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Budget 2020 not sufficient to achieve SPV 2030

LETTER | 1. The 2020 Budget presented last week was essentially a good budget considering the economic problems inherited by Pakatan Harapan and the challenging condition of the global economy. Of course, Budget 2020 is better than its predecessor and is a good foundation for starting the 12th Malaysia Plan which will run from 2021 to 2025 and ultimately achieve the Shared Prosperity Vision by 2030.

2. MTEM is particularly pleased with the following announcements:

• The funds allocated for the development of Bumiputera SMEs amounted to RM445 million

• Incentives to enhance e-wallet usage and investment to increase high-speed Internet coverage will strengthen the digital economy and drive Malaysia towards a high-tech economy

• Opening of registration for G1 contractors will help more bumiputera to become contractors

3. MTEM disagrees with the target of ensuring that at least 30 percent of each ministry's tenders is allocated to bumiputera contractors as bumiputera make up almost 70 percent of the Malaysian population. In fact, at least 50 percent of the tenders should be reserved for bumiputera contractors. What we feel is more urgent is how to:

• Eradicate instances of "Ali Baba" practices

• Avoid the creation of mega-tenders where only one or two companies which may be Ali Baba companies are allowed to monopolise government tenders by using the name of a bumiputera crony

• The government also needs to urgently discuss with all the stakeholders before tabling the Acquisition Act 2020 which will have a significant impact on bumiputera contractors.

• Government spending methods also need to be studied to make them more efficient and limit any harm to the country due to wastage of government funds

4. Setting a monthly minimum wage of RM1,200 in major cities by 2020 is a move that puts Malaysia on the right track by 2024 when the minimum wage will eventually reach RM1,500 per month as promised in the Harapan manifesto. But this is still not enough because Malaysian companies make large profits compared to the salaries paid to their employees. 

Governments need to be smart enough to make incentives and put pressure on big companies to share more with the working class in line with the vision outlined in the Shared Prosperity Vision 2030. We absolutely agree with the statement of Wong Chen that nobody can afford to live on only RM1,200 a month.

5. The [email protected] program as proposed does not emphasise the development of labour market capacity especially of the youth in high value, skilled and paid jobs or in line with "Knowledge-Based Economics". Instead, [email protected] should focus on incentives, grants and loans for increased productivity that will create skilled and high paying jobs. For example, the Employment Incentive of RM250 a month per worker will encourage employers to reduce their salaries as government subsidies mean that employees will still make the same as before. 

It is better for the government to provide automation matching grants to employers who replace the use of foreign workers with local workers who become more efficient through the operation of advanced tools and machines. The two main effects of this initiative are:

• The incentives and pressure for SMEs to join the IR4.0 revolution is no longer effective, as this initiative is an indirect declaration that the status quo will continue.

• It does not address the issue of the huge influx of foreign workers into Malaysia. Going forward, foreign workers should only be allowed to take up 3D jobs.

Now the government has to bear the huge cost of sending illegal migrants home and the even bigger expense of keeping them in detention. It is time for law enforcement to be empowered!

The government's actions, or lack of government action, will continue to encourage Malaysia's dependence on foreign workers by allowing them to continue to enter Malaysia in great numbers which has stunted Malaysia's economic productivity. This situation also affects the M40 as employers in Malaysia have no incentive to invest in technology that enhances industrial productivity. Increasing productivity will increase the average wages of Malaysian workers as well as reduce the need for foreign workers as every Malaysian worker can generate more economic activity.

6. One of the reasons for the failure of the Bumiputera Economic Agenda is that no agency or ministry that is a centre for strategic coordination. We hope that Teraju will be given this role in "Malaysia Baru". However, in our view, the role of Teraju (Unit Peneraju Agenda Bumiputera) has been reduced to an entrepreneur development agency similar to existing entrepreneur development agencies such as SME Corp and Tekun. 

What has become of the plan to make Teraju an agency responsible for ensuring the successful implementation of the bumiputera agenda? Teraju should be given regulatory authority and become a powerful coordination centre to monitor the commitment of government agencies and private companies for the success of the Shared Prosperity Vision 2030. This is important so that the failure of the past will not be repeated as Teraju goes beyond just raising funds for entrepreneurs.

7. The government's decision to reduce the minimum price of housing for foreigners to just RM600,000 will negatively impact the interest of the rakyat. The real estate industry in Malaysia will now have an incentive to focus on the construction of high-rise units worth more than RM600,000 as potential buyers are no longer limited wealthy local buyers but who are small in numbers. Most the luxury condominium units in Kuala Lumpur already cost over RM1 million so even high-rise units designed for middle-class Malaysians will be targeted by wealthy foreigners for acquisition. This decision will have two main effects:

• Real estate developers in Malaysia will be pleased as they no longer have to rely on Malaysians who are often unable to obtain a home loan approval due to their low income.

• It will impact other affordable homes, especially those built at affordable prices

The government should allow the market to punish those who built housing that most people cannot afford. At this point, the prices of all homes are decreasing but this will ensure that house prices remain high and will eventually rise.

Instead, the government should launch a large-scale public housing project to provide housing at affordable prices in line with demand which has not been satisfied by the private sector. This also benefits small contractors that the government will have to appoint.

8. Farmers and rural regions: We expect no significant improvement compared to Budget 2019. Issues that will have a serious impact on farmers are the lack of quality seeds. Input subsidies are meaningless if there are insufficient seeds. How will the income of the farmers increase? With the prevailing monopoly, input and output subsidies will not improve the plight of the farmers. Will the rice farmers continue to suffer from the Bernas monopoly? This question is, unfortunately, not yet answered in this budget.

9. Implementation issues: MTEM is concerned with the possibility that all the good planning in the Budget 2020 will be thwarted by an inefficient implementation and weak enforcement.

10. In conclusion, Budget 2020 is generally good, but it has yet to achieve the true meaning of "shared prosperity" in full. However, it can be considered as a solid starting point for the government to make policy-level reforms for the 12th Malaysia Plan for a stronger impact that will be felt by the rakyat

What is the point of a Malaysia for all if bumiputera are still left behind in most aspects? What is the point of a Malaysia for all if farmers and fishermen are victims of greedy middlemen, business cartels and industrial monopolies? What is the point of a Malaysia for all if the cost of living rises but salaries are insufficient for a dignified life? What is the point of a Malaysia for all if corporate profits far exceed the income of labour? 

Hopefully, Budget 2020 will be an initial benchmark heading to Shared Prosperity 2030 which will transform the Destiny of Malaysia.

The writer is chief executive officer, Malay Economic Action Council (MTEM).

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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