PETALING JAYA: The G25 group of prominent Malays may have praised Pakatan Harapan's manifesto for its wide-ranging reforms and social-oriented programmes, but are concerned about some of its proposals.
In a statement on Tuesday, the group said it favoured no political party but welcomed proposals to undertake economic reforms and restore sound management of the country's finances.
G25 also voiced concern over the proposal to abolish the Goods and Services Tax (GST) and reinstate fuel subsidies, as these would have negative impact on the Federal budget.
According to G25, reinstating the Sales and Services Tax (SST) would negatively impact government revenue and complicate budget deficit controls.
It said that many countries have found the sales and service tax methodology to be a less efficient way of taxing consumption and added that Malaysia had been running on a budget deficit for several years now.
G25 also said that the deficit situation had improved since the implementation of the GST in April 2015 and added that the tax served as a useful buffer against the ups and downs of the economic cycle and should therefore be retained.
"That being said, necessary improvements to address problems associated with the implementation of GST, such as its impact on the disposable income of B40 households as well as on business efficiency – e.g., speed of repayment of rebates or credit – to help companies' cash flow positions should still be made," they added.
The group also said that it was concerned with the long-term implications to take over 31 tolled highways – including PLUS – by paying the companies compensation to abolish tolls.
They said the "multi-billions of Ringgit" for the compensation would be better spent on health, education and a social safety system.
"Backtracking on the tolls is detrimental to investor confidence as it would send a signal that commercial agreements signed with the government on privatisation projects, for which the companies have issued long term bonds and raised bank loans, can be reneged with changes in administration," said the group.
G25 added that sustainable investment requires certainty in honouring contracts based on laws and regulations.
"We would like to remind that government actions which are tantamount to nationalisation will send jitters among the investing community," they added.
They also deemed it "extremely risky" to bring back fuel subsidies.
"It took decades of policy discussions and in-depth studies and analysis to move towards a market-based fuel pricing to promote efficiency in business decisions and innovation in energy consumption," said G25.
It added that fiscal gains from subsidy rationalisation are substantial and could be used more productively in continued expansion of infrastructure to support businesses as well as social and other amenities to raise living standards and the quality of growth.
G25 also urged Pakatan to be cautious about its "populist proposals" on the issue of taxation as well as its proposals on subsidies.
"They will have very serious implications, not only on the fiscal balance, but also on the stability of the entire financial sector. Such a situation will put pressure on the Ringgit and cause uncertainties on the future of the economy," they advised.
G25 also cautioned that changing everything for the sake of change was not wise.
"Pakatan should concentrate its reforms on institutional integrity and governance across Parliament, the Judiciary and the public service, education, health, social safety nets, labour and taxation policies for higher wages and disposable incomes.
"It is the reforms on both the economic and structural fronts focussing on checks and balance in a parliamentary democracy that will ensure good governance to secure long-term sustainable and equitable growth with social and economic stability," G25 added.