SHAH ALAM – Budget 2026 must address Malaysia’s low-skilled workforce challenge directly, with the government demonstrating the courage to invest in long-term upskilling, even if the results are not immediate.
Economists said the government’s aim of improving the people’s well-being was commendable but warned that both lowering the cost of living and raising incomes remained daunting tasks.
They added that Malaysia’s heavy reliance on imports and weak labour productivity were central to the problem.
Malaysia University of Science and Technology (MUST) economics expert Professor Emeritus Dr Barjoyai Bardai said the government’s objective was noble, but not easily realised.
“The challenge is that even keeping living costs steady is already a huge struggle.
“Reducing them is even harder, especially since Malaysia’s open economy is exposed to global price shifts,” he said when contacted recently.
He noted that with the country importing about 80 per cent of its needs, including RM90 billion worth of food annually, reducing prices was nearly impossible.
“Which is why the only sustainable path is to focus on increasing household income,” he added.
Barjoyai highlighted that more than 70 per cent of Malaysia’s workforce was low-skilled, with most having no qualifications beyond SPM.
Since 2019, he added, wages as a share of employers’ income had fallen from 37 per cent to 32 per cent.
“Although Malaysia has entered the upper middle-income bracket, over half of its 12 million workers remain stuck in the lower middle-income trap,” he said, stressing the need for sustained investment in skills upgrading.
Meanwhile, Malaysian Future Institute (Masa) honorary fellow Datuk Dr Madeline Berma said subsidies were still necessary but should be more precisely targeted.
She said that the government’s interventions in areas such as food and transport had helped low-income households cope, but current measures were not enough.
“Schemes like Budi95 are effective in cushioning households from sudden fuel price increases, but their impact is only short-term,” she said.
Madeline urged for subsidies to be refined based on income levels and geographical needs, citing higher transport costs in Sabah and Sarawak.
“The monthly Budi95 quota of 300 litres should be increased for rural areas,” she said, adding that structural reforms were essential to stabilise essential goods prices over the long term.
She further suggested empowering the Malaysia Competition Commission (MyCC) to enforce tougher laws against price manipulation, while strengthening the agro-food sector to reduce dependence on imports.
Stronger social safety nets, she said, would also protect vulnerable households from economic shocks.
Universiti Malaya (UM) Social Wellbeing Research Centre research fellow Dr Zulkiply Omar said subsidies in their current form were costly and inefficient.
He highlighted that while universal support had been effective, it was not sustainable as high-income households also benefited.
“In the longer run, we should phase out subsidies and move towards targeted cash transfers,” he said.
Zulkiply added that structural reforms were key, particularly in improving competition and addressing market failures. He emphasised that reforming the labour market to boost wages was as important as providing short-term relief.
“Labour market reforms to improve household income must go hand in hand with measures to make markets more competitive,” he said.
The Finance Ministry is set to table Budget 2026 in Parliament on Oct 10, the fourth in a series of Madani budgets and the first under the 13th Malaysia Plan (2026–2030).