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Budget 2020: what is to be expected

  • Many will expect Budget 2020 to give more priority to the poor in the interest of protecting the Budget integrity as well as social stability.

By Tan Sri Ramon Navaratnam

Budget 2020 will be tabled in the Parliament on October 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 PH budget policies and directions.

Hence, the upcoming Budget 2020 must show the difference and reflect more of the new government's socioeconomic thinking, plans and proposals for the 12th Malaysia Plan as well.

Budget 2020 strategy?

So what could be the budget strategy for Budget 2020?

In devising the budget strategy, the Treasury would have to take into account the world economic environment and outlook. All the major international economic agencies have highlighted economic slowdown for all economies.

With the continuing trade war between the two economic giants, the United States and China, the trade outlook seems poor. With the persistent turmoil in the Middle East, unpredictable oil prices and growing uncertainties of global climate changes all over the world, including the damaging haze in our country and 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 the economic growth to fall to 4.0 to 4.5 % next year, and even lower in the years ahead.

Then unemployment, especially among our graduates, will rise. Incomes are likely to fall, inflation is unlikely to moderate and life especially for the B40 group can be very difficult.

Budget revenues will also decline, while the government salaries, debts and pensions will have to be serviced.

Hence, Budget 2020 will face severe constraints.

The budget deficit will come under greater pressure to rise instead of falling, as the government had planned to achieve. In the meantime, global rating agencies are watching our budget very closely!

Hopefully they will have to be more realistic and allow our budget deficit to rise slightly to deal with 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 can Malaysians rightly expect from Budget 2020? The majority of Malaysians will expect Budget 2020 to reveal new proposals to better reflect the budget's theme “shared prosperity” as follows:

1. The Poverty line is currently too low as indicated by the recent UN report. 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% of the Malaysian population, regardless of race and religion! This will be a new bottoms-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 more 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, projects and programs to alleviate poverty and to reduce the widening income gaps. Income gaps 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 poverty eradication.

4. The digital economy is catching up faster than we expected. Hence the Budget has to introduce new Incentives to encourage small- and medium-sized industries to innovate and adopt to 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? Perhaps we should invite the Chinese experts here to help us.

5. Environmental challenges are threatening our future growth, income distribution and progress. This is evident from our the way we treat our own rubbish disposal and the rubbish from foreigners 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 form the past corrupt government?

6. Technical and vocational training and science and technology should be given more allocations in Budget 2020. We cannot tell the ministry of education to do more if 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 underqualified teachers who can't perform satisfactorily. Then we will have more unemployed graduates and more public frustration.

7. Health and other social services need to be reviewed and revised under the new PH 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 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 lower taxes?

The 2020 Budget should therefore raise some taxes, even slightly.

Foreign investors will not be deterred from investing in Malaysia because of higher taxes. They are attracted to Malaysia for its natural resources, quality of life, safety and future prospects. But, we cannot take foreign investments for granted.

9. Like all Malaysians, foreign and domestic investors look to our national unity, racial harmony, religious appreciation and well-being which have to be maintained and sustained, if business confidence is to be expanded in future so that we can compete with our neighbors.

This means genuine inclusiveness that should include fair and 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 moderates anywhere and everywhere!

10. In conclusion, the 2020 Budget should encourage and provide incentives to the best talents among us and to attract some of the best brains from abroad to come home and contribute to a better, fairer, more stable, prosperous and sustainable Malaysia for all Malaysians and for our posterity.

Finally, most of us would expect a realistic and mildly growing 2020 Budget 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.

(Tan Sri Ramon Navaratnam is the Chairman of ASLI Center for Public Policy Studies.)


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