2016 Budget: A Preview

SHAH ALAM: ARMED Forces chief General Zulkifeli Mohd Zin is not known to shy away from a fight. But even the veteran soldier seemed uncomfortable when the conversation turned to the 2016 Budget at a function on Thursday.

He did not really say anything on the budget – he would have to if I had followed up with a question – but his body language was enough to show – at least to me – that the Defence Ministry will get a big hit when the Prime Minister presented the 2016 Budget on Oct 23, 2015.

General Zulkifeli was speaking to the press after a ceremony to honour serving and retired Armed Forces personnel who were injured in service. During the meet and greet session prior to the ceremony, Zulkifeli even said the food served for lunch was too little “due to the economic crisis”. It could have been a joke but the lunch menu seemed to reflect what he had said.

The Sultan of Johor conferring the GGK Golden Jubilee medal to Armed Forces chief Jen Tan Sri Zulkifeli Zin
The Sultan of Johor conferring the GGK Golden Jubilee medal to Armed Forces chief Jen Tan Sri Zulkifeli Zin

At the Press conference later, General Zulkifeli acknowledged that one question he could not answer was “when will the disability pension be increased?”. It was the most repeated questions especially from those who had retired. He said the Armed Forces had forwarded the request to the government and hopefully “it will be raised when the government can afford it”.

It was at this point I knew I could asked about the 2016 Budget, but I decide against it. There are still less hot-button issues – the AV4, Blackhawks, Yemen and others – that had not been asked. So I decided to focus on the issues and leave the budget questions to the politicians.

Anyhow, as I stated before it is likely that the budget for the Defence Ministry and the Armed Forces will be reduced next year. No one I spoke too was able to come out with a figure though so its up to me to come with it based on my conversations and a review of the budget for the last ten years.

A graphic from the Finance Ministry 2015 budget document on the allocation for the Defence Ministry.
A graphic from the Finance Ministry 2015 budget document on the allocation for the Defence Ministry.

(The budget from 2011 to 2014 are the final allocation for the financial year including the additional funds sought during the mid-year, an annual ritual)

Based on the graphic above, we can surmised that the 2016 budget – the first in the RMK11 – could even be lower than the 2011 figure (RM14.2 billion) the first one for RMK10.
How much lower? It will be RM12.1 billion, of which RM11.3 billion will be the Operating Expenditure (OE) while whats left will be the Development Expenditure (DE) or procurement budget.

What they are going to do with around RM800 million for procurement then? Not much really, apart from all of the project already in the books like the LCS, AV8, A400M (one this December, with two more in 2016) and the Pilatus PC-7 Mk II (to be delivered by early next year).

If thats the case, can the Ministry signed on for new stuff? Yes, they can as most of the payment only starts when the items are delivered.

A US MH-6 Little Bird carrying operators on a rig designed to carry personnel. US Army picture
A US MH-6 Little Bird carrying operators on a rig designed to carry personnel. US Army picture

It must be noted that if the OE is at RM11.3 billion, 60 per cent of the amount will be for Emolument (salaries and allowances) and the rest is for non-personnel emoluments like operational costs from fuel, spare parts and maintenance.

RMAF Beechcraft B200T MPA
RMAF Beechcraft B200T MPA

So the Armed Forces will have to make do with around RM4 billion or so to pay for its operations for the next 12 months even though it has more stuff – new and old – than five years ago. Basically each services will get around RM1.5 billion each to pay for everything. Yes they can ask for extra allocation during the mid-year review but it will be very tough for those planning operations and maintenance.

And that if the Defence Ministry gets the amount I am predicting. What if its lower then? You guess is a good as mine. As for the Home Ministry and its agencies, it will also be in the same boat as Defence though its unlikely they will curtail normal policing operations.

Home Ministry's five year allocation from the 2015 budget.
Home Ministry’s five year allocation from the 2015 budget.

I am also of the opinion that the Home Ministry will get a lower allocation that the 2011 figures. Again as the 60 per cent of the OE allocation will be for Emolument, the DE will also be much smaller. For 2016, I expect that the Home Ministry allocation will be around RM9.5 billion – RM9 billion for OE and RM500 million for DE.

Anyhow, please check back this website on the evening of Oct 23, 2015, for the review of the 2016 budget. I hope I am wrong about the allocation for defence and national security.

— Malaysian Defence

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