The proposed budget 2002 will not differ much from the previous year as another 'counter-cyclical reflationary' budget is expected, said an economics professor today.

Universiti Malaya's Prof KS Jomo said Prime Minister Dr Mahathir Mohamad's 1999 budget when he was finance minister as well, was also a deficit budget justified to reflate the economy.

"With the economic slowdown this year and his various pronouncements in response, even before he became finance minister again, one can expect the same this time," said Jomo when asked to comment on the new budget to be unveiled in Parliament tomorrow.

"The initial RM3 billion budgetary stimulus announced earlier this year - as the slowdown became painfully obvious - has since been acknowledged to have failed, suggesting that it was poorly conceived in the first place," he added.

In March, the government unveiled a RM3 billion supplementary budget outside Parliament to shore up the economy to counter the slowdown in the US economy.

The US accounts for about 19 percent of Malaysia's global trade, mainly in rubber products, textiles and clothing, optical and scientific goods, electrical and electronics products and wood products.

Less significant

Jomo said the "increasing ad-hocism" of fiscal policy is worrying because it implies that overall policy balance and coherence is not considered important.

He said it must be noted that the annual budget has become less significant in recent years as major fiscal commitments have been made between budgets.

"This may be a good thing if it only implied the flexibility and responsiveness of government budgetary policy," he added.

However, Jomo said at times major policy announcements requiring legislative approval have been made outside of Parliament without securing such approval.

This, he said, is perceived as reflecting the "growing concentration of powers and arrogance of the executive and the parallel marginalisation and irrelevance of the legislature".

"This includes the huge majority of Barisan Nasional members of Parliament and ministers with relevant responsibility and jurisdiction," said Jomo.

"While there has been some improvement in holding some of the so-called off budget agencies or non-financial public enterprises more accountable, there has been a huge increase in off-budget activities, initially mainly financed by Petronas, but also with the Employees Provident Fund and Khazanah Nasional."

Mega projects

Jomo said public financing of mega-projects will only worsen Malaysia's current account deficit and further undermine confidence in the economy and currency.

He said such financing, although justified as part of the effort to increase domestic demand, will involve importation of materials from abroad.

"Thanks to our very open economy, external demand accounts for more than 40 percent of total demand in our economy.

"But you can be sure that most of these mega-projects will involve importation of materials from abroad, for example, for the twice-revived Bakun Dam project, which will only worsen our current account deficit and further undermine confidence in our economy and currency".

Jomo said the proposed budget should focus on social projects which would benefit the nation.

"I would favour committing far more resources to, say, accelerating the programme to ensuring only single-session schools within the next five years and to adequately computerise all secondary schools besides drastically increasing urban low -cost housing provision with creche, day-care and kindergarten facilities in all rural and urban communities," he said.