Economic priorities for GE15

 

As we head into GE15, here is my list of the main long-term economic challenges that must be addressed in the upcoming debates:

1. Universal basic income (UBI): Average and median salaries are 6% and 8% below pre-lockdown levels. Converting the RM42 billion subsidies from Budget 2023 to a UBI would provide RM1,200 per month to all B40 households or RM800 per month to the B60 compared with RM74 per month under Bantuan Keluarga Malaysia.

2. Universal basic pension (UBP): A total of 73% of EPF members have below poverty level savings for retirement, and 81% of them are bumiputeras. Around 96% of EPF members cannot reach a living income in retirement. A Malaysian SuperFund combining underperforming funds can give a UBP of RM1,000 per month to 70% of pensioner households.

3. Healthcare funding: Combined public and private healthcare expenditure in Malaysia is close to the international benchmark of 5% of GDP but the systemic dysfunction in the management and leadership of the healthcare system has created a toxic, inefficient environment which must be fixed before further funding is provided.

4. Unemployment and underemployment: There is no labour shortage in Malaysia, just bad workforce management and leadership. Underemployment affects about 2.4 million and 642,000 are unemployed, 7.3 million people are not in the workforce, including 840,000 graduates. That is 10 million Malaysians including, highly educated graduates, available for work.

5. Wages, salaries and employment conditions: Malaysian employees receive less than 40% of the value they create. Minimum wages are often not enforced even for government contract workers. Without effective enforcement options or regulations Malaysia has neither a free labour market nor a regulated labour market. Reform is essential.

6. Foreign workers and talent: Tens of billions have been lost across plantation, construction, manufacturing, retail and tourism sectors as well as in taxes from spending. Recruitment costs including agency fees can be RM33 billion to RM44 billion in non-productive transaction fees. Complete liberalisation of the labour market is needed to reduce agents, cartels and corruption.

7. Education, skills and training: The skills mismatch has put 1.8 million in skills-related underemployment while employers have too few properly skilled candidates. The combined RM30 billion for public (RM15.1 billion) and private higher education (RM7.5 billion) and TVET (RM6.8 billion) can improve these outcomes if the system is reformed.

8. Student debt and PTPTN: The RM40 billion debt PTPTN uses to issue new loans is almost depleted while students are burdened with debt and low salaries. The student loans system must be reformed to remove the systemic risk and provide a sustainable higher education funding system for all stakeholders.

9. Businesses and enterprises: For decades, government blueprints, soft loans and grants have not created a vibrant environment for SME growth. The current start-up and scale-up ecosystem emphasises specific projects for specific groups. Businesses need wider market space, removal of barriers to SME growth, greater export orientation and reduced regulation.

10. Responsible privatisation: The top 35 GLCs have 68,000 subsidiaries. These crowd out SMEs and are channels for patronage and corruption. Responsible privatisation would aim to sell enterprises that are non-critical, non-core and not strategic or which duplicate private functions. Revenue can help fund the Malaysian SuperFund for social protection.

11. Structural reform: Supply-side reforms promote competition, enterprise, agility, innovation, creativity and investment for sustainable growth and development. Reforms must emphasise deregulation, stronger rule of law, opening market space, reducing GLC and GLIC activities, reforming tax, labour market reform, wider capital access and widening private and foreign direct investment opportunities.

12. Tax reform, efficiency and equity: Malaysia must rebalance the tax system across income taxes, excise duties and GST and SST and the global minimum tax (GMT) which removes tax freedom. Reforms must lower tax rates, widen tax coverage and create a more transparent, efficient and equitable tax collection system.

13. Independent forecasts: An independent, non-partisan, technical, fiscal watchdog reporting directly to Parliament will bring Malaysia into the global best practice in fiscal policy management. This will strengthen the credibility of fiscal policies with credible and transparent budget information and provide forecasts and analysis of fiscal policies and their impact.

14. Housing: Malaysia has houses available at “affordable” prices but few buyers at those prices. This is a market failure. Development subsidies and housing finance schemes are a key cause and must be reformed. The best case scenario is complete reform of the housing market to remove the property overhang.

15. Domestic investment: Shares on Bursa Malaysia have fallen 26.5% since 2014. Private fixed investment as a percentage of GDP has fallen by half over 25 years. Domestic financial markets rely on GLICs for funds and pension and unit trust managers increasingly look overseas to deliver reasonable returns for members.

16. Foreign direct investment: Net foreign direct investment (FDI) has been falling since 2016. Malaysia must have a clear strategy for trade and FDI. Improving the rule of law, fair competition, compliance with international norms and welcoming foreigners will revive the look and feel of Malaysia as an FDI location.

17. Digitalisation and the future of work: Smarter ways to adopt and adapt technology are essential to the future of work but the highest demand for future jobs is in social care, health and welfare. Only 7% of students study these subjects. Balancing digital and social skills creates competitive advantage.

18. Sustainability and green growth: The green agenda or net-zero rightly respects the environment but must not do so at the expense of the sustainability of the incomes and living standards for urban and rural communities or families and individuals. Social issues must be prioritised in a Malaysia-focused sustainability agenda.

19. Inclusivity and women empowerment: Female workforce participation is very low at only 55%. More than five million women are outside of the workforce all together. This is a tremendous loss of economic potential which dis-empowers women of all ages and skill levels, reducing their independence, choices and life chances.

20. Inclusivity and empowerment of men: Unemployment, underemployment, low wages, zero pensions, long hours, poor terms and conditions and few career opportunities have a huge impact on millions of men, especially young men. The inclusivity agenda focuses mainly on women even though average wages for women are almost the same as for men. - FMT

 Geoffrey Williams is an economist at the Malaysia University of Science and Technology.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.