A com­pre­hen­sive and in­no­va­tive bud­get

The Star Malaysia - StarBiz - - News - An­thony Dass is chief econ­o­mist and head of re­search at Am­Bank Group. He is also ad­junct pro­fes­sor in eco­nom­ics at Univer­sity of New Eng­land, Syd­ney, Aus­tralia.

NOV 2, 2019 was a his­toric day for Malaysia. Prior to the tabling of Bud­get 2019, the new gov­ern­ment has been warn­ing many times that this will be a sac­ri­fi­cial and “belt-tight­en­ing” bud­get.

At the same time, the Pakatan Hara­pan gov­ern­ment has been telling the rakyat not to get their hopes way too high due to huge pub­lic debt and rising fis­cal deficit af­ter hav­ing in­cluded some of the “skele­tons” that were not shown by the past gov­ern­ment.

How­ever, Bud­get 2019 turned out to be more in­no­va­tive while re­duc­ing wastages, un­der­stand­ing the house­hold ex­pen­di­ture with a fo­cus on the medium term.

The new gov­ern­ment is in­tro­duc­ing some­thing new – prop­erty crowd­fund­ing. It is the first of its kind in the world which is be­ing of­fered to first-time home buy­ers. These house buy­ers pay only 20% to own a house, with the re­main­ing 80% to be borne by in­vestors, via the peer-to-peer fi­nanc­ing frame­work.

This scheme would en­able more peo­ple to own a house with min­i­mum pay­ment, which could be set­tled by their sav­ings, loans or Em­ploy­ees Prov­i­dent Fund with­drawals. It will be a new al­ter­na­tive for peo­ple to own their first homes, with­out high com­mit­ment owing to bank loans.

More de­tails are ex­pected to be high­lighted in or­der for prop­erty de­vel­op­ers to im­ple­ment and of­fer this new pur­chas­ing struc­ture ef­fec­tively to cus­tomers. Im­por­tantly, the crowd­fund­ing scheme will be prop­erly reg­u­lated by the Se­cu­ri­ties Com­mis­sion.

An­other area of the in­no­va­tive Bud­get is the tar­geted scheme for the B40 group. De­spite mas­sive na­tional debt and rising fis­cal deficit, the gov­ern­ment is still able to give ben­e­fits to the rakyat.

The new gov­ern­ment has fo­cused on the peo­ple’s wel­fare by stream­lin­ing the liv­ing as­sis­tance. House­holds whose in­come is less than RM2,000 per month will re­ceive RM1,000, while up to RM3,000 will en­joy RM750, and fi­nally RM500 for house­holds earn­ing less than RM4,000.

Ad­di­tion­ally, RM120 per month is given for each child in the house­hold un­der the age of 18 (up to a limit of four children).

Look­ing at the as­sis­tance given, it shows the low­est in­come brack­ets will be able to claim as much as RM1,480 per month of liv­ing as­sis­tance, com­pared to the pre­vi­ous BR1M (Ban­tuan Rakyat 1Malaysia) which was only RM1,200 at the most.

It shows the B40 group will be re­ceiv­ing even more ben­e­fits this time around com­pared to the last Bud­get with the aim to im­prove their liv­ing stan­dard.

At a glance, it may seem that the gov­ern­ment could be spend­ing much higher than ex­pected. This may not be true when it is scru­ti­nised more closely. The arith­metic of it shows oth­er­wise.

Look­ing at the liv­ing as­sis­tance pro­gramme, the new gov­ern­ment has clearly fo­cused on tar­geted groups and hence al­lowed it to al­lo­cate only RM5­bil, which is about RM1.8bil less than the al­lo­ca­tion for BR1M in 2018.

Mean­while, the gov­ern­ment has also em­pha­sised on a tar­geted petrol sub­si­dies sys­tem, but only for those who de­serve it. The float­ing petrol price will only ben­e­fit those with cars 1500cc and be­low. This en­sures sub­si­dies are used more ef­fi­ciently.

Also, the gov­ern­ment has ex­tended across mul­ti­ple ar­eas elec­tric­ity tar­iff and the B40 health pro­tec­tion fund. It has an­a­lysed the pop­u­la­tion dy­nam­ics and house­hold ex­pen­di­ture struc­ture to en­sure a more tar­geted method of so­cial wel­fare.

The new gov­ern­ment also slashed a number of in­fra­struc­ture projects. The Mul­tiProd­uct Pipeline and the Trans-Sabah Pipeline were can­celled to save bil­lions of ring­git while the East Coast Rail Link is sus­pended pend­ing rene­go­ti­a­tion.

A number of low-key new taxes have also been in­tro­duced. A new trav­ellers de­par­ture levy has been im­ple­mented to en­cour­age do­mes­tic tourism while there are plans to en­tice for­eign vis­i­tors.

Pangkor Island has been turned into a duty-free zone while tax free in­cen­tives are given to Pe­nang’s Swet­ten­ham Pier in the form of duty-free shops.

A 380-acre land in Pu­lau In­dah will be con­verted into a Free Trade Zone. Up north, the gov­ern­ment will sup­port the de­vel­op­ment and growth of the Kota Per­dana Spe­cial Bor­der Eco­nomic Zone in Bukit Kayu Hi­tam, Kedah.

