Explainer: Turning around the Malaysian economy

  • 3 months ago
Higher revenue from taxation and savings from subsidy rationalisation will allow the country to attain its development goals while providing better assistance to poorer Malaysians.

Read More: https://www.freemalaysiatoday.com/category/nation/2024/06/24/turning-around-the-malaysian-economy/

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Transcript
00:00Running government is an expensive affair.
00:31For 2024, the Malaysian government has allocated more than three quarters
00:35of its RM393.8 billion budget to cover operating expenditure, or OPEX.
00:41At RM303.8 billion, the OPEX for this year can already be described as a staggering sum,
00:48but it is one that we can only expect to rise over time.
00:51But why is Malaysia's OPEX so high?
00:54It covers a wide array of expenses, including wages for civil servants,
00:58pensions for retirees, subsidies, the upkeep of government buildings
01:02and interest payments on our national debt.
01:05That debt now stands at an astonishing RM1.5 trillion.
01:10The reality is that after servicing our debt and meeting OPEX payments,
01:14Malaysia just does not have much money left to meet its development needs.
01:19That is why the government is coming up with ways to fill its coffers.
01:22Recently, the government actually increased service tax from 6% to 8%.
01:27But that's not all.
01:28There are other new taxes, such as the low-value goods tax and capital gains tax,
01:33which both came into effect on January 1st this year,
01:36and an impending high-value goods tax.
01:39However, if taxes are increased while our incomes remain stagnant,
01:43it will only worsen our financial situation.
01:46That's why it is crucial that the incomes of Malaysians rise in tandem with any tax increases.
01:54The reality is that the per capita income levels in the country have more or less stagnated,
01:59hovering around US$11,000 per year in the last 10 years.
02:16To help Malaysians escape the low-to-mid-wage trap,
02:18the country needs to seriously increase productivity.
02:21So the government needs to create high-skilled and better-paying jobs.
02:25Up till this point, you will notice that the government would have increased the country's revenue from the additional taxes.
02:31It would also obtain large savings from rationalising subsidies involving fuel, sugar, chicken and electricity.
02:38It would also curb smuggling.
02:40Now, these funds must go to those who are truly in need.
02:44And that is where the Central Database Hub, more popularly known as PADU, comes into the picture.
02:51To develop and create a database that will be the main reference source for all government agencies
03:00in making the right decisions on data management,
03:04as well as to improve the governance of government services.
03:10It is designed to ensure that, moving forward, all subsidies reach the deserving recipients.
03:16This is of particular significance given that Malaysia is presently grappling with a RM52 billion subsidy bill,
03:23the bulk of which is presently enjoyed by those in the higher-income brackets.
03:28PADU doesn't just focus on individual income.
03:31It also considers the financial obligations of an entire household.
03:36Even if a person is categorised in the mid-to-higher-income group,
03:40if he or she is supporting a large family with significant expenses,
03:44PADU takes that into account when determining who qualifies for subsidies.
03:49Now that the government manages to fill in the coffers,
03:52the next step is to ensure that it is safeguarded from leakages.
03:56That is why it is important to eradicate corruption and plug fiscal leakages in the system
04:02to prevent public funds from going to waste.
04:05In summary, the government has taken a number of steps aimed at turning the country's fiscal trajectory around
04:11and enhancing our finances for development purposes.
04:15First, they're boosting revenue by implementing additional taxes.
04:19However, this must go hand-in-hand with increased productivity and higher wages.
04:25Secondly, they're rationalising subsidies to maximise savings.
04:30Third, they're fighting corruption vigorously to ensure that these funds are not wasted
04:34but are instead directed to those who truly need them.
04:38All of these to turn around the economy of the country,
04:41to pair our debt and gear up towards becoming a high-income country.
04:46These measures will undoubtedly be tough,
04:49so will the people back the government's turnaround initiatives?
04:53Is there enough political will to push these changes through?
04:57What we know for sure is that significant action is necessary before it's too late.
05:02Hannah Khan, FMT Business

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