GE15 manifestos: BN’s stronger on the economy, PH’s on social issues

THE Center for Market Education (CME) in its analysis has highlighted the strengths and weaknesses of the election manifestos of Barisan Nasional and Pakatan Harapan.

It aims to understand if and how they would benefit Malaysia in terms of stable economic growth and international competitiveness.

Below is CME's statement in full:

The Center for Market Education (CME) has analysed the GE15 Electoral Manifestos proposed by two of the main political coalitions (Barisan Nasional and Pakatan Harapan).

CME focused its analysis on the economic contents of the manifestos to identify strengths and weaknesses of the different platforms, trying to understand if and how they would benefit Malaysia in terms of stable economic growth and in terms of international competitiveness.

A general and preliminary consideration is that both manifestos are weak on the implementation part and often stop at the desiderata; however, the art of policymaking consists in going beyond intentions, desires and even targets, in order to evaluate those elements at the light of the relevant trade-offs.

Which means: how much is that target going to cost (not only in monetary terms but also in terms of other targets that need to be abandoned to achieve that one)? How is it going to be implemented in a financially sustainable way? These are the fundamental questions that the winning coalition could not avoid when moving from announcement to implementation.

These are the general conclusions CME draws from the analysis explained below:

Both manifestos are silent on a general tax reform, while – according to us – this would be the moment to push for a holistic approach which includes not only (and eventually) the reintroduction of goods and services tax (GST), but also a special scheme for microbusinesses, better enforcement strategies and a plan for targeted subsidies.

Pakatan’s manifesto is more widely devoted to social issues such as family, youth, elderly, freedom of speech and environment protection, while it contains less details on economic topics and in particular it lacks a comprehensive strategy for rebuilding a pro-investment ecosystem.

Barisan’s manifesto, while including a good hint on Federalism and a clear shift from race-based to needs-based affirmative action, introduces good points for rebuilding the pro-investment vocation of Malaysia; points that, if properly developed, may give a good competitive advantage to the country by creating good conditions for attracting foreign direct investment (FDI).

On education, Pakatan’s manifesto appears to be wider, while Barisan introduces a very important accent on the future (new) role for humanities and stresses free national early childhood education as part of a pro-social mobility strategy.

Both manifestos introduce a strategy for food security, with Barisan leaning slightly more on the importance of free trade, a pillar that CME considers fundamental for a true food security strategy.

Barisan Nasional

The biggest hole in the Barisan manifesto is the silence on tax reform. In the most recent years, despite the lack of practical actions, a vibrant debate has emerged on the reintroduction of GST and shifting towards a system of targeted subsidies.

In light of increasing fiscal deficit and the need for a sustainable growth trajectory, CME has spoken in favour of a multi-tier GST, paired with a slight reduction of income tax.

Furthermore, CME welcomes the debate on targeted subsidies, which would build a system of support truly based on intra-national solidarity. The proposed income tax cut (2% for the M40, as per Point 2 of the manifesto) – which CME welcomes – should be accompanied by a general strategy on spending cuts and improving revenue collection. CME would have expected to see more in this regard.

Another weak point is Point 1, which introduces an Assistive Basic Income Scheme to fight poverty. As argued in the recent book “Assessing and Addressing Urban Poverty in Malaysia”, in the fight against poverty CME favours a system of promoting entrepreneurship rather than redistributing income.

In line with what was proposed in the same book, CME instead welcomes the push for Federalism (Point 3) and the recognition of the need for a new balance between science and humanities in education (Point 19).

If properly implemented, these initiatives can both spur entrepreneurship and develop a more effective system for fighting poverty, grounded in the principle of subsidiarity. Solidarity instead should inspire the proposal of free national early childhood care (Point 16).

Improving access to early education surely is a key tool for social mobility and needs to be approached with attention to the financial sustainability of the reform.

CME favourably evaluates some of the points on social security such as the Employment Insurance System (Point 33), the reskilling initiatives (Point 35) and the Employment Retention Fund (Point 36). The Youth Entrepreneurship Fund (Point 41) is also a positive initiative if designed properly, for youth to benefit from interaction with successful entrepreneurs.

We have a mixed view of the food security strategy: while the creation of the food valleys, characterised by formation initiatives (Points 52 and 53) is good, it should be done with less government action and more involvement of the private sector. The removal of APs (Point 57) is a step in the right direction and more should be done to promote free trade as a fundamental pillar of food security.

The new strategy on FDIs seems to be the biggest added value of Barisan's proposal. CME welcomes a foreign worker policy centred on human security (Point 60), which should gradually move toward a higher degree of labour market liberalisation at Asean level.

Also good is the proposal of bilateral free trade negotiations between Malaysia and regional partners (Point 61), to possibly achieve a global strategy for a truly free trade. CME views very positively also the limits to government-linked company (GLC) investments in certain industries (Point 62) and the idea of a comprehensive immigration reform which could truly aim to attract investors (Point 63), to be clearly distinguished by wealthy individuals. This section of the Barisan manifesto seems to be the most promising for the relaunch of Malaysia as an international investment hub.

Also welcome is the shift toward a needs-based rather than racial-based policy, while a spur for investments can also come from Point 74 on the modernisation of the rail system. CME hopes that the development of megaprojects and infrastructure can be rethought in light of the Entrepreneur Rail Model, whereby urban planning goes hand in hand with real estate development for a different and sustainable way to finance infrastructure.

Pakatan Harapan

Like Barisan’s, Pakatan’s manifesto lacks a comprehensive proposal for tax reform.

In the cost-of-living issue, CME welcomes the fight against cartels if this means an approach against privileges that have been acquired through government protection, rather than oligopolies that have developed naturally bringing technological development and price advantages to consumers. More clarity is necessary in this regard.

A good set of proposals is advanced for food security, in particular with regard to modern farming and attracting young entrepreneurs.

We hope that Pakatan promotes this by favouring private entrepreneurship and consolidation in the industry, rather than with more regulation or direct economic activity by the government.

Pakatan offers in detail a strategy on poverty, worker protection and affordable homes. However, the proposed initiatives seem to entail a stronger role for government intervention via income redistribution, rather than the approach embraced by CME, which aims to spur social mobility by promoting entrepreneurship.

In particular, the strategy on affordable homes seems intended to return to the government the role of developer, when CME would like to see more support for rental schemes.

Pakatan proposes a very good approach to education by promoting technical and vocational education and training (TVET), very much needed to rebalance the gap between workforce skills and employers’ expectations, but CME takes a sceptical view of the proposed "zero reject policy", which may nurture a mentality of pursuing results that can be achieved without an adequate effort.

While several sections are devoted to important and crucial social aspects such as freedom of speech, care for youths and the elderly, family and environmental issues, it seems to us that too little is devoted to more purely economic strategies.

In chapter 25, a commitment to cut red tape to facilitate industries is presented, but the initiatives to be deployed for this purpose are not mentioned. The accent on upgrading infrastructure is welcome, but too little mention is made of how to nurture a more pro-investment ecosystem.

THE CENTER FOR MARKET EDUCATION