Friday September 30, 2022 17:28 GMT
SEPTEMBER 30 — The Masa Depan Malaysia Institute (MASA) would like to urge the government to consider our wish list for the 2023 budget in two key areas: fiscal consolidation and strengthening small and medium-sized enterprises (SMEs).
As of June 2022, Malaysia’s debt stood at RM1,045 billion while the federal government’s debt service payment was RM43.1 billion, or 18.4% of national income. It was also reported that RM19.8 billion had been spent by the end of June 2022 to pay interest payments on Malaysia’s total debt.
As of June 2022, Malaysia’s debt stood at RM1.045 billion. —Photo Reuters
Given the uncertainty in the global economy, Malaysia needs to have a strong fiscal base. Its operating expenses are inflated, with emoluments representing nearly 37% and pension costs representing 12% of gross domestic product (GDP). Therefore, the first step is to reduce public spending.
The government should consider alternative approaches to manage Malaysia’s cash flow for sound finances by reducing the implementation of insignificant projects and wasteful spending. Instead of focusing on highways and building skyscrapers, the government should focus on raising the living standards and welfare of the Rakyat.
The government should develop new revenue-generating strategies, with a focus on increasing national productivity. Tax alone represents 73.2% of total revenue. As such, the government must find new sources of revenue for the country. It is expected to leverage the growth of the digital economy and automation to improve Malaysia’s competitiveness and productivity.
As a short-term approach, a tax mechanism to widen the tax bracket for T5 to T10 individuals and large corporations should be put in place. The government can take this opportunity to recoup lost taxes on unreported income. For a long-term approach, the government must take major steps in a broad revenue reform and harmonize its fiscal policy for better financial consolidation.
SMEs must be supported at all costs. Not only do they represent 97.4% of all commercial establishments in the country. They also contribute 37.4% of GDP. This sector has always been the backbone of the country’s economy, contributing 11.7% to exports and 47.8% to job creation.
SMEs are the most affected segment due to the consequences of the pandemic. They are still struggling to cope with headwinds in the global economy caused by inflation, rising interest rates, a weakening ringgit and labor shortages.
The increase in the overnight rate (OPR) three times this year is affecting the momentum of the country’s economic recovery as well as the performance of SMEs. The government must therefore find ways to ease the burden on citizens and SMEs in the upcoming presentation of the 2023 budget.
In assisting SMEs, banking institutions should allow flexibility in loan repayment and restructuring. The recommendation of the National Recovery Council (MPN) that specific moratoriums be made immediately available to companies fighting the pandemic, should be implemented without delay.
The process of bringing foreign labor into the country should be accelerated through the use of technology to speed up recruitment. Coordinated oversight by relevant government agencies and ministries must be intensified to ensure efficiency and transparency by having them work in the sectors of this country.
The 2023 budget should also encourage the digital transformation of SMEs. Japan, Korea, and Thailand can be Malaysia’s benchmarks for reaching high-income nation status by 2030.
Business restructuring and rapid digital transformation to ensure the penetration of digital technology applications such as mobile payment, e-commerce and cloud applications among SMEs should be explored by relevant government agencies and ministries to build the resilience of businesses. Future-proof SMEs.
MASA hopes that its recommendations will be taken into account by the government and translated into strategic plans and policies in line with the vision of shared prosperity (SPV2030) to develop a sustainable, equitable and inclusive economic distribution at all levels.
* This is the personal opinion of the author or organization and does not necessarily represent the views of malaysian mail.