty faced by the padi farmers.

The increase in subsidy is also a confirmation that despite the $300 million spent on the gigantic Muda Irrigation Scheme to double-crop, plant high-yield varieties and increase the productivity and incomes of the padi farmers, the problem of poverty and backwardness remain as intractable as ever,

The Deputy Prime Minister, Dr. Mahathir bin Mohamed, said in Jitra on Monday that the government would be paying the increased padi subsidy from the oil revenues from trengganu oil off-shore.

But the question which must be answered is whether the increase in padi subsidy is the best way to alleviate the poverty and hardships of the padi farmers, or whether the $128 million subsidy this year, the $328 million subsidy next year and each subsequent year, could be more effectively spent in resolving the root causes of padi farmers poverty and backwardness.

A recent study of the Muda Region from 1955-1976 has shown that the hundreds of million of dollars infrastructural development in Muda Region have benefitted the absentee landlords and prosperous large farmers at the expense of small farmers and tenant-operators.

This study found a rapid polarization where “at one end is the growing number of large farmers cultivating an increasing proportion of the land; at the other, also a growing number of small farmers operating a decreasing proportion of land.”

This study, by the Centre for Policy Research at the University Sains Malaysia, found that large landowners (holding above 2.8 hectares) numbered only 11% of the Muda farming population, but their lands spread to 42% of the total average. The smallholders (below a hectare) accounted for 62% of the farmers, but owned only 22% of the padi land.

The tenant operators, who are the poorest of the poor in Muda, have been the hardest hit by the Muda Irrigation Scheme. About 7,000 or so tenant-households had been displaced by the prosperous farmers in the last decade –to become agricultural labourers or to nigrate to towns to become the proletarian poor.

The study said “we can safety say that many of the tenants and small landlords must be poised on the brink of marginalization. The on-going and inter-related processes of mechanization of padi production and accumulation of large padi farms are likely to aggravate the already difficult situation of the small farmers in the Muda region in the decade ahead.”

The study estimates that there are about 700 big landlord with land over 9.5 hectares. About half of this is operated by small tenants. Another 8,600 large farmers own padi lands of 2.8-9.5 hectares. If ownership of there large holding is redistributed among tenants, average small farm size could rise to around a hectare. With rents representing one-third of padi output for a tenant, land-to-the-tiller programme would immediately raise the income of the tenant farmers by 30%.

The study estimates that it would cost the government some $45.6 million to redistribute land in Muda at market value. I do not know whether this is an accurate valuation, but even if it is in the rigion of $300 million, such a redistribution would still confer greater and more lasting benefits to the small padi farmers and tenants and at a cheaper price. The costly $328 million a year subsidy would only increase the income of the padi farmers by some 30% for each of the two crops per year, while the redistribution of land in Muda, even if it costs $300 million, would increase the income of tenants farmers by 30% for all crop, apart from incentives for increased productivity and higher incomes.

Without a land-to-the-tiller programme, the main beneficiaries of public development expenditure and subsidies will be the ‘big man’ not many programme launched in the name of helping the ‘smallman’ had ended up in benefitting the ‘big man’

I know that politically, it is difficult for the government to launch a land-to-the-tiller programme in Muda, as the absentee landlords and large prosperous farmers comprise the backbone of UMNO. However, as what is proposed is not outright expropriation but land redistribution accompanied by market-value compensation, such a programme would enable then landlord to make use of their compensating funds to participate in other commercial and industrial ventures.

If the Finance Minister is truly concerned about the plight of the ‘smallman’, then he should get the government to adopt such a ‘land-to-the-tiller’ programme which would be a real benefit to the ‘smallman’.


Inflation is what the Malaysian ‘smallman’ suffer from most. The Finance Minister said the Consumer Price index is estimated to increase by about 7% this year, as compared to the earlier budget estimate of 5-6%. The CPI has ceased to be a reliable index for most Malaysian, in particular the long suffering housewives, who find a galloping inflation eating away the purchasing value of the Malaysian ringgit and who would think the Finance Minister making a joke when he spoke of 7% inflation.

The ready approval by the Minister of Trade and Industry of price increases inessential items like sugar, petroleum and oil products, following the creation of artificial shortage, have not convinced Malaysian consumers that the government is zealous in protecting consumer from exploitation and profiteering by manufacturers and their agents.

Although Minister every now and then call on consumers and consumer organisations to be more outspoken of their right, it is the government which is the first to deny consumers and consumer organisation the right to help determine the validity of any price increase by participating in the decision-making.

The DAP reiterates our call for the establishment of a Price Justification Tribunal to protect the consumers from unscrupulous pricing and profiteering by manufacturers and their agents.

