Budget 2020 should lead in making shared prosperity a reality

On Sept 19, in the midst of the worsening haze condition, Universiti Malaya became the venue of a public forum organised by IDEAS on the upcoming budget and how it can help realise “shared prosperity” in Malaysia.

Four panellists with quite diverse backgrounds presented their views.

The first to speak was Laurence Todd, who presented the IDEAS research teams’ suggestions for Budget 2020: introduce a living wage tax credit, an employee equity scheme, capital gains tax and introduce a government divestment strategy.

Next, Dr Jeyakumar Devaraj of PSM presented his views on a very fundamental issue about labour productivity. In a very simple but effective way, Jeyakumar questioned “global value chains” and how the economically dominant firms/countries extracted “surplus value” from developing nations.

Many nations in Asia and Africa were competing for foreign direct investment and, in the process, reduced taxes and kept wages low — which was then rationalised as a reflection of low productivity.

Jomo KS, now with Khazanah Research Institute, then talked about why a prudent deficit budget, with attention given to health, education and other necessary social expenditure, was greatly needed in Budget 2020. A correct understanding and implementation of Keynesian counter-cyclical expenditure was needed, he said, to mitigate the worsening economic situation and to set the tone for a true shared prosperity.

He called for a re-look at alleged corruption-riddled projects, such as the East Coast Rail Link (ECRL) that, according to him, had no significant long-term economic benefit for Malaysians.

Finally, Nik Nazmi Nik Ahmad of PKR talked about why shared prosperity could not continue to be seen from an ethnic lens per se. Discourse in Malaysia must promote a genuine needs-based agenda. He shared various statistics that showed how the New Economic Policy, while having positive results in some areas, also seemed to have created a small but super-rich class among the Malays/Bumiputeras.

Tremendous challenges

As we await the Budget 2020 presentation in mid-October, it has been stated repeatedly that the current Pakatan Harapan government is facing tremendous challenges —from unfulfilled promises of the PH electon manifesto to convincing the people who voted them in that they are genuinely different from the previous government.

The mid-term review of the 11th Malaysia Plan, that was presented last October, had no real input from the current government. While Budget 2019 last October was possibly one policy document that did have some PH flavour, it was basically a “defence mode, fire-fighting” budget.

Dealing with the national debt and trying to renegotiate some questionable infrastructure projects took most of the attention of the new Cabinet.

Hence, Budget 2020, just around the corner, and the upcoming 12th Malaysia Plan (that should already be in its final stages) will be the first genuine PH policy document.

The Shared Prosperity Vision 2021-2030, announced by Prime Minister Dr Mahathir Mohamad a couple of months ago, is still just that — a “vision” document.

Saying we need to ensure that everyone gets their fair share of the pie and that we need to reduce the gaps between regions and communities is the same thing that has been said for 50 years since the New Economic Policy (NEP) was introduced, albeit using different phrases.

It is the details of how this vision is to be implemented and realised that Malaysians are waiting for — some patiently, while others are getting increasingly impatient.

While Jomo was right in calling for the government to increase its spending (deficit budget) in “hard times”, this has also been the case for every budget since independence, except for a few years in the early 1990s. The government has been spending but the issue is — has the spending been done prudently?

The PH government intervened and in some cases, renegotiated/terminated contracts to reduce costs. However, the basic “system” needs overhauling so that it does not replace old bad practices, with new bad practices —cronies to the old establishment with cronies to the new (in some cases, they could be the same!).

In trying to achieve “growth with equity” since the 1970s — something that can also be seen as similar to the current “shared prosperity” vision — we have to see what the criteria of shared prosperity policies will be.

‘Needs-based shared prosperity vision’

Hence, Nik Nazmi rightly pointed out that a viable and genuine “needs-based shared prosperity vision” may be the answer in Budget 2020 and the upcoming 12th Malaysia Plan.

No more can crude ethnic comparisons be made without also addressing regional and intra-ethnic inequalities. Is there a difference between being oppressed by someone from the same region or ethnic group as opposed to someone from another?

Politically, it may matter. However, from an economic point of view excessive intra-ethnic, inter-ethnic, inter-regional and intra-regional inequalities are all forms of injustice that must be corrected.

