PAKATAN Harapan should not waste the good foundation offered by the Budget tabled last Friday.
Although by no means perfect — what Budget ever is? — it provides a useful guide on the direction of the Malaysian economy many have so long been asking for.
The four main thrusts and the 15 strategies form a sound basis that could be expanded and augmented under the 12th Malaysia Plan which is to cover the period 2021-2025 and, importantly, in Shared Prosperity Vision (SPV) 2030.
Pakatan Harapan must begin to want to be defined by its socio-economic policy and political reform rather than too much infighting and issues like the succession which must not become as if it is a right to the throne.
The finance minister in his Budget speech kept to script and was workmanlike apart from a very few snide political comments against the opposition.
Even those comments served the purpose of reminding the nation of the scourge of corruption and of the need to build upon what was good from the past: Vision 2020 which, alas, the country will fall short of and must now regroup under SPV 2030; and the Multimedia Super Corridor launched in 1996, now shown to be so visionary as we propel country forward through the digital economy.
The strategic direction outlined in the minister’s speech is clear: Driving growth and equitable outcomes in the digital era towards shared prosperity.
After the first Budget 2019, which perforce contained rather too many financial strictures, a more positive mood is engendered — despite a more challenging external environment.
There were a great many incentives offered to realise the objective without falling over the top. While there will be the debate whether they were sufficient, it has to be acknowledged while there is no limit to imagination, there is in financial management.
The projected fiscal deficit of 3.2 per cent is prudent, already exceeding the promised 3.0 per cent but offering some space to the 3.5 per cent regarded by many as an outer limit.
With a challenging external environment, that space is needed for a stimulus package if necessary.
Much beyond that will be taking the country into turbulent territory, along with the rest of the world, when all bets are off and there will have to be crisis management thinking.
In this connection, it can be asked if the projected economic growth rate in 2020 of 4.8 per cent is overly optimistic.
It is understood the minister cannot deny the Budget of its many positive proposals by forecasting a growth rate lower than this year’s.
But greater realism in the situation the world is in would also have been understood.
On another point, the minister might have been less effusive about having tamed inflation — an expected rate of 0.9 per cent this year — when all around us the people have been screaming about the rise in the cost of living, especially those in the B40 segment and below.
Inflation is what you experience, not what the numbers say which come from a basket of goods assigned weightage not related to reality.
The least satisfactory part of the Budget however relates to the fourth thrust: Revitalisation of public institutions and finances.
While the finance minister has done a good job in managing the huge debt bequeathed by the corrupt former government, there is a need also to keep a tight rein on current spending.
I am disappointed the minister did not introduce the discipline of rate of return on the budget allocations he has made.
The huge amounts that have been allocated to the Ministry of Education for instance — increased for 2020 to RM64.1 billion — must be set against impact and outcome.
The ministry has been notorious for low impact and poor outcome for years, and yet it has not been put on notice.
Similarly, a large amount has been allocated to the Ministry of Health, covering another important sector, which should be made to account for how money is spent.
In tourism, again a huge allocation for specific purpose of Visit Malaysia 2020 does not mean that the money can be poured into all sorts of fancy projects which look good and bright but bring low return.
Financial accountability, not unrelated of course to corruption, is a discipline in government which has been shown to be in short supply.
The minister of finance must introduce a system of measure of rate of return against defined purpose.
Only then will Pakatan Harapan be seen to be making a difference in financial governance.
Finally, the tax experts are getting restless that the finance minster has not addressed the burning issue of the narrow revenue base.
They point out, quite appropriately, that the minister noted Malaysia’s tax revenue as a percentage of GDP is low, but ask what exactly does he propose to do about it.
Only 15.2 per cent of the working population pay taxes while the figure for companies is just 16.3 per cent of those registered with SSM. The experts are asking what the minister is doing about broadening the tax base, what is he doing about tax reform.
Clearly, the current approach is that, as the economy grows, increased taxes will be collected from those who pay taxes.
But the rate of growth of tax revenue lags behind the rate of growth of the economy. And how far and how much is the government going to continue milking those who pay taxes, while leaving those who do not pretty much alone?
Various proposals have been made to address this matter which is becoming urgent.
Otherwise the Budget could topple over as expenditure demands in a growing economy are not sustained by sufficient tax revenue.
Even if the GST will not be reintroduced, what about improving collection under the SST? Some experts have suggested a kind of hybrid system which could begin to bridge the gap of coverage of goods and services (estimated at 70 per cent under the GST and only 38 per cent for SST).
I would also suggest the minister might want to use the Industry 4.0 drive to bring some of the SMEs into the tax net by requiring them to outsource their financial record keeping with digital service providers, which would give them easier access to finance while also achieving transparent declaration of profits.
Pakatan Harapan promised reform. Budget 2020 has outlined a good foundation. Now into the details, including tax reform, which is as strategic as the political, legal, economic and social.
The writer, a former NST group editor, returns to write on local and international political affairs. He is also member of the Economic Action Council chaired by the prime minister.