Timeline needed for Malaysian fiscal reforms

Published: Monday September 9, 2013 MYT 12:00:00 AM
Updated: Monday September 9, 2013 MYT 6:42:46 AMCORPORATE NOTES BY GURMEET KAUR

Less than 7 years to meet balanced budget by 2020

MUCH is being talked about the country’s finances and what should, could and would need to be done to fix things.

While one can argue about past mistakes, here’s a simple view on what needs to be done now.

The Government needs to set a timeline to execute fiscal reforms to assure investors that it has the political will to do so.

Any delay in setting such timelines and implementing them will be detrimental to the economy and financial markets.

For some time now, economists have been cautioning policymakers about the need to keep an eye on the country’s debt-to-GDP, which stands at 53%. No one doubts that one basic thing that needs to be done in this context is to rationalise the country’s rather generous government-funded subsidies.

Recall when the subsidy rationalisation programme was proposed under theGovernment Transformation Programme, it was supposed to have been gradually removed on a staggered basis.

Time is running out as we have to meet the Government’s commitment to cut the deficit to 3% by 2015 and have less than seven years to meet a balanced budget by 2020. And benefits of any reform show through after a lag.

The goods and services tax (GST), which has been delayed for several years, looks set to be implemented in 2015. A higher real estate property gains tax (RPGT) is also on the cards to rein in runaway house prices as part of a big scheme to address the nation’s structural issues.

But to get the buy-in from the people and businesses, the Government also needs to exercise frugality in its operating expenses, which makes up over 80% of spending. It should plug wastages and leakages in government procurement process and institute open tenders.

There should be greater transparency and accountability with regards to how public funds are used.

It is no secret the perception is that we have not done enough in fighting corruption.

While taking all the effort to put GST and RPGT into place, and removing or lowering subsidies and facing the possible backlash from the masses for these moves, it is interesting to juxtapose these new incomes or savings with the amount of money that leaks out of the Government’s coffers as outlined in the cases in the yearly Auditor-General’s Report.

Also, it has been highlighted that the subsidy savings from the recent fuel hike will be eaten up by the Government’s move to continue and increase its cash handouts via the Bantuan Rakyat 1Malaysia programme.

While there is an urgent need to accelerate reforms, it will be good to see the Government stepping up reforms in “soft infrastructure” in the areas of skills and education, which are just as important to an economy’s future success like “hard infrastructure” such as the MRT project. Countries need to compete on skills not only at the top levels, but at the medium levels too.

Perhaps it is also time to review the National Service Training Programme to see whether it has met the goals to instill national unity and patriotism.

If not, then shouldn’t the resources be channelled to something more productive?

Two other areas the Government should not compromise on is affordable housing and public healthcare as these would help ease the burden of the middle- and lower-income groups. Many years ago, a proposal to reform the healthcare sector was mooted in the form of a health financing scheme that were to encompass cross subsidies, greater cost-sharing and protection of specific groups of people but it never took off.

Deputy news editor GURMEET KAUR is glad to hear that the Government is placing more importance on the English language under the newly-launched Malaysia Education Blueprint.