Friday, September 7, 2012

Yes, Minister; No, Minister

I was alerted to this yesterday by a reporter. Sometimes I wonder…do our politicians do any fact checking at all, or do they just pluck figures out of the air?

Our esteemed Deputy Minister of Finance needs some help (excerpt):

Govt to spend on devt, keep debt manageable, says Deputy Finance Minister

KUALA LUMPUR: The government will have to continue spending on development while at the same time keeping national debt at a manageable level, says Deputy Finance Minister Datuk Donald Lim Siang Chai…

…As at December 2011, the ratio of national debt to the gross domestic product (GDP) reached 51.8%.

"Of course the debt figure is quite high but we have to spend money on infrastructure, healthcare and so on.

"We want to cut down the figure, which in most developed nations is 100% while in the United States it is 200%," he told reporters after delivering a keynote address at the "Forum on Private Retirement Scheme in Malaysia." …

…Lim said the government would work hard not to exceed the debt ceiling of 55% of the country's GDP which was increased from 45% in July 2009…

…Lim also said the country's dependence on the oil and gas (O&G) sector would eventually be lower going forward as the government had beefed up efforts to broaden its revenue base.

Lim said currently, the O&G sector supplies about 35% of government revenue, followed by the commodity sector (palm oil and rubber), manufacturing, retail market and tourism.

"The dependence level in the 1990s was as high as 50% and we have come down now with the expected increase in contribution from the services sector given the efforts put in place to boost the industry," he explained. - Bernama

First, a terminology issue – “national debt” in the MoF lexicon refers to total external debt (both public and private), not to government debt. It would be pretty ironic to have a Deputy Finance Minister using different technical terms from his staff. To be fair, this could have been inserted by the journalist writing the article.

Second, there aren’t actually all that many countries with debt to GDP ratios exceeding 100%, much less “most developed countries”. The April 2012 IMF World Economic Outlook  database lists just 12 such countries. The current actual figure for the US is just above 100% and nowhere near 200%.

Third, the current contribution of Oil & Gas to government revenues is correct, but that historical figure is ridiculously inflated (ratio to total government revenue):

01_pet

The average for the 1990s looks to be a little above 20%, not 50%. He could have been talking about all those sectors (O&G, commodities, manufacturing etc) collectively, but taken in the context of the previous remarks, the quote will be taken – as it seems to have been picked up upon by the rest of the media – as referring specifically to oil & gas. And that’s simply not the case.

2 comments:

  1. Been following the discussion from a land far removed from Malaysia by them oceans and seas. The weather here is surprisingly Malaysianish ( oh maybe a tinge cooler...allowances to nostalgia there) but still pleasantly warm or cloudy as Nature's fickle moodiness kicks in.

    Have some time on my hand away from the research labs and design studios, so I thought I will fritter them away with some tidbits about, of all things, economics!. I thought the Caledonian paper would have been pretty instructive but then again, if one wants to be persistent with myths, this might help to dispel tall tales :

    http://www.iser.osaka-u.ac.jp/library/dp/2010/DP0791.pdf

    And yes,no data exists to "negate" Ricardian equivalence. I am sure the poor guy would have had wanted someone to disprove his disprove...hahahaha whatever.....

    Ok that's it, my lil contribution to the great debate...and mmmm..MP in tow here, a think tank or head honcho job beckoning? Good for you man, you deserve it tho we may disagree about wealth, inheritance and exit taxes and the people on whom that should be levied. The subsidies part though? 100% so kong and yes all of it.

    Shale?

    http://www.bloomberg.com/news/2012-06-28/petronas-agrees-to-buy-canada-s-progress-energy-for-4-7-billion.html

    Ok , back to work for me.......for morrow of course

    Warrior 231

    Maybe this should have been on mythbusting part 2 but for some inexplicable reason, it just wanna go in there. Some mystery or poltergeists...hahaha

    ReplyDelete
  2. politicians are both aggregator and exaggerator, no suprise there

    ReplyDelete