The private sector work force are disappointed that the Finance Minister had not taken the opportunity of the Budget speech to restore their real wages, in like with the 14%-28% salary increase for the 700,000 public servants.

Attempts by private sector unions and workers to secure wage increases to keep in step with inflationary development have in fact been frowned upon by the government. This can only generate industrial unrest and instability as highlighted by the stoppages in the union-banned sector of Bayan Lepas Industrial Free Trade zone in Penang recently.

The government should advise the private sector to revise the salary structures on their employees, whether in the form of a payment of a Special Relief Allowance or otherwise, to ensure that workers do not suffer in the form of a lower standard of living because of the ravages of inflation.

In this connection, the DAP called on the Government to seriously consider introducing legislation to provide for Indexation of Wages to the Cost of Living, whereby every year, there is an automatic adjustment of worker salaries to keep in step with inflation.

The increase in the rate of contribution to EPF from 13% to 20% of the wages of the workers, of which 11% will be contribution by the employer and 9% by the employee is welcome, provided it does not lead to a reduction in the real take-home pay of the workers. In the absence of compensatory wage adjustments upward for the lower-income group in the private sector, such an increase of EPF contribution on the part of the workers would cause hardships.

I would therefore call on the Finance Minister to proceed with the 11% contribution on the part of employer and to suspend the 9% contribution on the part of the employee until such time as there is a wage revision which would not lead to a reduction of take-home pay of the workers.

The government’s consideration of a scheme to enable EPF contributors to utilise some part of their saving at EPF to own homes is to be welcomed.

However, I must say that the government’s performance on the housing front has been one of the greatest failures of the Third Malaysia Plan.

The Government cannot be unaware that housing is one of the basic human need, and that housing development in the past few years have virtually made cheap and decent housing beyond the mean of the majority of Malaysians who come from the low income groups.

Yet apart from Ministerial speeches and statement calling on the people to be patient, the government has done practically nothing to break the back of the problem of housing shortage in the country.

The announcement of increase of allocation of housing votes for the various State Government in the Budget does not herald any new era in housing seriousness, as the implementation capacity of the State Government is probably among the lowest, if not the lowest, of all public sector developments.

And where a few low-cost houses have been built, they do not go to the genuinely needy, but are parcelled out as a form of political patronage among party hacks and local leaders of the component ruling Parties, as happened in Kulim in Kedah recently.

A government which is concerned about the ‘smallman’ must recognise and respect the human right to a roof over his head with minimum standard of amenity, security of tenure and location within reach of employment opportunities.

The slums and squatters especially in the urban areas in Malaysia are a physical illustration of the poverty of the smallman, and a visual reflection of inequalities of income and wealth.

A Government of the ‘smallman’ must launch a nation-wide public low-cost housing crash programme to clear the slums and squatters, and provide decent shelter for every Malaysian.

Until the Government has built adequate public low-cost housing for the poor, the Government must use its legislative and enforcement powers to protect the security of tenure of the poor from eviction by unscrupulous and unconscionable landlord.

The Government cannot claim to understand or sympathise with the sufferings and hardships of the poor for a decent shelter when it could sit on the Ministerial Committee Report on the 1966 Rent Control Act for some five years doing nothing. . Every day of inaction on this matter is a day of licence to unscrupulous and unconscionable landlords to throw poor tenants out onto the streets.

Until there are enough public low-cost housing for the poor, the Rent Control Act 1966 must be extended to provide protection for houses built after 1948. I hope that the Finance Minister can live up to his new concern for the ‘smallman’ in the context of the total housing needs of the poor, including security of tenure for the low-income tenants.

The blatant abuses in the housing industry, the demand fir under-the-table money, the bottlenecks at the State Government level in conversion and subdivision and processing of plan, leading to the fantastic increase of house price and corruption and malpractices in the various stages of housing approval stage, have become so scandalous that it is only matched by the even greater scandal of government apathy, indifference and inaction.

The entire housing industry must be shaken up, but to do that, the country needs a Housing Authority vested with all powers and authority to get housing, and in particular low-cost public housing, moving. All the Housing Ministers in the country has have proved to be only good in making beautiful speeches and forecast, but abysmall in delivering goods.

Budget should be used as an instrument of unity to weld diverse races into one people to face the challenges of the Eighties

The budget should not only be an annual fiscal and economic exercise, it should be used as an annual instrument of unity to further unite the people of Malaysia, especially to face the challenges and dangers of the Eighties.

Malaysia is living in a dangerous decade of the Eighties. Externally, Malaysia faces the threat of an expansionist and Soviet-backed, Hanoi-headed Indo-China, which is even now testing the will and territorial integrity of neighboring Thailand.

Should Thailand fall or crumble from within, then Malaysia will be next in the forefront facing the Indo-China juggernaut. It is on this excuse that the Government is yearly devoting such a large chunk of public expenditure to defence and security.

