IN devising the budget strategy for Budget 2020 the Treasury would have to take into account the world economic environment and outlook. All the economic agencies have highlighted slowdowns for all economies. With the trade war between the US and China, the trade outlook seems poor.
With the persistent turmoil in the Middle East and unpredictable petroleum prices and the growing uncertainties of climate change, including the damaging haze in our region, the prospects for economic and financial declines are becoming real.
Consequently, the economy is expected to suffer from a slowdown that could cause the economic growth to fall to 4-4.5% next year. Growth may even be less in the years ahead – but who can say for sure?
Then unemployment, especially of our graduates will rise, incomes are likely to fall, inflation is unlikely to lessen and life especially for the B40 groups and particularly the B20 group can become very difficult.
Budget revenues would also decline, while the government salaries, debt and pensions will have to be nevertheless serviced.
Hence, the 2020 Budget will face severe constraints. The budget deficit will be under greater pressure to rise instead of falling, as the government had planned to achieve. In the meantime, the global rating agencies are watching our budget closely.
But hopefully they will have to be more realistic and allow our budget deficit to rise slightly, to face the global economic challenges and to enable Malaysians and particularly the poor to live more comfortably, despite the economic slowdown.
The majority of Malaysians will expect the budget to reveal proposals to better reflect the budget theme entitled shared prosperity, as follows
1. The poverty line is too low as indicated by a recent UN Report. The budget has to come clear on this vital issue, as the new poverty line will provide the basis for the budget’s expenditure policies and allocations to fight poverty.
The budget should have a special package of anti-poverty proposals for the lowest 20% of the population regardless of race and religion. This will be a new bottom-up approach, which will be widely accepted as just and fair, in accordance with our national values .
2. Our minimum wage is low and could be raised gradually to a decent living wage. The basic initial adjustments could be announced in the budget speech.
3. Inflation has been rising and should be contained. Here again there should be different cost of living indices for the poor. This would help more specific policies and projects and programmes to alleviate poverty and to reduce the widening income gaps. The income inequality gap has to be bridged if we believe in implementing the UN inspired sustainable development goals, especially pertaining to poverty.
4. The digital economy is catching up faster than expected. Hence the budget has to introduce incentives to encourage especially, the small and medium industries to innovate more to adopt new technologies of the digital age of Industry 4.0 and 5.0. If SMEs in China can do it – why can’t we. Maybe we should invite China’s experts to help us.
5. Environmental challenges are threatening growth, income distribution and progress. This is evident from the way we treat rubbish disposal and the rubbish from other countries. The budget has to come out with new proposals.
6. Technical and vocational training and science and technology should be given more allocations. We cannot urge the Education Ministry to do more when we allocate it less than its basic financial requirements.
But equally important is the need to choose trainers on the basis of merit and real skills rather than to employ underqualified teachers, who can’t perform satisfactorily.
7. Health and social services should be reviewed and revised. The long-awaited health insurance scheme could be introduced in the budget or as soon as possible.
The very low hospital charges could be adjusted to gain more revenue. The poor need not pay higher charges, but the better off could be charged more and be encouraged to use private medical services. This important principle could be applied across the board to be fair to all. After all this could be shared prosperity?
8. Taxes should be slightly and gradually increased under shared prosperity policies. The wealthy could be taxed more. How else do we share prosperity? Many developed countries have superior welfare services because their tax rates are much higher and their services are more efficiently provided.
The 2020 Budget should therefore raise some taxes, even slightly.
Foreign investors will not be deterred from investing more by higher taxes. They are attracted to Malaysia for its natural resources, quality of life, security, safety and future prospects. But we cannot take foreign investment for granted.
9. Foreign and domestic investors look to our national unity, racial harmony, religious appreciation and wellbeing to be maintained and sustained, if business confidence is to expand.
This means genuine inclusiveness that should include just treatment to all states and particularly to the poorer states of Sabah and Sarawak as promised in the M63 Financial Agreements.
Too much politicking, racialism and religious bigotry will not be tolerated by investors and moderates.
10. The 2020 Budget should encourage and provide incentives to the best talent among us and to attract some of the best brains from abroad to come home and stay to contribute to a better, more fair and stable and prosperous and sustainable Malaysia, for all Malaysians and for our posterity.
Finally, most Malaysians would expect a realistic and mildly growth 2020 Budget that will give more priority to the poor, in the interests of protecting the budget integrity as well as our social stability and real progress for all Malaysians
Tan Sri Ramon Navaratnam is chairman of the Asli Centre of Public Policy Studies. Comments: firstname.lastname@example.org