IN terms of measures and initiatives laid down in the budget, it is clear that overall, it is the most inclusive, comprehensive and people-centric budget in Malaysian history.
It is an expansionary budget, while at the same time, responsible. It is about addressing short-term, long-term and structural issues of the economy and hence, capturing the bigger picture and the future direction of Malaysia.
But essentially, it is the thinking and vision behind the budget which is what I like the most.
For the first time since tabling his first budget in 2009, Datuk Seri Najib Razak’s 2018 Budget is one of the most reflective of all economic policies which he advocated and developed, and is now firmly in place.
These long-term economic policies, seen entirely as a new approach to Malaysia’s economic development, transcend simple economics and involve the interdependent relationships between economic and non-economic variables, which can be measured, described, monitored, and evaluated.
Also known as Najibnomics, it puts equal importance on the inclusive and sustainable economic growth on the one hand, and the happiness and wellbeing of the people on the other, so that eventually, the economy will be transformed into high-income economy, allowing the nation to attain the developed nation status in 2020.
The ultimate goal is to become one of the top 20 economies in the world by 2050.
Najibnomics adopted the “Big Results Fast” methodology, where it is outcome-based, more democratic and consultative, inclusive and bottom-up in its approach, a stark difference from the previous administration. Although not all economic policies of the past are bad, there are many structural and legacy issues, which Najib had to confront and undo before he could transform the economy and put Malaysia in a better place in 2050. He should know, after all, he is the only prime minister in Malaysia’s history who is formally trained in economics.
One of the important legacy and structural issues which Najib has to deal with is the price level in Malaysia, where it was kept at artificially low levels due to the past policy of blanket subsidy. As a result, wage rate was stifled, cost of living was suppressed, brain drain problems escalated and research and development activities were discouraged.
And worst of all, it was highly unsustainable, as it had worsened the deficit and debt levels further.
Based on estimation, if it was maintained, Malaysia would plunge into bankruptcy in 2019. It was also unproductive, as the money was not spent on projects which had high multiplier effects, such as healthcare, education or infrastructure. Hence, there was a need for subsidy to be rationalised so that it is more targeted and served its purpose in the first place.
Hence, Bantuan Rakyat 1Malaysia (BR1M) and other special assistance were introduced and maintained in the budget. The fact is, subsidy rationalisation is meant to normalise the price, not increase it.
Unfortunately, but as expected, this had been highly politicised and cited as the main culprit in the spike in the cost of living.
Even on the issue of cost of living, the government has put in place, measures to overcome this, by improving the people’s purchasing power, such as by introducing the minimum wage policy, reducing income tax, promoting entrepreneurship, and significantly, for Sabah, Sarawak, and Labuan, abolishing the cabotage policy.
Instead of controlling prices directly, Najibnomics gives a better way to manage the overall price level, such as by promoting competition, increasing efficiency, stimulating production, encouraging innovation, improving productivity and enhancing competitiveness.
The specific measures towards all these are many, chiefly among them is the introduction of the Competition Act (CA) 2010.
An anti-trust law, it is designed to set the business ecosystem in Malaysia to be more efficient, competitive and innovative, which essentially means an improvement in production and a reduction in overall price level.
Najibnomics, too, had to address the archaic, skewed tax system and an economy which is highly dependent on oil and gas revenue. To tackle these structural problems, the Goods and Services Tax (GST) was introduced.
It is interesting to note that during the pre-GST era, only 1 out of 10 Malaysians paid taxes and the black economy was rampant; and before GST, more than 40 per cent of Malaysia’s revenue was derived from oil and gas, which now stands at merely 14 per cent.
Najibnomics is about “market friendly affirmative action”, where “merit” and “picking winners” are emphasised when it comes to dispensing business concessions among Bumiputeras.
The focus for Bumiputera development now is not merely on equity ownership, but also about their empowerment through education, wellbeing, and happiness. And this time, even the Indians and Chinese have received their share of the pie as outlined in the budget.
Najibnomics is set to focus on public transportation and has made great success via the construction of the Mass Rapid Transit Line (MRT), with more in the pipeline, as stated in the budget.
The element of inclusiveness is apparent in this regard as it goes beyond the Klang Valley, stretching to east coast states in the peninsula, through the East Coast Rail Link (ECRL), and Sabah and Sarawak via the Pan-Borneo Highway. It is significant to highlight the building of the bridge linking Labuan and mainland Sabah in the budget.
Already, Labuan is slowly becoming a ghost town as connectivity is limited. This bridge is certainly critical to unlock Labuan’s economic potential in the foreseeable future.
Overall, Najibnomics has successfully prevented Malaysia from falling into a middle income trap, as the gap to achieve a high-income status has been narrowed, from 33 per cent to merely 19 per cent, today. The wellbeing and happiness of the people have improved steadily, as seen in the 2017 United Nation’s World Happiness Index.
The 2018 Budget is set to continue this positive and stable trend moving forward.
Dr Irwan Shah Zainal Abidin