I feel a little funny this morning when I read the news item, ‘Customs Dept to be corporatised, says Najib'. These are the points I gathered:

First, only through corporatisation could a government agency offer a better scheme of service to its staff and hopefully provide more efficient service to the people.

Second, the Goods and Services Tax (GST) is the panacea of Malaysia’s fiscal problem. Without GST, Malaysia would have faced financial dire straits. Fiscal deficit would have escalated from 3 percent of gross domestic product (GDP) to 6 or 7 percent. Therefore, GST is implemented for a purpose - to “safeguard the welfare” of the people.

Third, without GST, the value of our currency, the ringgit would drop to RM6 or RM7 against the US dollar compared to the current rate of RM4.45.

Fourth, our international ratings (I believe it is our sovereign ratings) would drop further since we need to borrow more for the country’s development.

Fifth, if we want to see Malaysia transformed into a developed nation, GST is necessary because it is the “best tax system” in the world.

Please allow me to rebut each of the points stated above:

First, unwarranted corporatisation of government agencies is not a cure but a recipe for disaster if we are not careful. Government agencies must operate based on proper regulations and control. Government functions such as revenue management, customs, immigration, prison, law and order and security cannot be corporatised.

Corporatisation without proper oversights would lead to abuse and massive moral hazard problems as in the case of so many government-linked companies (GLCs). If fiduciary duties and governance of many government departments and statutory bodies have run out of control, making them into GLCs without proper oversights would make the situation worse.

Second, Malaysia fiscal problem is due to our profligate way, not whether or not we have implemented GST. If we are too lavish, wasteful and lack of governance, how could another source of revenue help?

Make no mistake; Malaysia’s fiscal problem arose from the expenditure side, not the revenue side. No amount of revenue is able to fill up the bottomless pit. Just ask ourselves where did the oil windfall go over past decades? With GST, the people are burdened, but the fiscal position of the government is not getting better. We can all compare the numbers, no problem.

Third, the value ringgit is dependent of many factors, but certainly not due GST contributing positively to it. It is almost ridiculous to state that our ringgit would drop to RM6 or RM7 against the US$ if Malaysia has not implemented the GST. Ringgit is about confidence - how Malaysians and foreigners look at this country politically, economically and socially. If GST could help the ringgit so much, why don’t we increase its rates to “strengthen” the ringgit further?

Fourth, on international ratings, again it is important to look at all the relevant factors, not just the ability of GST to raise revenue. No doubt, more revenue would help to reduce borrowing but it is also how the country’s resources, including borrowings, are used. If expenditures are unproductive or lead to mediocre/negative returns, it does not matter we borrow less because we have higher taxes.

Fifth, I think it is too sweeping to infer that the GST is the “best tax system in the world” and with it, Malaysian will transform itself into a developed economy. If it is that easy, all we need is GST. Why then the need for the Performance Management and Delivery Unit (Pemandu) and its half-baked transformation agenda being hawked around ad nauseam.