By Ramon Navaratnam

As always, all Malaysians are looking forward with hope and great expectation to Budget Day on Friday, Oct 21.

They invariably ask – “what is there in the Budget for me?” We are mostly selfish, but we should also ask – “What is there for our economy?” or indeed for the whole country and not only for the present – but the future welfare of our nation as a whole.

After all, the annual Budget reflects the nation’s Five Development Year Plans, as well as the long term Perspective Plan or Vision 2020.

The government should explain more about the thinking behind the Budget, so that the people do not only look for immediate handouts and Budget goodies. They must also seek to find new policy measures in the Budget that will bring in more economic growth and better income equity and fairer income distribution on a sustainable basis for the future.

Budget 2017 therefore, cannot be just another “Incremental Budget”, where we continue to get more of the same ideas and policies and programmes, every year.

With the onslaught of globalisation and world economic transformation, we have to be more innovative in our Budget planning and implementation.

The budget has to become much more relevant to the people for now and the longer term. That is why Budget 2017 should better respond to the “People’s Wish List.”

The government has to be commended for having broadly consulted civil society, the academic and business communities as well as the general public, at many meetings at the Treasury and also via the Internet, in preparing for Budget 2017.

Prime Minister Najib Razak’s novel invitation for the rakyat to give the government new Budget proposals and ideas, has been well received by the public at large.

However, the government has to not only consult widely, but to listen carefully and follow up with concrete Budget proposals for tax adjustments and expenditure allocations, to meet the people’s expectations.

What do the people want from Budget 2017?

1. Tax reductions for big business are constantly requested, but they cannot or should not be fully entertained. Businessmen will usually want more reduction in corporate tax and personal tax but this concession cannot be prudentially given, particularly at this time of budget strain.

In fact some would convincingly argue that there is a good case for the government to raise taxes for the rich, so as to provide more allocations for the Bottom 40-per cent (B40) of the income group.

Then there is the Middle 40-per cent (M40) income group whose standards of living have been relatively diminishing, with rising inflation. Should they also not enjoy better quality government facilities and services?

But where would the funding come from?

It has to come from more reserves and not more borrowing. Hence could Budget 2017 introduce some income equity taxes to offset against the serious widening income disparities that can cause social unrest? Could there be better estate duties on huge properties, wealth taxes on the very wealthy, etc?

2. The people want lower taxes and more tax reliefs for the lower- to middle-income groups. These requests are fair, given the national need to raise living standards for the rakyat whose real incomes have declined relatively, especially with unduly slow wage increases.

3. More basic needs for the poor (B40) – housing, health, education, transport, etc – could be provided on a gradual basis, so that Budget deficits can be controlled and constrained. But again, if we are not to borrow too much, then the finances have to come from more taxation at the top income brackets, like in more developed economies.

Investors may protest against higher taxes. But the response should be that investors are attracted to not only lower tax regimes, but more importantly to the attractive investment climate created by many factors.

4. Inflation has to be better contained. The steadily rising prices of food is especially depressing. Furthermore the rising prices on the ground, may not be adequately reflected in official price statistics.

This could mean that the rakyat is paying far more for essential food and services than they should. The impact of rising prices on the poor can be more painful than we of the middle- and upper-income classes, can imagine.

So what can the Budget do about inflation?

i) Affordable Housing

Surely the Budget can provide more incentives to build more low-cost houses through the Industrial Building System.

Private developers can be encouraged to build more affordable housing by promoting the Public-Private Partnership concept on a win-win basis, as has been successfully accomplished in infrastructure and other development projects and programmes.

ii) Health

The state of the people’s health in the country can be improved if new and higher taxes are imposed on food and goods that have a negative impact on our health – sugar, salt, cigarettes, alcohol, etc.

Lower taxes on sports equipment can also encourage people to exercise more and become healthier.

iii) Education

Scholarships and bursaries can be provided to more students in the B40 and M40 groups, by enabling private schools, colleges and universities to increase their scholarships to poor but bright students.

This can be done by granting these institutions full tax relief on their surpluses. More savings from these surpluses can then be diverted to fees exemption and scholarships. This will also encourage the establishment of more Education Endowments and Foundations – and thus relieve the government of huge and rising education Budget expenditures.

Similarly public universities should be encouraged to raise fees from well-to-do parents.

iv) Transport

Transport charges and fees can also be given more tax concessions. There is no point in building large transport infrastructures like the MRT, LRT and BRTs and to provide bus services, if these expensive facilities and their services are highly priced and thus, not adequately used. The pricing has to be constantly reviewed and made more market-oriented.

Sometimes the authorities lose the “consumer feel” and both sides lose out and it is the government who unnecessarily loses the goodwill that it can richly earn from providing better transport to the people.

v) Food supply

Supplies must be increased as shortages are the main causes of inflation. More production, higher productivity and larger supplies could be encouraged to meet the stronger and rising demand for more goods and services.

So Budget 2017 has to identify the many supply bottlenecks and break these, to increase the supply of food as well as goods and services to the rakyat. Very often these supply shortages are man-made.

For instance, bureaucracy and wasteful protectionism can seriously hinder and hamper production and productivity.

The careless denials of suitable land alienation for food and agriculture, and for housing; deprivation of licences and permits for trade and especially, small and medium industries; severe compliance costs; and wide and rising grand corruption, can stifle efficiencies and suppress supplies very badly. Corruption causes cost inflation too.

Conclusion

Budget 2017 has to be different. It cannot offer more of the same, but should be much better than in the past. This is because we are facing more challenging circumstances internally and especially from globalisation, with greater innovation and competition from abroad.

We have to do much more for the B40 and M40 income groups, as otherwise the rakyat will state their case more vehemently. Yes, they want economic growth, jobs and higher incomes, but for whose benefit, the rich or the poor?

Corruption, cronyism and expenditure wastage as testified by the Auditor-General repeatedly, for so many years, have to be overcome urgently or the government’s credibility will suffer even more.

The Budget should adopt more of the New Economic Model that the government had considered earlier, and ensure that it gradually replaces the New Economic Policy, which is considered by many, if not most economists, to be outdated, outmoded, inefficient and much abused.

Finally, the Rakyat must realise that this Budget 2017 will be a “tight Budget” because of many economic constraints. The global economy is slowing down, our Budget deficits have to be reduced to about 3 per cent of gross domestic product (GDP), the national debt has also to be limited to about 55 per cent of the GDP, the balance of payments and the ringgit are under pressure. Hence, all these constrains allow little room to manoeuvre.

Finally, we must have a pragmatic and prudent Budget 2017, so that we can move forward with greater confidence to build a stronger and more sustainable economy to reach our Vision 2020 aspirations and to help implement the United Nations Sustainable Development Goals in our beloved country.

The Budget could hopefully also announce the formation of the National Consultative Council 2 (NCC2) as soon as possible, to consider a more sustainable Economic Model.

We all sincerely hope that Budget 2017 will live up to our people’s simple, humble and realistic expectations.

I wish my former Treasury colleagues and the Malaysian people, all the very best for a Happy Budget 2017.

Tan Sri Ramon Navaratnam is the Chairman, Asli Centre for Public Policy Studies

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