However, there should be enough lessons in recent history to tell us that military build-up alone cannot assure defence capability in the absence of national unity, solidarity and will to be a nation.

Internally, Malaysia faces the dangers of chauvinism and racialism rearing their ugly heads, and a new danger of religious fanaticism and bigotry as recently exemplified by the madness perpetrated at the Baru Pahat police station.

Every government action, and in particular the budget, should be aimed at contributing to greater national unity among the diverse peoples in Malaysia.

The National budget has never been approached from this standpoint, and I would commend to the Finance Minister to formulate the national budget in the light on how national unity could be fostered in future.

Undoubtedly one of the greatest causes of national disunity in Malaysia in the Sixties, even more so in the Seventies, had been educational opportunities for the young generation of Malaysia.

This had been the cause of emigration of some 25,000 Malaysians to Australia, involving a loss of precious brain drain of some 7,000 Malaysian professionals, like doctors, engineers, dentists, accountant, etc.

I meet a cross-section of these Malaysians during my recent visit to Australia, and the single most compelling reason for their migration is their concern about the educational future of their children, and not because they wanted to seek higher remuneration or greener pastures overseas. In fact, I have met many who are unhappy in Australia, but who are sticking on with their unhappiness for the sake of their children.

It is indeed a sad commentary on the outlook and mentality of those in authority who refuse to see the legitimate worries and anxieties, not only of the 7,000 – odd professionals who had emigrated to Australia, but the entire Malaysian people who have not and will not emigrate abroad.

Recently, the Minister of Education condemned Malaysians who send their children abroad for primary education as people who have no confidence in the education system of the country, but who are blinded by colonial education.

The irony is that the majority of the Cabinet Ministers ever since Merdeka have had their children educated abroad, many from primary levels upwards.

It is not that Malaysians have no confidence in the national language media of education. What they lack confidence is that their children would be given an equal opportunity to develop their capabilities and potential.

In fact, if the government can assure every Malaysian regardless of race, that through the national language medium of education system, apart from special assistance for Malays students to fully participate in the higher reaches of education, all students who have the requisite academic ability, qualifications and inclinations would be able to have a fair opportunity to pursue the educational and professional attainments of their choice, then this Crisis of Confidence as evidenced by the outward flow of the flower of the Malaysian generation would not take place.

Twenty years ago, normally the best and cream of each batch stay behind to continue and complete their higher studies. But ever since the Seventies, among the non-Malays, large numbers of the best and the cream of each batch go overseas at the pre-University level because of lack of confidence about fair recruitment chances into the courses of their preferences in the universities.

Isn’t it time that we pause and ask ourselves as to what type of a nation we are building, what type of a commitment we are inculcating among the young generation of Malaysians?

Extremists and bigots can take the easy way out by dismissing Malaysians who have emigrated as ‘good riddance’, for they would not want to admit that it is precisely their extremism and bigotry which have driven Malaysians abroad.

But Malaysians of good sense and rationality must search themselves to find out the causes of this migration and brain drain, instead of going round our neighbouring scouring for their doctors, dentists, and specialists when our neighbours need them even more!

There is no single act which can unite Malaysians of all races into one people than the courageous defusing of the bitterness, alienation and antagonism caused by deprivation of higher education education opportunity in their own homeland.

Last weel, when I asked the Education Minister during question time whether the government proposes to increase the intake of non-Malay students into Universiti Kebangsaan, Universiti Pertanian and Universiti Teknologi, to ensure a more multi-racial campus in line with the second prong objective of the New Economic Policy to restructure society, the Education Minister criticised me for deliberately refusing to understand and accept the government’s higher education policy.

Let me state that it is not me alone, or my colleagues on the DAP parliamentary benches, who do not accept the government’s higher education policy. Sufficiently large numbers of Malaysians do not accept the higher education policy to warrant the government to rethink and reconsider its policy if it believes in participatory democracy.

Higher Education in Malaysia must be liberalised through:

  1. Assistance to Malay and indigenous children to participate fully in the higher reaches of education to rectify their historical under-representation in the professions be continued and expanded;
  2. The great expansion of university places in the five local universities and establishment of new universities to provide places for the bulk of Malaysian students in tertiary institutions abroad, which could be financed not only by the tens of millions Malaysian students are spending overseas but also from the oil revenue.
  3. To supplement government efforts in provision of higher education opportunities for Malaysian students at home, the approval for the establishment of private universities.

A budget aimed at the expansion and liberalisation of higher education, opportunities at home would go a long way to promote national unity, which is more important and effective than a similar expenditure on defence and security.

