IMPROVING THE PEOPLE’S LIVELIHOOD
KUALA LUMPUR: A sustainable budget must help the rakyat help themselves, says Second Finance Minister Datuk Seri Johari Abdul Ghani.
Discussing the recently announced Budget 2018, he said to achieve one of its main thrusts: improving the rakyat’s well-being and tackling cost of living concerns, the Government would do so by assisting households to increase their income.
“We are not a government that just gives all handouts, we assist wherever possible to intervene and help people,” he said.
He said when it comes to maintaining cost of living, the Government could only do so much, like placing price controls on certain essentials like rice, sugar and flour, or trying to maintain core inflation within 2% to 3%.
“We control only certain elements and then the market decides supply and demand.
“If you control too much, people end up being unable to do business and this makes it more difficult to get products in the market,” he said during a recent interview at the Inland Revenue Board office here.
Instead the Budget would focus on improving the livelihood of the people, especially entrepreneurs – small and medium enterprise (SME), which the minister cites made up for nearly 97% of business in Malaysia and around 65% of employment.
To strengthen SMEs, Budget 2018 has set aside more than RM9bil on programmes like Funding Schemes for working capital for the services sector ( RM7bil), Government Guaranteed loans to enable SMEs to automate production (RM1bil), syariah-compliant SME Financing Scheme with a subsidy rate of 2% (RM1bil), plus soft loans, grants and training programmes for SME under SME Corp and development programmes for halal industries and products under various agencies.
Johari said micro financing was also essential to give small players to be more competitive, as the segment was underserved by traditional financial institutions.
“Financial institutions do not want to serve them as they’re viewed as high risk or too high cost. In such cases, government intervention is necessary to save these micro and small entrepreneurs,” he said.
Some of the micro financing schemes funded by Budget 2018 include Tabung Ekonomi Kumpulan Usahawan Niaga (Tekun) with RM500mil, Amanah Ikhtiar Malaysia (AIM) with RM200mil and Rural Economic Financing Scheme (SPED) for rural bumiputra entrepreneurs at RM80mil.
The largest fund, Tekun has since 1998 channelled RM4.72bil to some 388,233 entrepreneurs in the country.
Though valuable in kick-starting businesses, some of these funds did not deliver returns, with the 2016 Auditor-General’s report stating that Tekun’s financial performance was “less than satisfactory” for the year 2013 to 2015 due to massive debt to the Government, with a total of RM410.61mil bad debt written off.
Asked if a certain amount of loss from non-performing loans through such programmes was acceptable, Johari said there was more at play than just getting monetary returns on investment.
“We hope that for every 10 entrepreneurs we help, say five or six are successful, and each in turn employs three people, to run their businesses, creating more employment,” he said, adding that the workers would gain a steady salary, become self-sufficient and contribute back to the economy through consumption.
He said if micro financing was not offered, the communities depending on small businesses would be left behind.
“It’s understood that with micro venture capital sometimes you fail, sometimes you’re okay, but at least you give a helping hand.
“The successful businesses will pay us back, but they also create a healthy ecosystem by creating employment,” Johari said.
The Budget’s plan to improve the household income also meant creating opportunities for women to re-enter the workforce after having children.
Among the perks are a new requirement to ensure childcare centres are provided in all new office buildings, starting in Kuala Lumpur; increasing mandatory maternity leave for private sector workers from 60 to 90 days; and individual income tax exemption on income earned within 12 months for women re-entering the workforce, at least two years after a work break.
“This is part and parcel of the Government creating an ecosystem to encourage women and mothers to work. By bringing in more women talents, it would boost the economy, GDP and household income,” he said.
Those from the low income group are not left out in Budget 2018, with welfare allowances provided to at-risk communities, including increased allowance for senior citizens to RM350 per month (RM603mil), increasing allowance for working and unemployed People With Disabilities (PWD) as well as caretakers of PWDs by RM50 per month (RM100mil) and assistance to children from poor families (RM245mil).
