PETALING JAYA: Budget 2024, which is the first full budget by the unity government, must appeal to the people and help local enterprises as it carries the visions of the member parties, say economists.
Malaysia University of Science and Technology (MUST) economics professor Dr Geoffrey Williams said the unity government’s maiden fiscal plan should be fully consistent with the seven Madani Economy targets, as well as other key social areas of the Malaysia Madani framework.
“It must focus, in particular, on raising disposable income, especially for the middle-income group, to help them with the cost of living.
“Development expenditure should be consistent with the 12MP (12th Malaysia Plan) of around RM90bil,” he said, adding that savings from cancelled and rescheduled development projects should be reallocated within the overall development expenditure budget.
“It must also set out a clear plan for subsidy rationalisation, with parts of these reforms taking immediate effect and others set out for the long term.”
This is the second Budget announcement by the unity government.
The first one on Feb 24 this year was a retabling of Budget 2023 presented by Datuk Seri Ismail Sabri Yaakob’s administration, as it was not passed before Parliament was dissolved on Oct 10 last year to make way for the general election.
Dewan Rakyat Speaker Datuk Johari Abdul reportedly said the retabled Budget 2023 was only a “mini-Budget for service expenses and salary payments”.
Williams added that Budget 2024 should also prioritise reducing waste, leaks and corruption and using the savings to increase spending on social protection priorities.
“The overall focus should be on spending within the constraints of revenue. Overall spending should only increase if revenues have increased to avoid higher borrowing and reduce the deficit ratio.“Spending on key priorities should be funded from savings in other non-essential areas and from cutting wastage,” he said.
There should be no major changes in taxation until wastage and leakages have been reduced, so that we know what taxes and tax rates are necessary, he said.
“Taxes, especially on consumption, should not be raised until incomes have increased.
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“Otherwise, people will be burdened at a time when they are already struggling,” he said.
Williams went on to say that a “bad budget” is one that praises higher spending as a successful strategy even if it requires more borrowing or is not financed by savings.
“If the budget is a list of projects for special interest groups like we saw in the past, or if the projects are artificially fitted to the Madani framework as we saw in the last (revised) budget, then it will be a bad budget,” he said.
Tunku Abdul Rahman University of Management & Technology assistant professor Dr Foo Lee Peng said such focuses were crucial for the budget’s success and the country’s stability.
“It is important for the budget to appeal to the people while aligning with the vision of the member parties in a unity government.
“However, success also depends on effective communication, collaboration and compromise among the member parties of the unity government.
“Balancing diverse interests while working towards common goals can be challenging, but it’s essential for the unity government’s stability and ability to govern effectively,” she said in an interview yesterday.
Foo, who is chairman of the university’s Centre for Business and Policy Research, predicted that Budget 2024 would focus on mitigating the burden of living expenses, implementing programmes to empower SMEs towards self-sufficiency, and enacting measures to stimulate the economy and foster investor trust.
“Budget 2024 will likely maintain the proposed tax cut for the M40, who had been the most affected during the (Covid-19) pandemic.
“There were many initiatives by the unity government to help the M40 group cope with the rising cost of living in the previous Budget 2023.
“Among them, a 2% cut in individual tax for the RM35,000 to RM100,000 taxable income band will benefit the M40 group, particularly with their spending power and savings.
“The individual tax reduction should be maintained in Budget 2024,” she said.
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While SMEs make up the majority of businesses in Malaysia, Foo said retaining domestic direct investment (DDI) would help increase the country’s corporate tax revenue and job opportunities.
It will also foster confidence among Malaysians to reinvest in their own country, she said.
“However, numerous local entrepreneurs voiced grievances that they were being treated as secondary to foreign direct investments (FDI).
“In fact, DDI is equally instrumental in ensuring the well-being of local firms and entrepreneurs and in contributing to the growth of Malaysia’s GDP.
“So there is an urgent need to accelerate their growth to overcome the existing limitations that have impacted Malaysia’s export performance.”
To attain the targeted economic growth rate of 5% to 6% throughout the 12MP from 2021 to 2025, Foo said it was imperative to attract more investments and establish a more conducive business environment.
Out of the RM1.37 trillion of DDI that have been approved since 2013 to the first quarter of this year, Foo noted that 73.3% came from the services sector, the manufacturing sector (21.3%), and the primary sector (5.4%).