Boost­ing tourism in­dus­try apart from sup­port­ing house­hold spend­ing will bode well for the re­tail busi­ness seg­ment.

Other tar­geted mea­sures in­clude rais­ing the real prop­erty gains tax. Tax ex­emp­tion for in­ter­est earned on whole­sale money mar­ket funds has been re­moved, and casino du­ties in­creased to 35%.

Fur­ther­more, there is the sell­ing of gov­ern­ment as­sets which in­cludes in­tro­duc­ing the world’s first air­port real es­tate in­vest­ment trust. The gov­ern­ment hopes to raise about RM4­bil.

The gov­ern­ment has been cau­tious that the new taxes do not harm the econ­omy but in­stead pro­mote growth and pros­per­ity. The in­tro­duc­tion of the dig­i­tal tax means the gov­ern­ment will tax on­line ser­vices like Net­flix and Spo­tify.

This en­sures that a fair and ef­fi­cient tax­a­tion stan­dard is im­ple­mented for the dig­i­tal econ­omy. This lev­els the play­ing field be­tween lo­cal and off­shore ser­vice providers – be it in soft­ware, mu­sic, video or any dig­i­tal ad­ver­tis­ing.

A com­pre­hen­sive and medium-term bud­get

Look­ing back, Bud­get 2019 does show the aus­ter­ity grim ini­tially en­vis­aged. In­stead, it is a com­pre­hen­sive Bud­get and is aligned with the pol­icy di­rec­tion of the new gov­ern­ment. This Bud­get has many dif­fer­ent pri­or­i­ties es­pe­cially over the medium term.

Clearly, there is a strong com­mit­ment on ed­u­ca­tion, fo­cus­ing on all cat­e­gories. This is a good be­gin­ning for a brighter fu­ture, given the as­pi­ra­tion to be­come a higher in­come de­vel­oped na­tion.

It is es­sen­tial to in­vest in ways where the children of this coun­try will be able to learn bet­ter by im­prov­ing the qual­ity of ed­u­ca­tion. Ed­u­ca­tors and stu­dents will to­gether build the na­tion. Children will be able to de­velop the right skills to en­sure this coun­try’s hu­man cap­i­tal re­mains com­pet­i­tive and will be able to lift the coun­try to the next level.

As we strive to be­come a high-in­come and de­vel­oped na­tion, we need to up­grade and adapt our health­care sys­tem to over­come cur­rent and fu­ture chal­lenges.

The bud­get has a larger al­lo­ca­tion on health­care to im­prove qual­ity of care and health out­comes, en­sure good fi­nan­cial pro­tec­tion for the sick and strengthen the level of gov­er­nance to pave the way for a vi­able and sus­tain­able sys­tem.

Bud­get 2019 fo­cuses on build­ing up small and medium en­ter­prises (SMEs), given that its growth has con­sis­tently sur­passed the na­tional GDP over the years by an av­er­age 1.5% per an­num.

En­cour­ag­ing SMEs to adopt new tech­nolo­gies on dig­i­tal plat­forms like e-com­merce, mo­bile com­merce and so­cial com­merce will im­prove their rev­enue by open­ing doors to en­ter new mar­kets and im­prov­ing cus­tomer ser­vice sup­port and ex­pe­ri­ence.

It will pro­vide a more ef­fi­cient end-to-end cus­tomer jour­ney. It should im­prove the gap be­tween SMEs and larger in­dus­try play­ers.

How­ever, they should be pro­vided with more strate­gic ad­vice, coun­sel and ini­ti­at­ing net­work­ing plat­forms to fa­cil­i­tate knowl­edge ex­change.

The gov­ern­ment plans to rein­tro­duce the Malaysia In­cor­po­rated Pol­icy, first in­tro­duced on Feb 25, 1983 as an “in­dus­trial strat­egy”.

This should bode well po­ten­tially. It is to forge a new sym­bi­otic re­la­tion­ship and part­ner­ship be­tween the pub­lic and pri­vate sec­tors.

The gov­ern­ment in­tends to stream­line and im­prove ad­min­is­tra­tive rules and reg­u­la­tions and es­tab­lish a new pub­lic-pri­vate part­ner­ship.

Land swap ap­proach will be re­vised, ten­ders to be more open, ex­ports widened and green for­eign di­rect in­vest­ments are en­cour­aged.

This will force those busi­ness to dis­card their past ways of “busi­ness as usual” mind­set and put an end to the “Napoleon” cul­ture.

In con­clu­sion, the new gov­ern­ment has taken pains to study the house­hold be­hav­iour and the re­quire­ments of most house­holds. Much of their ex­pen­di­ture goes to­wards hous­ing, food and trans­porta­tion.

At the same time, the gov­ern­ment has em­pha­sised that its role is not to do busi­ness, that the func­tion of the gov­ern­ment is not to com­pete with the pri­vate sec­tor.

It will only step in when the pri­vate sec­tor fails to pro­vide what the peo­ple need. This clearly spec­i­fies the gov­ern­ment’s role and re­spon­si­bil­ity to the so­ci­ety.

AN­THONY DASS star­biz@thes­tar.com.my

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