I AGREE with the economists who say that the federal government’s 2020 budget should not be so fixated on keeping the deficit ratio low at the expense of growth. In times of external weaknesses, the budget should be expansionary to provide a counter cyclical effect on the economy. Higher government spending is necessary to safeguard the strength of the domestic economy against the external headwinds.
Higher levels of government expenditure would put more money into the economy to generate more work orders, thus strengthening the private sector’s confidence in hiring more employees for their business.
The budget should increase the operating expenditure allocations of ministries and departments for maintenance work and procurement of supplies, for example for hospitals, schools and universities. These expenditures on operating expenses have always been given less attention, hence schools do not have proper equipment in their labs, universities run short of money for their research projects, toilets in government offices are not repaired and etc.
Expenditures on these operational requirements would generate more business in the private sector, leading to higher levels of demand for workers, engineers, lawyers, accountants and professional services. Many university graduates in the professional categories are not gainfully employed today because businesses do not have enough work orders to support a full-time staff on their payroll.
The development expenditure side of the budget should also be expansionary. The budget should be spent on productive projects that add to the future capacity of the economy and address the pressing needs of B40 households in both rural and urban areas. Social spending should be targeted at specific needs to minimise wastage in subsidy programmes.
While increasing the expenditure, the government should also have a plan for strengthening the revenue base, considering that the oil price may not last forever. This is essential to prevent the fiscal
balance from deteriorating and threatening the financial stability of the country.
The most stable revenue source is a broad-based consumption tax. However, since the GST has been abolished, the government has to find new ways of making the direct and indirect taxes yield more revenue without adversely affecting the country’s competitiveness for local and foreign investments. The budget should provide details on what the Treasury Task Force on Tax Reforms is recommending.
Tax reforms should not be done in a rush as they need to be thoroughly discussed first. The parliamentary budget select committee should be convened to examine the Treasury proposals on tax reforms. In mature democracies, taxation is viewed as a public policy, not the sole right of the Treasury. Hence, the parliamentary select committee should be involved in examining the tax reforms.
Over and above the budgetary measures, the government should also address the structural issues that are weighing heavily on the long-term growth and development of Malaysia. In this regard, there is fresh wind blowing through the New Malaysia reforms on fighting corruption, strengthening institutional governance for a clean and responsible government and meeting the human rights aspirations of society. These are positive measures that will improve Malaysia’s image as a progressive democracy with political and social stability.
National stability will make Malaysia an attractive destination for foreign investors looking for a good place to locate their overseas operations. However, Malaysia is not moving fast enough on reforms to strengthen its talent resource.
As human capital is a country’s most valuable asset, it’s a pity to see that we have a big problem with “brain drain”. The government should introduce measures to retain our talents and attract those working abroad to return home.
At the same time, the education policy should be reformed in the same way as the Asian Tigers have done to achieve their remarkable economic and social development, transforming them into fully developed high-income countries. While Malaysia has achieved much success on quantity, it has lagged behind these countries on the quality of education.
Our national schools need urgent reforms to become the first choice of parents for their children. The schools should be less racial and religious and more secular in character. Teachers have complained that History textbooks are more about indoctrination than facts while parents are pointing out that not enough hours are being allocated to teach Science, Maths and English at the primary school level and for making school a fun experience for children.
Our government schools can become truly national in character to attract all races if they emphasise the fundamentals of all-round education in and outside the classroom.
TAN SRI MOHD SHERIFF MOHD KASSIM