Malaysia must make use of the bounty of nature, and in particular, oil export earnings which will become the No. 1 export earner beginning this year displacing rubber for the first time, to lay a strong and resilient basis of national unity and solidarity. There is no more productive investment, especially from the point of view of national building, than in the liberation of higher education opportunities, both in creating national unity and in providing for the human skills and expertise to take Malaysia onto a higher plane of development.

Ever since the Seventies, Malaysia appeared to have turned her face against the pursuit of excellence in any field. While Malaysia must regress the historical imbalances, the pursuit of individual and professional excellent must not be sacrificed, for we are then sacrificing national excellence and greatness.

It must therefore be a matter of national importance that Malaysia should seek to conserve national brain powers, which have been trained at great public expense, and to persuade Malaysian brain power emigrated overseas to return to serve the country. If Dr. Malaysia is prepared to lead delegations after delegations overseas to attract foreign investment, why is it the government is not prepared to consider a scheme to attract Malaysian brain power to return to Malaysia to help develop the country?

Malaysia is short of qualified expertise in many fields. For instance, although Malaysia has been producing oil for over a decade there is not a single Malaysian who is qualified in the technology of oil production.

This brings us to the question as to how Malaysia could possibly protect her oil rights and interests, ensure that contracting parties keep to the fine letter of the production-sharing agreement with regard to production and control?

That Malaysia is abysmally backward in oil expertise and experience is best illustrated by what happened in 1973. As disclosed by he Public Accounts Committee Report of the Dewan Rakyat just tabled with regard to its Reports on the Auditor General’s Report on the 1974 Federal Government Accounts, the Federal Government lost some $26 million due to gross negligence, incompetence and ignorance of top Federal officers in charge of Petroleum.

$26 million loss because of lack of expertise, experience and competence in field of petroleum.

As the Auditor-General commented in his 1974 report, the Government of Malaysia and Sarawak Shell had an agreement to whereby Sarawak Shell was granted the sole right to explore, produce and dispose of any petroleum from the State Sarawak, its territorial waters and from the Continental Shelf, in return for royalty on all crude oil produced. In January 1974, The Ministry of Primary Industries then in charge of petroleum decided to collect the government’s royalty in kind instead of in cash, and because of the operation of income tax laws, caused the government to lose over $20 million. Although Sarawak Shell had offered to pay this $20 million of lose revenue, in two letters to the Ministry of Primary Industries, this was not pursued, and as a result, till this date, Sarawak Shell had not paid this $20 million.

Further, as a result of the receipt of the royalty from Sarawak Shell in kind, the Ministry of Primary Industries in October 1973 executed a ten year agreement on behalf of the Federal Government with an oil purchasing company based in the United States, namely Shaheen Company, for the sale of the crude oil received as royalty. Although one of the conditions of the agreement stipulates that payment for the crude oil should be made by the Shaheen Company by an irrevocable letter of credit not less than 10 days before shipment, this condition was never complied with, and as a result, the Federal Government eventually lost more than $6 million following the bankruptcy of the oil purchasing company. The officer in charge of the petroleum division said he did not know what was a letter of credit nor how it operated!

The 1974 Auditor-General’s Report also pointed out in Paragraph 11 that although the mining leases between Federal Government and the Sarawak Shell provided for the Government to station its officers during the measurement of weighing of crude oil, which determines the royalty payable to the Government, the Ministry has not made arrangements to ascertain that the procedures adopted were adequate to safeguard Malaysia’s oil interests.

The big gap in the expertise of Malaysians in oil technology, is most disturbing when we consider the billions of dollars involved, in the oil industry.

In 1979, Malaysia exported a total of 90.4 million barrels of crude oil valued at $4,210 million. This is expected to decrease to 89 million barrels of 243,259 barrels per day in 1980, although average export prices are expected to increase markedly by 43% compared with 1979

The decline in the crude oil production in Malaysia in 1980 by 3% from 103 million barrels of 283,000 barrels per day (bpd) in 1979 to 100 million barrels of 275,000 barrels per day in 1980, and that of associated natural gas, is the result of the adoption of a national Oil Depletion Policy to decelerate the exploitation of crude and gas resources in the country. The National Oil Depletion Policy imposed further control on crude oil production besides the two earlier measures, namely the Gas-to-Oil Ratio and the Maximum Allowable Production Rate for each field.

According to the Economic Report, under the oil depletion policy, production control has to be applied to major fields in the form of limiting production from these fields to a ceiling of 1.75% of oil-in-place in any one year, as otherwise, 23% to 60% of the recoverable reserves would be depleted within the next five years and Malaysia would then be a net importer in the second half of the decade.

The big question is what expertise and control could the Government, through Petronas, the wholly-owned government company in charge of oil, exercise to ensure that the restraints on production and other controls are observed by the oil producing contractors.