Analysts: A sober and 'kurang manis' budget
After years of lacing the federal budget with sweeteners, analysts say, the 2014 Budget announced appears sober and balanced.
While the man on the street may not like the sound of the goods and services tax, the analysts say it fell within expectations, as did much of the budget.
Others felt that the budget is rather “business as usual” and that after many years of going to Parliament to ask for more money, the proof of whether the budget pudding will be enough is still in the eating.
After years of lacing the federal budget with sweeteners, analysts say, the 2014 Budget announced appears sober and balanced.
While the man on the street may not like the sound of the goods and services tax, the analysts say it fell within expectations, as did much of the budget.
Others felt that the budget is rather “business as usual” and that after many years of going to Parliament to ask for more money, the proof of whether the budget pudding will be enough is still in the eating.
Yeah Kim Leng, Ratings Agency Malaysia chief economist
After four to five consecutive years of dishing out goodies, this is a budget which economists would call fiscally prudent, and in some ways, bold.
The sugar subsidy cut will bring about mild inflationary pressures, but it will be temporary as the economic environment is now benign. It is a good time cut subsidies, especially a negative one like this which has health implications.
On the revenue side, the government is expanding its base with GST. The announcement of the rate is positive as businesses can prepare. Six percent is also revenue positive, which means the GST can held at this rate for a while without adjutsments.
This is balanced with tax breaks as well as expansion of the Bantuan Rakyat 1Malaysia to those earning RM3000-4000, plus the restructuring of the tax regime will make Malaysia more competitive.
Those earning RM8,000 and below will also benefit from efforts to control house prices, especially if houses in high demand areas can be kept below RM1 million.
Wan Saiful Wan Jan, Institute of Democracy and Economic Affairs chief executive
I agree with the introduction of the GST at 6 percent but my reasoning is not at all based on economics.
I look at the political impact instead. Malaysians have for so long feel that the government spends the "government's money". They don't realise that the government spends the people's money.
With GST, everyone will realise that the government takes money from our pockets to spend. So I expect that with GST, the people will demand for more accountability when the government spends.
This is good for our democracy in the long term because it will force the government to be more transparent and accountable. I know this is a rather long-winded way of looking at the issue, but this is why I support the introduction of the GST.
But of course from an economic priority perspective, there are many other ways for the government to raise revenue. For example, if they give more attention to what the Auditor-General reports annually, they could save billions every year. That is why I said that I like the GST but I look at it from a political perspective.
On the budget as a whole, I hope the government takes their own announcement seriously enough and do not behave in the same way they behaved in the last few years.
We have seen the government repeatedly coming back to parliament with supplementary bills because they ran out of money mid-year. This is a sign of incompetence and lack of respect to parliamentary processes, and I am sure the government is much better than that.
Lim Teck Ghee, Centre for Policy Initiatives chief economist
The 2014 Budget is business as usual one and offers no break in the pattern of excessive government expenditure and high operating costs.
It talks about boosting entrepreneurship and generating new wealth but the fear is that all the newly minted projects will simply result in more opportunities and funding for the politically connected and wasteful expenditure on projects that provide less than the promised value added.
There is also little in it that the lower and middle classes in the country can cheer. The gains from the cut in the individual income tax are really minor and will not provide any relief as they will be offset by higher inflation.
The allocation of RM1.9 billion for affordable housing shows how unconcerned the government is about the housing crisis affecting the lower income groups especially when one compares this with the RM3 billion is being set aside for the Maritime Development Fund, much of which will undoubtedly go towards politically connected companies and individuals.
Finally, the budget does not recognize that the country has a major problem with an underclass and racially marginalized group which has been left out of the mainstream of development and which needs special attention and financial allocation if they are not to be left even further behind.
It also does not address the sustainability of a large Malaysian civil service, which is the largest in the world per capita.
There is no bonus for the civil service now but I'm sure they will be able to sneak something in once the civil service unions make a big fuss about it.
Ramon Navaratnam, economist and Asli Centre of Public Policy Studies chairperson:
There are many giveaways for the corporate sector, but the corporate sector can afford the taxes.
The corporate sector is not attracted by tax incentives, they are more attracted by good governance.
GST must be implemented immediately. To postpone it further is not advisable.
The predicted budget deficit of 3.5 percent may not be realistic estimate given the generous goodies given out through higher expenditures and postponement of GST.
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