Budget 2023: rebuilding the nation post-pandemic or fishing for votes?

05 Oct 2022 12:02pm
Photo for illustration purpose only - Source: BERNAMA
Photo for illustration purpose only - Source: BERNAMA

This Friday will be an important day for the country as the rakyat will find out on how the leaders' plan to spend the people's money.

Finance Minister Tengku Datuk Seri Zafrul Aziz or prime minister Datuk Seri Ismail Sabri Yaakob may unveil the country's Budget 2023 which is considered important because the rakyat will get to know on how the government lay out its priorities.

Will Budget 2023 be all about rebuilding the nation and helping the people after the nation and the world experienced one of the world's most devastating pandemic?

Or will this budget be all about fishing for votes and dishing out goodies to become a populist government ahead of the upcoming general election?

Helping the rakyat after Covid-19

Budget 2023 will be presented as a rebuilding budget focused on growth and structural reforms but also trying to protect against a global downside risk in 2023.

Dr Geoffrey Williams expect an election budget with higher overall spending and a long list of projects aimed at key voter groups.

Key voter groups will be the Bumiputera groups. There will be some claims that money will go to the Indian and Chinese communities but as normal, this will be small and may be misappropriated as it has in the past.

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"I expect nothing meaningful for the Chinese community again," Williams who is an economics lecturer at the Management, Science and Technology University told Sinar Daily.

"The reasoning for a bigger budget will be the narrative of slower growth due to external factors.

So the government will say they have to spend more to support the economy. This is predictable but unfortunate.

What we should see is a smaller budget taking advantage of the end of the Covid-19 special measures, said Williams.

The savings should be passed back to the rakyat to allow them to spend more of their own money however they choose rather than having the government spend it for them.

This will put money directly into the hands of consumers and businesses and help sustain consumer spending, increase revenues for businesses especially SMEs and allow more private investment for growth.

Any new goodies for businesses?

This year could be election year and that will likely impact the budget.

Budget 2023 will be nothing more than an attempt to appeal to voters ahead of the election.

"We will see another list of training grants, technology projects, sustainable driven growth or SDG focused programmes and special support for ethnic groups.

Technology middlemen and consultancy companies connected to the government will be given hundreds of millions to implement schemes, with very little job creation, a small multiplier effect and few benefits to the wider community.

Exciting proposals would be more universal including ending subsidies based on specific products, brands and companies which is a recipe for high transactions costs and corruption.

Instead the government should focus on introducing a cash transfer scheme or Universal Basic Income through reform of the Bantuan scheme and the tax system into regular monthly payments for low-income groups.

This would replace the current complex welfare payments with one simpler system.

PTPN's woes must be addressed

PTPTN's predicament must be addressed because it has only two years of funds left.

A full reform of higher education financing with a new role for PTPTN must be introduced.

PTPTN has around RM40 billion in debt guaranteed by the government.

It has expenses of around RM4-5 billion each year for repaying its own debts, financial costs and operational expenditure and received a subsidy from the government for this.

However, it funds RM3 billion in loans each year and collects back only 79 per cent according to latest public information.

This is actually higher while it was under Pakatan Harapan when it fell to 43 per cent.

So, it issues RM3 billion, collects back RM2.4 billion.

So, it has a RM600 million deficit each year and spends RM4 billion on top of that to fund the system.

So, based on current assets it has two years left of funding.

Replenishing EPF pensions

For Budget 2023, pensions must be addressed to help people build retirement income.

Increasing the tax exemption for voluntary EPF contributions would be a good start and building a new Malaysian Superfund for pensions should start now.

This would help create Universal Basic Pensions for those heading for retirement.

There should also be reform of the tax and duties system across the board, ending the debate on GST or SST and covering income taxes on households and companies to reduce taxes overall.

This will encourage growth and tax income will rise as a consequence of higher growth and spending.

"Essentially we should avoid project-based handouts and focus on wider cash transfers to people and businesses directly," said Williams.

Make budget funds accessible to all

Under Budget 2023, a chunky amount will go to small and medium-scale enterprises or SMEs.

However, out of the one million companies registered with the Companies Commission of Malaysia (SSM) and hundreds of thousands of other micro-enterprises, only a few thousands will get access to funds.

Strengthening the ringgit

The budget cannot really do anything to strengthen the ringgit except to support fundamentals and create policy credibility and manageable debt and deficit.

Williams said there will be a list of small grants or soft loans to SMEs which will be targeted and will likely cover less that one per cent of all companies registered with SSM.

Students may be given more vouchers or offers of loans to buy laptops from government-linked suppliers.

So laptop businesses will benefit but universities and students will not.

There will be many massive projects for government-linked companies.

The key to judge the budget and whether it has reached its target is to take the amount allocated and divide it by the number in the group.

RM1 billion for SMEs, for example is only RM1,000 each. Barely enough to pay one month salary.

Tackling rising cost of living

Budget 2023 will be more on tackling the rising cost of living especially the prices of products and services.

Associate Professor Dr Ahmed Razman Abd Latiff said financing assistance for businesses will also be increased as well as home ownership initiatives.

"Allocation for subsidies will also be increased. Overall, the budget 2023 will be higher than 2022, maybe it will reach RM330 billion allocated for expenditures.

The Universiti Putra Malaysia business school lecturer said the government will probably continue to provide financial assistance via SME Bank and other financial institutions.

Grant for mentoring, coaching, digitalisation and automation activities will be continued.

Subsidies increase?

The government will most likely increase the amount of subsidy allocated for next year so that the prices of goods and services are kept at a low level.

As for the unemployed, more training and reskilling programmes will be provided as well as some financial incentives for employers to hire more workers especially local labour.

Diversifying government income

The government will go all out to diversify the economy to ensure multiple sources of revenue and reduce income dependency on a particular sector only.

Digital economy will remain a focal point and efforts toward strengthening IR4.0 related industry will be seen in Budget 2023.

Strengthening the ringgit

In order to strengthen the ringgit, the government will introduce initiatives to reduce dependency on imported products and at the same time to encourage domestic production meant for exports

Cash handouts?

Most likely there will be more cash handouts under Budget 2023 to the targeted groups especially if the government decided to introduce targeted subsidies.

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