Those who really fall below the poverty line will get monthly subsistence.
It’s part of the government agenda to ensure inclusive economic development of these people as well.
“We don’t want them to be left behind as the economy moves forward,” Johari said.
Asked if there would be tighter controls for welfare programmes, like the Bantuan Rakyat 1Malaysia (BR1M) Programme – which got a RM6.8bil endowment – Johari said more comprehensive cross-checking of applicants would be done by accessing various government databases like the Road Transport Department, Employer Providence Fund, Inland Revenue Board and Malaysian Companies Commission (SSM).
“Say a person claims he doesn’t have a payslip, SSM can check his business, and if he makes high profits of RM100,000 to RM200,000 a year, he doesn’t deserve BRIM.
“Over time we have perfected the system, so we will get deserving recipients,” he said.
One of the goals for the increase in household income and welfare assistance, Johari said, is to ensure there will be more disposable income to elevate the public’s living standards.
Under Budget 2018, the target was to raise disposable income to between RM300 and RM1,000 per household.
There would also be a reduction in individual income tax rates according to strata: a reduction from 5% to 3% for those earning RM20,001-RM35,000 per annum, from 10% to 8% for those earning RM35,001-RM50,000 per annum, and from 16% to 14% for those earning RM50,001-RM70,000 per annum.
“We also want in the long term to have households not depend on government subsidies so much.
“So over time, the Government will reduce subsidies when the households can self sustain and keep up their living standards,” he said.
Everyday costs from toll collection would also be reduced with the abolition of toll collections starting from Jan 1 next year at Batu Tiga and Sungai Rasau, in Shah Alam, Bukit Kayu Hitam, in Kedah and Eastern Dispersal Link, in Johor.
“This translates into annual savings for commuters of RM102mil at Shah Alam, RM8mil at Bukit Kayu Hitam and RM70mil in Johor,” he said.
Asked if more tolls would soon be abolished, Johari said the Government also needs to be mindful of the toll operators liabilities, like with Plus Highway which has RM30bil in outstanding bonds.
“We need to be mindful that if they’re not bankable, the Government needs to step in to pay, and we don’t have that kind of money.
“Therefore we need to strike a balance so that PLUS can continue to maintain a first class highway” he said.
Johari added that in some cases like with the Batu Tiga and Sungai Rasau toll plazas, 150,000 vehicles pass through daily, and that was why the Government decided it would be beneficial to the public to abolish it now.
An ongoing concern for those in the middle and lower income bands is the affordability of housing, and in Budget 2018 RM2.2bil was allocated for housing, of which RM1.5bil is allocated for PR1MA housing programme to build 210,000 units at RM250,000 and below.
“Today we have a problem, 42% are depending on affordable housing but the supply is at only about 24%. This is where there’s a gap,” said Johari.
He said based on Bank Negara studies, the ministry gleaned that the affordability of people taking a loan is between RM250,000 and below.
“To compensate for this, 210,000 PR1MA units costing below RM250,000 were put in the pipeline, in addition to the planned PR1MA units costing RM300,000.
“The lower income segment desperately needs housing, so we’ve asked PR1MA to readjust the requirements,” he added.
According to Johari, PR1MA would deliver between 11,000 and 15,000 units by the end of the year, with some already in the midst of handing over the keys to purchasers.
“For those who still could not afford to buy their own homes, Budget 2018 introduced a tax exemption of up to 50% on rental profits for rent up to RM2,000.
“This is to encourage the rental market, especially overhang properties. We give them an exemption to encourage rental,” said Johari.
He added the incentive to have more affordable rental rates would encourage those with investment properties to rent to households and bachelors who were waiting to reach an income level where they could eventually purchase their own properties.
We are not a government that just gives all handouts, we assist wherever possible to intervene and help people. Datuk Seri Johari Abdul Ghani