CPPS’ response to Budget 2017

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The Centre for Public Policy Studies (CPPS) views Budget 2017 as an attempt to balance multiple economic and political realities at a time when there is a need for tight fiscal constraints. Politically, the Budget has largely succeeded in its goal to bolster its traditional voter base through large investment in the civil service, rural and low-income communities, while also not alienating other groups as we move into what could become the beginning of an election period.

Economically, the government has clearly seen that the writing is on the wall for a continuing reliance on commodity revenue and has made serious efforts to diversify its growth strategy through heavy investment in small and medium enterprises (SMEs) (which make up over 95 percent of all businesses), as well as in entrepreneurship and the newly highlighted focus area of the digital economy.

With so many focus areas in this year’s Budget, we have chosen a few sectors that we think encompass the main thrusts, as well as some that we feel have been neglected.

Agriculture and Agro-based Industries

The government’s commitment to invest further in the productivity improvement in this sector is welcomed. It represents much needed opportunity to integrate issues which were inadequately addressed in the previous budgets. This will enable small farmers to gain better access to technology, credit, marketing platforms, and provision of infrastructure both for agricultural production and ancillary facilities.

Adequate investment in this sector will help to improve the productivity of labour whose output has been declining over the years. It will benefit places like Sabah who remain heavily agrarian with limited industry and export sectors.

Women’s empowerment and protection

While we’re pleased to see that continuous investment will be made in addressing women’s economic empowerment through the Ikit and I Keunita programmes, there is still a lack of attention paid to provide protection to vulnerable women and girls. It fails to address the need to provide more safe spaces for domestic violence (DV) victims.

This is particularly needed in rural and interior areas in Sabah and Sarawak. Every year only a few hundred women are able to seek shelter services at one of the 42 shelters gazetted by the government.

Middle 40

Budget 2017 reiterates support for Bottom 40, though it does not contain clear investments for those who are in the Middle 40. Realising the burden for this group to cope with high rise cost of living, including targeted subsidy rationalisation, the budget lacks the focus to provide key areas for strategic interventions on what can be done immediately, as well as developing medium to long term strategies to respond to this issue.

Goods and Services Tax (GST)

The government will leave the GST at the 6 percent rate for at least the next year. While they would ideally like to raise this to plug the revenue gap being felt by the sharp decline in oil revenue, which they estimate has resulted in a RM30 billion hit against the budget bottom line, politically this would have been unpalatable at the moment.

The GST is one area where the government is receiving backlash from its core voter base who are feeling the brunt of the rising cost of living.

Entrepreneurs and the digital economy

This is an area where the government has made some big announcements. There was an expectation that both the digital economy and the promotion of entrepreneurship would receive much attention as the government looks to ways to spur innovation carrying on from the many measures in relation to technical and vocational education and training that were announced in last year’s budget.

With the digital economy contributing to an estimated 16 percent of the GDP, The Malaysian Digital Economy Corporation (MDEC) will be the big winner here, receiving an extra RM100 million in allocation. They will also receive an additional RM162 million to implement various other programmes.

Entrepreneurship programmes range from the agriculture sector where there will be RM100 million earmarked to 3,000 individuals produce high-value products, to the promotion of more coding in schools, and even a new foreign work pass category for those coming here as tech entrepreneurs.

This focus, and the many other programmes announced in the budget are encouraging as it shows a serious effort to diversify the economy away from a heavy reliance on commodities, towards more knowledge-based solutions to growth and prosperity as the country enters the last lap towards Vision 2020 and high-income nation status.

Small and medium enterprises (SMEs)

SMEs are the lifeblood of the Malaysian economy. As such, it was essential that they received key attention in this year’s Budget - especially as the government looks toward more domestic demand to promote economic growth. Here, they will be supported by increased assistance to export their goods through a RM130 million promotional fund under Matrade, as well as a RM200 million investment to be used for loan financing through Exim Bank.

Monitoring transparency and accountability

The country is at crossroads whereby there is a growing lack of faith in public institutions to fulfil their roles in relation to accountability and transparency. While the Malaysian Anti-Corruption Commission (MACC) must be commended on recent high-profile cases in combating corruption, they are acting from an already weakened position.

Various events in the past few years have not only hampered accountability measures, but have severely limited public access to information and transparency. Institutions and mechanisms that allow for this are the bedrock of our democracy, and must be protected. As we near our goal of developed nation status, we must acknowledge that this does not only mean achieving income targets, but also creating a society in which equality, justice, compassion and the rule of law are upheld.

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