NOW that an ostensibly reform-oriented government is in power, will the nation see a budget that addresses the shortcomings of earlier budgets? This upcoming budget is the first real test for Prime Minister (PM) Datuk Seri Anwar Ibrahim’s administration. We will see how reformed the new administration really is.
For reform to begin in earnest, the new government must tackle the major challenges facing Malaysia that are outlined here. Otherwise, this year’s exercise could end up as another instrumental agency misshaping the country’s socio-economic development further, which is clearly evident from the following:
-> The widening gini index of inequality. Gini coefficient inequality worsened from 0.399 in 2016 to 0.407 in 2019. This was the first time since 2004 that the household income gap had been recorded as widening.
-> Poverty numbers remain large and have grown, with little evidence of progress in the last decade. According to the Department of Statistics, in 2021, a majority of households experienced a decline in income, with many households from the higher income decile group moving to the lower income group. Twenty percent of households from the M40 group, with income between RM4,850 and RM10,959, moved to the B40 group.
-> Inequalities in regional development have been uncorrected. The latest data has led the World Bank to observe that significant differences now exist between bumiputera in Peninsular Malaysia and bumiputera in East Malaysia, with the latter experiencing more chronic poverty, more downward mobility and less upward mobility.
-> Burgeoning government debt and liabilities have reached record levels. Total government debt and liabilities as of June 2022 was estimated to be at RM1.42 trillion. Federal government debt accounts for 61% of debt-to-gross domestic product (GDP), at RM1.04 trillion, up from RM979.8 billion in 2021. Total debt and liabilities are about 82% of GDP.
Populist but reformist?
The PM has signaled what will be the main concerns in the coming budget. According to reports, there will be a mix of focus on everyday issues, such as cost of living and food security as well as on debt reduction. He has also indicated that he will not reinstate GST until income levels rise.
It is entirely to be expected that the government will want to burnish its populist credentials. On this, while there is a need to act on the larger spectrum of sectoral concerns, it will be crucial to focus attention and prioritise the one or several key budget related policy changes that can make a positive difference to the everyday life of Malaysians and the economy.
One possible game changer
The removal of toll charges on all – or as many as economically prudent – the highways of the nation can be one immediate budget game changer to benefit Malaysians.
Freeing road users from payment of toll fees will not only lift a significant financial burden for road users, especially those from the M20 and B40 groups, but will also have a positive knock-on effect in reducing the transport costs of components of the supply chain and increase the efficiency of most business sectors.
Other benefits are the reduction of physical and mental stress of road users due to shorter trip times. This will lead to improvements in the rakyat’s quality of life and generate other indirect socio-economic returns.
One source in 2019 had estimated that the taking over of all 29 toll highways in the country would cost the government a total of RM130 billion to RM145 billion, inclusive of about RM52 billion in debt. The total annual cost of maintaining these toll roads was estimated at RM1.5 billion to RM2.5 billion.
Today, the cost of any takeover will be higher but this is affordable to the nation’s treasury, which has been padded by rising oil and gas revenues. Although local businesses are among the concessionaires owning the toll highways, some of the major toll companies are government linked entities.
The government share of ownership can help finance the buying over of toll highways in agreements that are fair and reasonable to all parties. The fact is that most concessionaire holders have already been well remunerated for their investment.
As for the concern that conversion of concessionaire operated toll roads to free highways may result in the toll highways not being well maintained or economically unsustainable, the Works Ministry, which is responsible for public works and highways, with an enlarged budget from the several billion ringgit annual collection of road tax receipts should be able to ensure the efficient running of the takeover highways.
Tackling long standing issues
While the PM’s promise that the new government will take up and prioritise the public concerns of the day is reassuring, he must also begin to address the structural deformities in the nation’s socio economic situation.
Despite the challenge that the PM and the government face on the political front, the launch of the new budget provides a historic opportunity for:
-> Nurturing more competitiveness. Malaysia is suffering a relative decline in productivity growth. This must be turned around to sustain economic growth.
-> Shifting from a low cost labour production towards creativity and innovation-led industries, run and operated by the private sector. Government-linked companies have been good in rent-seeking monopolistic and oligopolistic structured industries. These business units are coming to an end in their potential to keep growing without further subsidies by the taxpayer.
-> The low wage model has given rise to the huge brain drain. This needs to be checked to enable Malaysia to seek new growth engines.
-> There needs to be radical changes to the education system. Within humanities, there is a glut of graduates in relation to job availability. The value of these degrees in current and future employment is questionable. Thus, there needs to be a radical evaluation and immediate change plan on curriculums and what is taught.
-> There needs to be a refocus towards Tvet (Technical and Vocational Education and Training) to provide relevant skills to sole proprietorships and SMEs (Small and medium-sized enterprises). The MSME (Micro, small and medium enterprises) sector is a major section of the economy that can be quickly enhanced through Tvet. This will have quick and positive effects within some of the B20 and M40 groups.
-> There must be an SME centred rather than a government-linked company centred budget. Pouring extra money into the public sector is only adding to inefficiency and leakages.
-> The systemic corruption raging through the public sector must be stemmed through reform of the Malaysian Anti-Corruption Commission and within the civil service itself.
The big challenge
To tackle the major concerns identified here – widening income inequality, rising poverty levels and regional inequalities – the government needs to craft a universal basic income mechanism and appropriate social safety net. This will require a new development paradigm for the nation to reverse the current pattern of wealth accumulation and concentration which, while rewarding the upper and middle class, has been hijacked by a small elite to the detriment of the national interest and that of the great majority of Malaysians.
The shaping of the new paradigm and the type of reforms that are necessary to go along with it can emerge from unimpeded public discourse.
Lim Teck Ghee’s Another Take is aimed at demystifying social orthodoxy. Comments: letters@thesundaily.com
