In a recent article in The Edge (Sept 19 2012) "Where will the money come from", Khairy Jamaluddin, the Umno Youth Chief, again warned Malaysians that the Opposition's various electoral promises will bankrupt the country.
Khairy poured scorn on the Opposition's claim that it can pay for its promises via the curbing of leakages and corruption.
He argued that this "classic Opposition" argument does not make sense, since "corruption and leakages can only occur for procurement-related expenditure, any savings could be saved from this portion of the budget...".
The procurement portion of the 2012 budget amounts to RM84.3 billion, out of a total of RM232.8 billion. He suggests that a 10% savings would yield only RM8 billion, hardly enough to fund the Opposition's populist programmes, which he estimated to top RM206.5 billion.
I am rather surprised that Khairy, given his pedigree education, would conclude that leakages can only occur when on the spending side. Leakages can also occur on the revenue side, and at times, at a much greater magnitude.
A simple example would be a traffic policeman stopping you for a traffic violation. Imagine that, instead of issuing you a summons for RM300, he offers instead a RM50 "settlement" which you duly accept.
The result: the treasury is deprived of RM300 of revenue, whereas RM50 ended up in the pockets of a corrupt public enforcer. This is a leakage from the public purse, as a result of corruption.
There are cases after cases where the government forgoes or accepts lower proceeds when awarding concessions, licenses or state assets to well-connected individuals or companies.
Instead of boosting the public purse, these surpluses became windfall profits for these private operators, amounting to billions of ringgit.
At best, this is an example of incompetence, at worst it is corruption, when the government deprived millions of the rakyat of their rightful share of the national weath and diverts these into the bank accounts of well-connected individuals or private entities.
Khairy could not have failed to realise this.
An often cited example of revenue loss is the huge gas subsidies given to IPPs. Recently, the Petronas chief executive estimates that gas subsidies for 2012 would reach RM30 billion, with IPPs enjoying the lion share.
If we assume that 40% of these are enjoyed by the IPPs (extrapolating from a 2008 report), this amounts to a massive RM12 billion subsidy which could have gone into the treasury instead of the IPPs'.
Private toll-operators are another class of concession holders that continue to reap billions in profits collectively.
As most of their costs of capital are already recovered, they reap fat margins for the remaining of their concession years, and even enjoy guaranteed rates increases for which the government has to compensate them if these rights are not granted.
Since roads are a public good, and with such high returns for the tolled highways, why did the government not choose to own and operate these toll roads direct?
The profits generated would go straight into the Exchequer, and instead of yearly increases, the government could have lowered the rates and still enjoy a steady income stream that could be utili sed to improve public transport.
State assets, both physical and virtual, are flogged out without undergoing a transparent and competitive process so that the highest possible returns can be attained.
State land are frequently sold off via negotiated deals instead of open tenders, which then raise the question whether the government are getting the highest possible price for valuable prime land.
A case in point: In 2009, Matrade did a land swap deal with Naza, where in return for building an expo centre that costs an estimated RM600 million, 62.5 acres of prime federal land potentially worth RM1.5 billion is given free to the latter.
And more recently, the 200ha Sungai Besi RMAF airfield was sold to 1MDB, again, without calling for a competitive bidding.
Without an open bidding, the public will never know the true worth of this large tract of land. Thereby goes another leakage of public income.
Precious spectrum bandwidths are also not sold via competitive tenders. Between 2002 and 2005, the 3G spectrum was awarded to 4 local telco operators for a paltry sum of RM50million each (TM/Celcom, Maxis, Time dotcom, MiTV).
To illustrate just how ridiculously low the lucky winners paid for the 3G license, DiGi, who failed to win the bid, then offered approximate RM700 million to Time dotCom (via issuance of DiGi shares) for the utilisation of TDC's 3G spectrum for a 10 year period.
Why did the government drastically under-price the value of these assets? Similarly, the 4G spectrum was awarded yet again without competitive bidding, with vague conditions for the award.
Throw in the revenue loss from APs to a select few (RM3.5billion), you get the idea. Billions and billions of ringgit which should have gone to the people's treasury ended up in the pockets of politically-connected businessmen or former politicians. This is a massive leakage.
There are numerous other leakages from the revenue side which has never been adequately explained by the government.
By arguing that leakages and corruption are only limited to the procurement side of the budget, either Khairy has missed the wood for the trees or he deliberately chose to downplay the massive gains once the holes on the revenue side are plugged.
True, if we add all these leakages up, it may not be sufficient to pay for all the Opposition's promises, but the gap is much narrower that he would have us think otherwise.