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10 APRIL 2024

Monday, September 30, 2019

What can we expect from Budget 2020?

Budget 2020 will be tabled in Parliament on Oct 11. This will be the second budget of the new Pakatan Harapan government, after 60 years of Barisan National rule.
 Last year, there was too little time to properly plan and introduce budget proposals that would clearly define the new Harapan policies and directions.  
 Hence, this Budget 2020 must show the difference and reflect more of the new government`s socio-economic thinking and plans and proposals for the 12th Malaysia Plan as well.
 Budget 2020 strategy

So, what could be the strategy for Budget 2020? In devising the strategy, the Treasury would have to take into account the world economic environment and outlook. All the major international economic agencies have highlighted the economic slowdowns for all economies. 
With the continuing trade war between the two economic giants, the US and China, the trade outlook seems poor. With the persistent turmoil in the Middle East and the unpredictable petroleum prices and the growing uncertainties of global climate changes all over the world, including the damaging haze in our country and our region, the prospects for economic and financial declines are becoming real.
Consequently, the Malaysian economy is expected to suffer from a slowdown that could cause economic growth to fall to 4.0 from 4.5 percent 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 government salaries, debt and pensions will have to be nevertheless serviced.
Hence, Budget 2020 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.
 Budget 2020 theme of shared prosperity
So, what would Malaysians rightly expect from Budget 2020? The majority of Malaysians will expect the budget to reveal the new proposals to better reflect the budget theme entitled 'shared prosperity, as follows:
1. The poverty line is currently too low as indicated by the recent UN Report. The Budget 2020 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 percent of the Malaysian 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 appropriately and 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 gap. The income inequality gap between the rich and the poor has to be bridged, if we believe in implementing the UN-inspired sustainable development goals (SDGs), especially pertaining to no poverty.
4. The digital economy is catching up faster than we expected. Hence, the budget has to introduce new Incentives to encourage, especially the small and medium industries to innovate more to adopt the new technologies of the digital age of Industry 4.0 and 5.0 in the future. If SMEs in China can do it, why can't we? Maybe we should invite the China experts to help us here?
5. Environmental challenges are threatening our future growth, income distribution and progress. This is evident from the way we treat our own rubbish disposal and the rubbish from foreigners e who dump their rubbish for us to clean up, or worse still, that we silently ignore and endure. We even tolerate toxic industries which others reject. Surely, the budget has to come out with new proposals from the new government, which should be different from the past corrupt government?
6. Technical and vocational training and science and technology should be given more allocations in Budget 2020. We cannot urge the Education Ministry to do more when we allocate them less than their basic financial requirements.
But equally important is the need to choose trainers on the basis of merit and real skills rather than to employ under-qualified teachers who can`t perform satisfactorily. Then we will have more unemployed graduates and more public frustration.
 7. Health and other social services should also be reviewed and revised under the new Harapan government. The long-awaited health insurance scheme could be introduced in the budget 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 sector 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 the shared prosperity policies. The wealthy could be taxed more. How else do we share prosperity? The Nordic and many developed countries have superior welfare services. But this is because their tax rates are much higher and their services are more efficiently provided. They don’t have the wastage and corruption that we have today. Yet we ask for more and want it all for paying far less taxes? 
The Budget 2020 should therefore raise some taxes, even slightly. Foreign investors will not be deterred from investing more in Malaysia due to higher taxes. They are attracted to Malaysia for its natural resources, quality of life, security and safety and future prospects. But we cannot take foreign Investment for granted.
9. Like all Malaysians, foreign and domestic investors look to our national unity, racial harmony, religious appreciation and wellbeing that have to be maintained and sustained, if business confidence is to expand in the future and to be able to compete with our neighbours. 
This means genuine inclusiveness that should include just treatment to all state governments 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 all investors and all moderates anywhere and everywhere.
10. In conclusion, Budget 2020 should encourage and provide incentives to the best talent among us and attract some of the best brains from abroad to come home and stay to contribute to a better, more fair, stable and prosperous and sustainable Malaysia, for all Malaysians and for our posterity.
Finally, most of us Malaysians would expect a realistic and mildly growth Budget 2020 that will give more priority to the poor in the interest of protecting the budget integrity as well as our social stability and real progress for all Malaysians 

The writer, Ramon Navaratnam is chairperson, Asli Center of Public Policy Studies - Mkini

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