With the theme “Ensuring unity and economic growth, inclusive prudent spending, wellbeing of the rakyat”, the 2017 Budget can be seen as a set of measures to boost Malaysia’s economic resilience amid a challenging external environment.
Essentially, it is a budget that is pro-growth, people-centric and forward-looking. The economy is poised to grow between four and five per cent next year, compared with the four to 4.5 per cent this year, and the deficit target is on course to be reduced to 3.1 per cent this year and three per cent next year.
This is remarkable, and a manifestation of prudent spending. It is a fine balancing act of not stimulating the economy too much at the expense of deteriorating the deficit and debt levels further on the one hand, and not to aggressively reduce the budget at the risk of slowing growth on the other. How will the government achieve this? Simply put, enhancing revenue and optimising expenditure in a way that is inclusive and sustainable. It is important to note that without growth, there is no revenue. Hence, stimulating growth is vital. This budget is not just pursuing growth; it’s quality growth.
There are two issues with regard to quality growth. First, one that is sustainable, meaning besides fiscal levels being in check, the inflation rate is also maintained at a stable rate of two to three per cent. And second, measures to stimulate growth are more or less underpinned with an increase in productivity through innovation, which will eventually improve the competitiveness of the economy. This is manifested clearly in the thrust on digital economy, research and development, big data, financial technology and, especially, in making Malaysia a digital hub and start-up year for next year. This is a revolution in economic activity moving forward. In fact, this is where more than 65 per cent of future jobs will be.
The other aspect is the focus on infrastructure development, especially public transportation. A Bogota mayor once said: “A developed country is not a place where the poor have cars; it is where the rich use public transportation.” Although we should have focused on this a long time ago, it is better late than never. The RM55 billion allocated for the new East Coast Rail Line, for instance, will invigorate domestic demand further through private investment, which, according to the 2016/2017 economic report, is targeted to grow at 10.7 per cent next year.
Financial and capital markets are also getting a boost, with the establishment of the Capital Market Research Institute and the Small and Mid-Cap PLC Research scheme to propel these markets to greater heights. If there is one thing that everybody can agree on in this budget, is that it has prioritised the people, particularly the bottom 40 per cent group. Of course, those who oppose for the sake of opposing will twist this and claim that it is an election budget. But the truth is, this has been the core of Prime Minister and Finance Minister Datuk Seri Najib Razak’s economic policies since he introduced the 1Malaysia concept of “People first, performance now” way back in 2009. I see coherence in this budget from the past six budgets he announced as prime minister, and also in line with the five-year economic plans of the 10th Malaysia Plan and the current 11th Malaysia Plan, and the National Transformation Programme. This is basically what the majority of the people wanted in the run-up to the budget announcement.
One thing that I like most is that this is a forward-looking budget. This is in reference to the 2050 National Transformation vision or TN50. There is already criticism and scepticism about TN50, although the content has yet to be formulated. It’s a work in progress. The fact that there will be a series of national discourses led by multiracial youth and conducted by Youth and Sports Ministry has been grossly overlooked.
As a young Malaysian, of course, this is what I am looking forward to — my concern is about the future of my country, as I believe many Malaysian youth are as well. And, this is also a reflection of the government’s approach to policymaking, which is one through consultation and a bottom-up approach. It is a clear exhibition of the government’s mantra that the era of “the government knows best” is over. I see the budget as a mirror of the state of the Malaysian economy. It shows a positive prospect of an economy that is moving in the right direction. It has laid down sound strategies and measures to improve the economic fundamentals further and eventually make the economy less vulnerable to external shocks.
Instead of going bankrupt, the economy is on track to graduate from the middle income trap by 2020. And, instead of becoming a failed state, the economy is on the right trajectory to achieve a balanced budget in 2020.
Dr Irwan Shah Zainal Abidin is director of the Asian Research Institute of Banking and Finance (ARIBF), Universiti Utara Malaysia