Concentration of wealth — whether it is the concentration of commercial properties in urban areas by apparently one ethnic group, the concentration of Employees’ Provident Fund (EPF) savings among a small percentage of Malaysians from all ethnic groups, or the highly-skewed ownership of Tabung Haji savings and ASB unit trust shares, among the Bumiputera/Muslim/Malay group — requires attention if we are to make genuine shared prosperity a reality.

Should the Malay/Bumiputera community feel happy that they also have members in the super-rich club, while a large number of Malays/Bumiputera are still languishing in the B40 low-income category and have virtually no savings at all? This outdated “sharing” along ethnic lines must give way to a more relevant discourse on shared prosperity.

As Malaysia Baru moves forward, this shared prosperity vision must take on a Malaysian identity. Based on the principles of justice and equity, together with the guiding provisions in the Federal Constitution, the shared prosperity vision of the PH government needs to have a new format.

Start with the way budgets and, especially our five-year plans, are presented. These government documents should present economic development statistics as well as poverty alleviation and inequality reduction measures using a “Malaysian” framework that gives priority to a needs-based approach.

Of course, we cannot totally neglect ethnic-based realities, but I would argue that following a genuine needs-based approach would also resolve ethnic inequalities.

Choosing best person for the job

The late Syed Hussein Alatas, when asked why he did not follow ethnic quotas in appointing deans/heads in Universiti Malaya during his tenure as vice-chancellor, answered that not everything required quotas, sometimes you needed the “best person” for the job. This is still relevant today.

While ethnic comparisons are not going to disappear in the near future, to a certain extent, the highlighting of the state of bottom 40 (B40), middle 40 (M40) and top 20 (T20) in the last 5-10 years in Malaysian economic discourse has been a welcome feature of government reports.

However, it may also be important to compare between the T20 and T2; between the B40 and B5 or B10. Without any real studies and detailed figures available to me, I still think we would be very surprised to see the figures and how over the last five decades — in the name of the NEP or Malay/Bumiputera agenda — a very small elite group at the top, cutting across all ethnic groups, actually dominates the wealth in Malaysia.

That raises another issue concerning data and statistics in Malaysia. In order to truly have a genuine “national discourse”, reliable and timely data/statistics must be easily accessible to all researchers. The idea of “sensitive” data should be generally dismissed.

In addition, there is no need for the government to charge anyone a fee for data that comes from public money in the first place unless absolutely needed.

In addition, our government officials should not be overly sensitive when they are criticised. The recent hoo-haa about poverty statistics is a very good example. In actuality, there is nothing new in what the UN Special Rapporteur on Extreme Poverty and Human Rights Philip Alston said. Malaysian academics have been talking about the unrealistic poverty income line for decades.

The more vocal ones were branded “opposition supporters” and marginalised while many others have usually been ignored.

The quality of new academics has also resulted in a situation where government policy for the last three to four decades has been done by government officials and supported by “trusted” academics. It does not take complicated formulae to tell you that a family of 4.2 cannot survive on RM980 ringgit a month in Kuala Lumpur. However, this figure continues to be used.

Finally, what Budget 2020 can do to realise a needs-based shared prosperity vision is to prioritise genuine “Malaysian partnerships” —business ventures that manifest the multi-ethnic, multi-religious and regional diversities of Malaysia, based on the Malaysian constitution.

The government should consider giving tax breaks and other tax incentives to those who demonstrate a genuine “Malaysia Baru” spirit.

In addition, incentives can also be given to those who show good governance and acts of benevolence in developing Malaysia Baru (improve and expand the existing charity-giving provisions).

This kind of recognition for a Malaysian shared prosperity vision in Budget 2020 then needs to be carried forward in the 12th Malaysia Plan. It will need a government with a genuine Malaysia Baru vision and political will to steer the nation forward.

Conversely, those who want to argue from a narrow negative group viewpoint should also be engaged rather than simply marginalised or dismissed for their views. More such public forums like the one at UM —forums that cut across ideologies, ethnicities and religions — need to be organised so that Malaysians develop a keen and healthy culture of exchange.

By listening to others’ views, it will help us empathise and go a long way in developing understanding among all Malaysians. Bravo to IDEAS and may many more public forums like this be organised in charting out our shared vision.

Mohamed Aslam Haneef is professor of economics at the International Islamic University, Malaysia. - FMT