Malaysian Rating Corporation Bhd (MARC) chief economist Firdaos Rosli said the SPV had overly ambitious targets even without taking into account the impact of the Covid-19 pandemic, such as aiming for the gross domestic product (GDP) to reach RM3.4 trillion by 2030.
It also targeted an average GDP growth rate of 4.7% annually from 2021 to 2030 and for employees’ compensation to hit 48% of the GDP, compared with 35.7% in 2018.
Firdaos said most of the economic development plans and initiatives formulated by Putrajaya had been internally driven rather than external, adding that the nation’s growth model was still based on the New Economic Policy (NEP) introduced in 1971.
“In 1971, the global economy was not as integrated as it is today, so an internal-minded long-term growth plan is ‘okay’. In 1990, we started to see more convergence and in 2019 before the pandemic, globalisation grew by leaps and bounds.
“But Malaysia continues to play catch up with the global economy. Despite numerous long-term plans, blueprints and annual budgets, we have yet to touch 50% of the GDP per worker that is the benchmark in the US.
“This calls into question the effectiveness of Malaysia’s long-term economic planning. Are we meeting our development targets? And if we are, do these targets matter when looked at from a global perspective,” he said at a virtual press conference today.
Firdaos said the various plans have been pretty much the same thing redrafted over and over again, adding that Putrajaya might need to change its targets if its development plans have not worked.
While it is good for development plans to have goals and for Putrajaya to endeavour to achieve them, he said, these long-term plans must be as fluid as possible, evolving as circumstances change.
He said the pandemic offered the government the opportunity to revamp its economic planning, suggesting that it put in place fewer targets as ‘less is more’.
In pushing for Putrajaya to pursue greater infrastructure development, he said it should also look at addressing the lack of basic infrastructure and amenities in certain parts of Malaysia.
He pointed out that Kelantan had the highest percentage of households with no access to piped water, while many Sabah and Sarawak citizens did not have immediate access to public healthcare.
“What kind of high-income economy do we want to be in the future? Do we want to be a high-income nation where a significant percentage of its people still have no access to piped water?”
Firdaos also pressed for the goods and services tax (GST) to be reintroduced, saying it should be done within the next 10 years.
With Malaysia on the road to becoming an ageing nation with 50% of the population comprising retirees, this will lead to a decline in tax revenue to GDP with no direct taxation on retirees.
“The problem is not the tax structure in itself but the right design. We say it should be set at this or that rate, that some items should be standard-rated or GST-exempt. These kinds of questions have to be debated because these things matter.
“And a timeline also makes a difference because if we were to introduce GST at a later stage, it creates the notion that it is not something that urgent. We could decide to reintroduce it in 2029.
“In terms of direct taxation, we will have to look vis-à-vis our regional competitors. Right now some have a lower corporate tax structure and, by that virtue, lower personal tax as well,” he said.