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When Malaysian Finance Minister Tengku Zafrul Tengku Abdul Aziz presented his country’s biggest annual Budget in Parliament in his stylish samping (he said the garment was spun in a prison facility) on Friday (Nov 6) he probably had the most unenviable responsibility.
In the House were five former Finance Ministers, three of whom were seated in the Opposition benches. Unlike Zafrul, 47, who was an appointed senator, they had all been elected MPs who were mostly at least two decades older than him.
The other advantage that they had was that they had presented a minimum of two such Budgets in their lifetimes earlier in relatively affluent, more auspicious and promising times. They also had belonged to governments that were strong and well-placed, quite unlike the weak government under a rather shaky and insecure Prime Minister that Zafrul belongs to.
One of the former Finance Ministers, Tengku Razaleigh Hamzah of titled royal lineage somewhat like Zafrul, had served in that capacity at a more youthful age, was still suave, savvy at 84 and has acquired the status of a seasoned and supremely trusted deity of Malaysian economics and finance management. Zafrul must have known he only had the job as this far more talented titan did not want it.
With this informed and largely insightful audience in the House, the unelected Zafrul had to appear smart, sensible and superb in delivering his maiden Budget speech while maintaining a modicum of modesty. He measured up somewhat with his sonorous delivery, occasionally sipping water from an unusual water tumbler.
Not An Awe-Inspiring Budget
The Budget he presented in spite of its greatness and generosity did not inspire awe, confidence and hope. Sometimes it seemed so removed from a country that was experiencing its most calamitous moments in a challenging external environment. There are swelling ranks of unemployment, underemployment and a large number of individual-run businesses that have had to close.
Contents of the Budget
The Budget prospects that Zafrul presented were the most upbeat, perhaps even the most hyped up in the country’s history. It was a remarkably responsive Budget that sought to address in rather generous terms the fears of largely the poor and poorest in a nation deeply distressed by the fall and loss of earnings, jobs and businesses. Covid-19 has had a catastrophic impact causing the failure of many businesses and impairing the capacity of millions of people to meet their loan and mortgage obligations.
A breather in the form of a repayment moratorium was provided for most. Then there were tax breaks, funding for retraining, upscaling for digitalisation and other kinds of provisions for religious teachers, childcare, disabled groups, etc. It is estimated that 8.1 million individuals belonging to the hardest-hit segment or a quarter of the country’s population will benefit directly from the handouts provided.
Like Zorro, Zafrul was going to take the economy zealously out from a miserable minus 4.5 per cent hollow groove to a plus seven growth performance. It was achievable, some analysts said, given the prospects for fast growth after this descent into this dire situation because of the Covid-19 pandemic. A rapid recovery was expected on the assumption that the pandemic will fizzle out fast and the country will go back to its normal moorings and patterns of growth.
Many questions were raised, however, about the sources of revenue to fund such an expansive and generous Budget which provides handouts, incentives and the most innovative inputs to a broad range of beneficiaries. These questions were pertinent given the much lower oil prices, a major source of sustenance for Malaysia.
There were no satisfactory answers to explain the sources of revenue although it was clear that almost 20 per cent of the RM322.5 billion Budget would be financed from borrowings. New borrowings would increase the federal government’s debt to more than 60 per cent of the country’s GDP in 2021. As of the third quarter of 2020 total debt and liabilities already amounted to almost 88 per cent of the country’s GDP. With these unprecedented borrowings, debt servicing costs will consume about 15 per cent of the revenue receivable. This will be worrisome.
Priority to Bumiputras
Although not a politician, Zafrul delved quite deeply into establishing that the Budget was focused primarily on the dominant Malay-Muslim community although he attempted to fudge it with references to the wider Bumiputra community that makes up two-thirds of the population.
The real issue is that Zafrul is a member of the weakest and most Malay-Muslim government in the country’s history. That government is shaky and shortsightedly slanted significantly but sheepishly in favour of the peninsular Malay community.
He could have redressed this perceived underrepresentation of the underprivileged Sabahans, Sarawakians, the minority Chinese and Indian communities with fewer references to the peninsular Malay-Muslims. But he did not. Instead in one analysis of the Budget allocation, it was pointed out that in appealing to provincial peninsular Malay-Muslim sentiment he had largely neglected the larger segment of low-income households who are made up of all ethnicities, including Malays.
Zafrul’s Budget signalled that his government was clearly committed to a continued paradigm of an ethnicity-based approach than a needs-based one.
This policy is akin to one that has been in place since the launch of the New Economic Policy about five decades ago. It had periodically received fresh inputs from successive Prime Ministers but up to March 2020, the non-peninsular Malays had had a greater representation in the government.
Even more significantly up until March 2020 the extremist Islamic party PAS had had no role in the federal government. This Budget with its large allocations targeted at the Malay-Muslim community and the paltry sums provided for Sabahans, Sarawakians and other minorities suggests a lower priority for the latter communities.
While most countries, including President-elect Joe Biden’s USA, are focused on national unity and healing divisions within their borders, the Malaysian Finance Minister was largely indifferent to that issue and concentrating on convincing his audience that Malaysia had the real resolve to overcome its current adversities.
The Budget has received both praise and criticism from a broad spectrum of economists, political leaders, analysts and members of the public. Its fate will depend quite a bit on how the Covid-19 pandemic plays out in the next six months. For that reason, the Budget is sensitive to the Covid-19-prone environment and almost 10 per cent of the Budget is dedicated to the health sector. The larger issue is not so much the import of the Budget but the fragility of the Malaysian Government under Tan Sri Muhyiddin Mohd Yassin, which does not seem to display the endurance and professional expertise needed to steer the country through its greatest existentialist challenge.
Dato M Santhananaban
Nov 16, 2020