For Malaysia, short of borrowing which would add to its already staggering RM1.2 trillion national debt, taxes serve as another source of revenue.
However, this is highly unpopular.
But under Budget 2025, which was tabled at the Dewan Rakyat in October, the Madani government has offered a new strategy — crack down on corruption and financial mismanagement.
Corruption and mismanagement are said to be endemic in Malaysia.
For instance, research outfit Emir Research estimated that the country has lost a whopping RM2.3 trillion through corruption and leakages from 1997 to 2022.
That would be enough to give every Malaysian RM74,000 each — a tidy sum considering that 50% of Malaysians earn less than RM2,844 per month or about RM34,100 per year.
In 2024, the Malaysian Anti-Corruption Commission (MACC) put Malaysia’s losses through graft at RM277 billion over the previous five years, or roughly RM56 billion annually.
These numbers are for the whole economy, not just the public sector.
Even so, it won’t be a stretch to say that if the government had cleaned up its own house, there would have been billions more to spend on making life easier for the people without burdening them with additional taxes.
The government has even admitted that it can save RM10 billion by just cleaning up the public procurement process and another RM20 billion from plugging leakages in the diesel subsidy programme.
This is money that can be spent on meeting the people’s needs.
As Prime Minister Anwar Ibrahim pointed out, “it is not defensible” to have economic growth without social well-being.
For the record, Malaysia’s GDP grew 3.7% in 2023 and is projected to expand by 5% this year.
“It is unconscionable to imagine that you can propel the economy but at the same time condone these excesses,” Anwar said in an exclusive interview with FMT recently.
He attributed the failure, in equal measure, to corruption, flawed policies and inconsistency with conventional thinking that prioritises economic growth over the people’s well-being.
Maximising revenue
More could have been added to the government’s coffers had public institutions such as government-linked investment companies (GLICs) and government-linked companies (GLCs) been more prudent.
It is true that not every investment will turn out to be a winner.
Even so, GLICs should base their investments on rigorous assessments to ensure that they generate multiple benefits for the economy.
The RM43.9 million loss incurred by Khazanah Nasional and Permodalan Nasional Bhd (PNB) in their investment in FashionValet Sdn Bhd is a case in point.
The fashion e-commerce sector is known to be a high-risk investment and FashionValet, which was founded by social media influencer Vivy Yusof, was already losing money when Khazanah and PNB came in.
FashionValet was not Khazanah’s only investment miscalculation. In 2018, it lost RM80 million on an online lingerie business in India
Three years later, the sovereign wealth fund sold its stake in semiconductor company SilTerra Malaysia Sdn Bhd for RM273 million after giving it a RM781 million loan.
Unlike Singapore’s Temasek, which cut senior management compensation after they incurred a loss of S$372 million (RM1.2 billion) on cryptocurrency exchange FTX, there were no repercussions for Khazanah’s missteps.
Course correction
So how does Budget 2025 turn the tide?
A lot of it has to do with what’s known as institutional and legal reforms.
One proposal is to make open tenders compulsory to shut out closed-door deals.
Amendments to the Audit Act will give the national audit department greater authority to check GLCs and GLICs’ finances and public money.
Another initiative, called “Follow the Public Money”, will track how taxpayer money is used.
The MACC and Public Accounts Committee (PAC) are expected to get bigger budgets to make them more effective.
The Madani government is also introducing reforms to ensure better performance by GLCs and GLICs.
Missing piece
These may be steps in the right direction but given the sheer magnitude of administrative mismanagement, more needs to be done.
Firstly, the government must go beyond just talk and take appropriate action.
That means holding those who mismanage public money accountable, be they ministers or heads of GLCs.
On top of highlighting their transgressions, those who have looted the country must be severely punished.
Anwar’s directive for Khazanah and PNB to be investigated for their FashionValet blunder should be par for the course going forward.
Putting the country first entails making difficult choices, like ending political appointments to GLCs and giving out contracts to politically-connected businessmen.
But the devil is in the details.
For instance, if the proposed Public Procurement Bill covers only ministries and agencies but is not applicable to GLICs, GLCs and public-private partnerships, it will be a lost opportunity for the Madani government to put the Malaysian economy back on track and on a clean trajectory.
Time to act
Budget 2025’s bold anti-corruption measures have the potential to unlock billions, redirecting wasted resources back to the rakyat.
By ending leakages and mismanagement, Malaysia can strengthen its economic and financial health, as well as restore public trust.
The government has sketched a viable path forward. It should act sooner rather than later.