Government Budget for 2025 will be tabled in Parliament next week on October 18th. The conversation in the mainstream, on-line and social media have begun to pick up and the coverage will be bigger next week leading to Budget day.
Seldom this blog delved on the Budget before it is tabled. Its decades since this blogger bothered to watch the live Budget presentation. Prefer to buy up all the newspapers the next morning to read the highlights and wait for analysts' reports on Monday. Perhaps, this year will be an exception.
It is not because of the turmoil in Europe. Middle East and on-going "pivot" on China. And, not because media was mum prior to the Bukit Mahkota by-election and only started to deal with the less-than-rosy news coming.
The boring predictability of Budget discussion by politicians and public is that its too focused on the spending side. Repeatedly discussed are demand for larger allocations, arguement for prioritising this over that, and what government should do, et al, but hardly anyone talks about where the revenue will be coming from.
For almost a year, this blogger have been concerned with the declining tax revenue despite Royal Customs delivering beyond expectation under its new and lady Director General. The percentage decline heard to be about 15%.
Government is in dire need to reduce its fiscal deficit, raise its revenue and in comparison to the rest of the world, the Malaysian economy is undertaxed, yet BN government was toppled and Najib slandered intensively for introducing GST.
In the light of all thesse, Huzaime Hamid's tongue and cheek comment in his column in Edge Weekly Sept 30-Oct 6 issue caught this blogger's attention for the accuracy in touching the crux of the budgetary and economic issues with few suggestions made to improve common rakyat well beings.
It is reproduced below albeit two weeks later:
Four suggestions for Budget 2025
By Huzaime Hamid / The Edge Malaysia
It’s that time of the year again, when public finance economists get quite excited. Yes, you guessed it, it’s national budget time, when economists put forward their suggestions for the budget, with fiscal and monetary policies in mind. Industrialists do the same, usually requesting things that would benefit either their industry or company. Most vocal of all would be the non-governmental organisations, announcing their wish lists to aid those whom they represent.
It sounds like it is a “temasya” (festival), but it isn’t — it’s deadly serious. Many years ago, I attended one pre-budget session and the prime minister actually sat through the whole affair and got the appropriate government representatives to reply on the spot why they could or could not accept the proposal. Talk about accountability and transparency. One wonders if that happens now.
Well, this year’s budget is going to be a painful one, given the rather dark outlook for the world economy (which, according to the World Bank, is finally stabilising after years of downturn but is still at a multi-year low); interest rate cuts happening globally but with macroeconomic numbers seeming to point towards caution and a steady pace of cuts rather than an all-at-once approach; protectionism, started by the Americans under President Donald Trump, building up everywhere; the war in Ukraine threatening the world’s food supply and genocide in Palestine shaking the foundations of world security.
Several developments have occurred in Malaysia. For the rakyat, a host of tax increases has hit prices and affordability, while wages remain flat given that companies are barely recovering from the ruinous Covid-19 lockdowns. The subsidy withdrawal for diesel is starting to result in higher transport costs and consequently, higher retail prices. A wholesale salary increase for civil servants, who form some 10% of the country’s labour force, only adds to the pressure on the national budget. One wonders if the old formula of spending what one projects to get next year is going to be broken this coming year, meaning higher than anticipated budget shortfalls.
Private consumption remains the prime driver of the economy, accounting for 61.2% of nominal gross domestic product as at March 2024, according to Bank Negara Malaysia. Yet lower affordability for the rakyat threatens private consumption. Revelations on the actual cost of living in Malaysia show how difficult life is. For example, every chance to take out money from the Employees Provident Fund is seized upon. “The future must take care of itself later; one needs to eat now,” is the rationale. Aid that is only a few hundred ringgit is welcome but quite ineffective. If private consumption goes down, so would the economy, obviously.
Hence, to relieve the pressure of high living costs, it has been suggested that the rakyat be given a 5% income tax cut for the next five years to allow them some financial breathing room and to get their lives back on track. For companies, an income tax cut of the same quantum for the same period has been proposed to enable them to recover and regain strength. It must be remembered that companies are, by far, the biggest employers in the Malaysian labour force. Imagine if they collapsed.
On the subject of aid, there have been several schemes for those in the B40 category, which are the lowest 40% of the country’s earners. At the same time, there is a problem of inadequate retirement savings. As far as we can see, aid that is eligible to pensioners, aged 55 and above, requires registration but couples only receive RM150 a month and individuals RM100 a month under the Sumbangan Tunai Rahmah (Rahmah Cash Aid). Given that the minimum wage is currently RM1,500 a month in Malaysia, the amount given under this scheme is hardly enough.
As such, the second proposal is twofold: One, all non-civil service retirees in the country should be made eligible for government aid, as quite simply, they generally fall into the B40 category as soon as they retire. Registration should be made automatic (the National Registration Department would have the necessary records). Two, the amount of aid should be enough to allow the warga emas to live a dignified life. Let us start with the minimum age amount first. Needless to say, this amount should be given to individuals, and not to a group of people collectively, such as couples.
Third, growing domestic industries is the way to make Malaysia a developed nation. Towards this end, the country needs to impose protective tariffs for its local industries to allow them to grow and compete against foreign competitors. This is allowed in international trade rules under infant industry provisions. In this age of heightened protectionism, doing so would be a form of “keeping up with the times”.
Last but not least, to inculcate a lifelong learning habit, it is proposed that the RM1,000 annual book allowance be reinstated in full. This allowance has been merged with another category, not only reducing it but making it indistinguishable from other allowances. Already, Times bookstore has closed; which is next? Furthermore, to keep up with the times, it is proposed that electronic books and periodicals, including research papers, be included in this category.
Happy budgeting!
Huzaime Hamid is chairman of Ingenium Advisors, Malaysia’s financial macroeconomics advisory, and has just launched his second of two books on economics and finance published by UM Press
Suggestions to address the problems of the rakyat is greatly appreciated.
Still, its about the spending side. Government's PR machine can gloat on the stronger ringgit to claim country is out of the deep hole but remember that Malaysia is not out of the wood yet.
One can talk about raising living standards, or various enhancements or fiscal responsibility or 16th Malaysia Plan and its challenges, but do "show me the money" to finance all the plans!
Otherwise all the planned expenditures will end up being repeatedly mentioned at every Budget to give false impressions of big plans in the works which is no different than the myriad of past PAS Kelantan government grandeur project launches.
Government need to look at the rakyats' needs and problems wholeheartedly from "cradle to the grave" and strategise a way forward.
Privatising all the governments' revenue generating assets have proven to be a disaster to the government coffer and social programs. The outcome is presently felt with the masses becoming victims of depravation.
Rafizi need to start showing formulae more original and effective than growing chilies or introducing vending machines or announcing civil servants' copycat of policy ideas from UN or World Bank/IMF or WEF.
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