By Kua Kia Soong
Malaysians voted in Pakatan Harapan (PH) against tremendous odds as the coalition that provided hope for a progressive “people centred” future.
If such a future is to be delivered, it is crucial that the coalition re-examines the populist policies they espoused on the way to victory because these are not necessarily progressive.
By “progressive” it is meant, whether these policies manage our precious resources well and actually make a significant and sustainable difference to the lives of the poor.
Here I examine three populist policies which at first glance sound egalitarian, namely: free water, abolition of tolls and free tertiary education.
There is actually a fourth policy regarding the abolition of the goods and services tax (GST) which has already been shown by Gunasegaran to be not progressive since it is the middle class and the rich who will be enjoying the removal of GST.
The fact is, it is the rich and middle class who wash their cars every day, drive cars on the highways and who go on to tertiary institutions that will be subsidised by the working class if water, tolls and tertiary education were free.
Since Malaysians are now more aware of the need for sustainable development and equitable wealth redistribution, we must ensure that our taxation policies are progressive rather than let the working class subsidise the rich middle class.
1. Free water
First and foremost, water is a finite resource. In 2014, I described the free water policy by the Selangor state government as “populism gone mad” at a time when Selangor and other parts of the country were experiencing critical water shortages during the prevailing drought. The recent water crisis was another warning that this populist policy is misplaced.
Free water is not like any other populist handout – there are dire consequences.
The Orang Asli community in Kuala Kubu Baru had to sacrifice their traditional ancestral homes in 1999 in the construction of the Selangor river dam, alleged to be the only option to satisfy the water demands of the Klang valley.
In the process, Selangor lost one of its most pristine white-water rafting sites, acclaimed as world class, and taxpayers bore the cost of the dam through indirect taxation.
The rising cost of living is but the result of such uneconomic and unnecessary projects by the authorities, a burden for which we are paying today.
Even if some Malaysians remain unmoved about the displacement of indigenous peoples for dam projects, the personal and economic discomfort Klang Valley folk have experienced during water shortages ought to be enough to warn us all of the impending catastrophic water crises to come.
And as this precious resource becomes increasingly scarce, it is clear that future wars will be fought over access to water. It is not a free infinite resource.
When water tariffs are too low (never mind free), consumers neither respect nor conserve water. The statistics on the water consumption rate of Malaysians speak for themselves.
The current water shortage and looming water crisis has accelerated because of population growth and erratic rain patterns. This crisis should wake Malaysians up to the urgent need for water demand management.
Water demand management is a form of progressive taxation. It sets targets for per capita water use, and reductions in non-revenue water.
Malaysia is blessed to be among the countries in the world with abundant rain water, yet we are the worst squanderers of this natural resource. We have many times more water than most African countries and yet we are facing a water shortage crisis.
According to Water Watch Penang, Malaysians are among the worst water wasters in the world, with a national average water consumption of 212 litres/capita/day when 20 to 30 litres of water per person per day is considered adequate for basic human needs.
Urban Malaysians are worse – they use more than 500 litres/capita/day.
A comprehensive water demand management policy would include changes to building by-laws, through subsidising the installation of water saving devices in business and residential properties and through giving industry incentives to switch to water-efficient technologies, besides incentives to household consumers to conserve water.
We have yet to see a serious water conservation campaign in this country, one which not only encourages household and industrial consumers to conserve but also provides imaginative fiscal incentives to conserve water without affecting productivity.
The same can be said for the lack of a serious energy conservation campaign. Unless this is done, we will continue to see the wasteful attitude to water usage in this country and the needless building of dams.
Giving away free water makes a mockery of water demand management. In fact, water demand management would involve making sure the middle class and the rich who get their foreign maids to wash their precious cars every day pay MORE for the luxury.
When Malaysians start collecting our plentiful rain water for gardening and cleaning, only then will we be on our way to becoming an environmentally conscious people who have a sustainable lifestyle.
There must be a deterrent to anyone who wastes this precious resource, with a sliding scale of water tariffs to benefit those who are in the low-income bracket.
Thus, B40 households would pay the absolute minimal water tariff while the T20 households would pay the maximum tariff. The M40 would have to pay a tariff that is somewhere between the two extremes, just enough to encourage water conservation.
2. No tolls on highways
This is a populist demand that goes down well with the middle class and the rich who drive their cars on the country’s ever-expanding highways. The manner in which the highways have been privatised to crony capitalists is a separate matter.
Any toll collection should be undertaken by the government and not private concessionaires. But why should the poor and all those who cannot afford cars have to subsidise highway users which they effectively do if these highways are toll free?
Studies in the US have shown that the amount that road users pay through gas taxes accounts for less than half of what’s spent to maintain and expand the road system.
The resulting shortfall is made up from other sources of tax revenue at the state and local levels, generated by drivers and non-drivers alike. This subsidising of car ownership costs the typical household about $1,100 per year— over and above the costs of gas taxes, tolls, and other user fees.
Cheap petrol, subsidised cars and highways have produced the sprawling madness that so frustrates the need for alternative public transportation. Instead of spending billions on new, mostly unnecessary, highways, we should encourage the construction of denser communities that foster connection via public transit.
Instead of more and more shopping malls, we should encourage more walkable town centres with better local bus services. It is also time that Kuala Lumpur City Centre imposes a congestion charge just like that in Singapore and London.
On the other hand, highway tolls can be free for outstation buses that the working-class use. That would be progressive.
3. Free tertiary education for ALL
Free tertiary education for ALL sounds like good heart-warming populism. Free tertiary education for the working class and the poor is of course progressive and laudable.
But if we provide free tertiary education for all irrespective of their means, it is equivalent to the working class subsidising the rich and middle class. And why shouldn’t the rich pay more to subsidise the working class and the poor?
This is because the statistics show that individuals from rich backgrounds are more likely to go to university, and free tuition would mean that they would benefit more from the tax revenue that we all pay including the working class.
A progressive way out would be to provide free tertiary education to families on a means tested sliding scale: For example, those families with a monthly income of up to RM10,000 say, would be eligible for TOTALLY FREE tertiary education while those with a monthly income of RM20,000 and above would have to pay full cost tuition fees. All those whose monthly incomes fall between these two poles would pay tuition fees on a means tested sliding scale.
Time we had progressive means tested taxes
It is time we introduced means testing in tertiary education tuition fees and other social services such as public housing or social security benefits as a means of progressive taxation to benefit the less privileged and to implement wealth redistribution.
Many Malaysians were shocked recently to realise that Bumiputeras can enjoy a discount for buying a house priced at RM1 million. This is not only racially discriminatory, it is the opposite of progressive taxation! For buying low-cost housing, B40 households in ALL communities regardless of ethnicity should be entitled to a discount. Now that’s progressive!
Kua Kia Soong is the adviser to Suaram.
The views expressed are those of the author and do not necessarily reflect those of FMT.