KUALA LUMPUR, Feb 25 — Prime Minister Datuk Seri Anwar Ibrahim’s Budget 2023 will put his administration on a strong foundation for his aim of driving Malaysia’s economic growth even if it did lack the “wow factor”, said an economist.
Barjoyai Bardai, emeritus professor at Universiti Tun Abdul Razak, commended Anwar for juggling the government’s resources and priorities, as well as setting the economy on a path towards less inequality.
“Overall, it’s a very good budget, I’m impressed with the ability of the finance minister to balance his budget,” Barjoyai told Malay Mail when contacted yesterday, noting that increased spending was offset by higher projected revenue to still arrive at a lower deficit.
Anwar’s Budget 2023 totalled RM388.1 billion, with RM289.1 billion for operating expenditure and RM99 billion for development, and a projected deficit of 5 per cent of the economy.
Despite the Budget’s austere note, Barjoyai noted that Anwar, who is also the finance minister, was still “able to give more goodies to the people, he targeted some special assistance to the rubber tappers, to the fishermen, to the youth group and so on”.
“He really made an effort to show that he is caring of the people, and the budget reflected the spirit of helping each other, he’s taking from the rich, T20, by increasing the tax rate by two percentage points, giving it back to the M40 — two percentage points reduction — and he introduced the tax on luxury goods and on capital gains for non-listed [securities].
“So, I think it is the beginning of an era where we will see more of the perspective of the rich will need to think of helping the middle-income and the lower-income group,” he said.
Lee Heng Guie, the executive director of the think tank Socio-Economic Research Centre (SERC), said the Budget 2023 presented yesterday represents a “tight juggling” between the expansion of government spending and trying to show discipline by aiming for a smaller deficit.
Lee expressed concern, however, that the Anwar administration chose to increase development spending to its highest levels ever without first ensuring that the leakages and abuse from previous governments have been convincingly plugged.
The economist said this meant there remained a risk of not getting full value from taxpayers’ money spent on such projects, especially with actual collections still up in the air due to the headwinds in the horizon.
“It’s a tight juggling, because you are going to see weaker growth, so there’s impact on revenue collection, and you also have to bear in mind economy is going to slow down more, you may not get your expected revenue, you may have to recalibrate expenditure along the way,” he said.
While Anwar yesterday proposed new taxes on some luxury goods and capital gains on non-listed securities, Lee said he would have preferred to see subsidy rationalisation matched with targeted aid to lower-income groups to partially offset higher prices, as well as the introduction of a broad-based consumption tax.
The economist said the proposed CGT on unlisted securities could fuel concern that this form of wealth tax could be expanded to other asset classes, which may discourage foreign investment here or trigger capital flight.
Taxes targeting higher income groups could also undermine Malaysia’s efforts to reverse its brain drain, he suggested.
Again proposing a consumption tax, Lee argued that this would be a lasting and reliable income source for the government that would not jeopardise local or foreign investment.
“So, we must start to have more sustainable revenue measures instead of approaching it piecemeal,” he said.
Lee Chin, associate professor at Universiti Putra Malaysia’s school of business and economics, described Budget 2023 as emphasising “efficiency, prihatin (care), and growth”.
“It takes into account the current economic challenges while attracting investments and is able to boost short-term economic growth,” she said when contacted yesterday.
“One of the significant differences in this budget is that the development expenditure has significantly increased to 25 per cent of the total budget. Development expenditure is important because it contributes more to economic growth than operating expenditure.
She also noted that the simplification and acceleration of approval processes for quality foreign direct investment were among the good initiatives in the budget.
“The government has provided a lot of assistance and funds to help various industries especially, the small and medium enterprises (SME), palm oil industry, etc. to boost the economic growth.
“Nevertheless, Malaysia needs to emphasise on the development of future technology such as 5G, AI, Internet of Things and Industrial 4.0 to accelerate Malaysia’s transformation plan,” she said.
She explained that the government plays a crucial role to link education institutions and enterprises to work together to train and supply talent to industries in order for Malaysia to become an innovation-driven economy.
“In the midst of paradigm shift, emphasis in future technology investment will improve various aspects such as economy, employment, income and life, to transform to a new economy platform,” she said.
