Pakatan Rakyat Budget 2015 Offers Malaysians a Sustainable and People-Centric Alternative National Budget
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ENGLISH VERSION Table of Contents PREFACE ........................................................................................................................ 2 INFOGRAPHICS: PAKATAN RAKYAT TOP BUDGET POLICY PRIORITIES ....................................................... 4 MACROECONOMIC OVERVIEW .................................................................................................................... 5 FISCAL: REVENUE ........................................................................................................................ 7 FISCAL: EXPENDITURE ...................................................................................................................... 11 PROJECTED BUDGET TO GDP ..................................................................................................................... 22 ECONOMIC MISMANAGEMENT OF BARISAN NASIONAL ......................................................................... 23 POOR GOVERNANCE .............................................................................................................................. 25 OVER-RELIANCE ON OIL AND GAS REVENUE ......................................................................................... 28 OUR TAX SYSTEM: CAPITAL GAINS TAX ................................................................................................. 31 TPPA ........................................................................................................................................................ 35 WELFARE BUDGET ...................................................................................................................... 39 A CASE FOR LIVING WAGE ..................................................................................................................... 40 HIGH COST OF LIVING ............................................................................................................................. 41 ACCESS TO PUBLIC HOUSING ................................................................................................................. 44 HOLISTIC RURAL DEVELOPMENT ........................................................................................................... 46 CONCLUSION ...................................................................................................................... 48 1 PREFACE The Pakatan Rakyat Budget 2015 offers Malaysians a sustainable and people-centric alternative national budget. It is a counter-balance to the impaired financial administration of the Barisan Nasional government. In this document, we will provide a critique of Barisan Nasional’s fiscal policies and suggest viable alternatives. We begin by reflecting upon the reminder of Allah SWT in the Surah Al-Baqarah verse 188: And do not consume another’s wealth unjustly or send it [in bribery] to the rulers in order that [they may aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful]. The practice of the Malaysian Opposition in producing an alternative budget is not conventional in most Westminster-based democracies. However, for the purpose of sharing our views and perspectives with the people, we continue to craft the Pakatan Rakyat Budget every year to be scrutinized by the public. As a fiscal tool, the efficacy of any budget must also be thoroughly assessed for good governance. The Federal Government Budget 2015 will be the last one of the 10th Malaysia Plan (RMK10 2010-2015). Last year, Malaysia’s Gross National Income (GNI) per capita was USD10,060 (RM32,134), breaching the USD10,000 mark for the first time. With this achievement, the Federal Government projects Malaysia to achieve the status of both a high-income and a developed nation by the year 2020. Whilst achieving a high GNI per capita target of USD14,000 or RM48,000 may be possible by 2020, we need more work to achieve ‘developed nation’ status. To be a truly developed nation, many more critical metrics have to be achieved. The measure of a developed nation goes beyond one narrow measure of material wealth. The following three components (which also support economic achievement) are critical: the existence of vibrant democratic social and economic institutions, a culture of good governance (with integrity, transparency and accountability), and the supremacy of the rule of law based on social justice for all. For example, living in a ‘developed nation’ means that people should enjoy an efficient health service that safeguards their wellbeing, and communities should benefit from development projects that are sustainable and which minimize damage to the natural environment. 2 By such standards, the fact that we may have hit an average household income of RM5,900 a month as recently claimed by a minister, becomes moot. Furthermore, the average income measure also hides tremendous disparity in income attainment as a narrow rich group has been reaping most of the economic gains. Many Malaysians are missing out. Recent government statistics show that there are 7.9 million Malaysians who are eligible to apply for BR1M 3.0 because their household income is below RM4,000 a month. Further statistics show that 78.6% of EPF contributors have an income of less than RM3,000 a month. A shocking 40% of EPF contributors earn less than RM2,000 a month. The widening divide between the rich and poor, urban and rural, and developed and developing, leaves the Malaysian dream of a high income nation based on social justice and income equality, somewhat out of reach. In addition, we note that the later part of our post-Independence period has been widely acknowledged as a tale of underperformance. While we have overtaken some of our neighbors such as Indonesia, Philippines and Thailand, we have been left far behind by South Korea, Taiwan, Hong Kong and Singapore since the 1980s. In this Pakatan Rakyat Budget 2015, we will continue to provide macroeconomic projections as well as detailed fiscal analysis. We constructively critique the fiscal practices of Barisan Nasional and explain our vision and policies for Malaysia. We know that the rakyat will be able to distinguish ours as the better of the two different approaches. This year’s budget moves away from focusing on showcase policies and programs which we may implement in a Pakatan Rakyat federal government. Instead, we look at the urgent fundamental issues of governance that need to be addressed under the current government. By focusing on governance, we will pressure the Najib administration into implementing true economic reforms. We will fight and press for, amongst others, reforms in governance, oil and gas revenue, tax policy, Trans Pacific Partnership Agreement or TPPA, living wages and rural development. In so doing, the Pakatan Rakyat Budget 2015 will also show what it takes to be an effective and caring government. We are confident that with continued constructive pressure on the current administration, some of our proposals contained herein will be implemented. This is our commitment to delivering real social justice outcomes to the rakyat. Pakatan Rakyat Budget Committee, Tuesday, 7th October 2014. 3 INFOGRAPHICS: PAKATAN RAKYAT TOP BUDGET POLICY PRIORITIES Budget under Pakatan control, cut Rakyat 2.6% wastage and corruption budget deficit Redirect more Rationalising funds towards oil and gas developmental revenue spending Say "No"to Free but fair GST and trade "Yes"to CGT Living wage Freedom for a decent standard of from price living hikes Better public Holistic rural housing for development all 4 MACROECONOMIC OVERVIEW 2015 is expected to be a challenging year. With global uncertainties, in particular the slowdown of China (our biggest trading partner), the disruptions to our economy from the US monetary tapering and the geopolitical risks in the Middle East and Ukraine, and falling oil and commodity prices, most economists are projecting a cautious 5% growth target for Malaysia in 2015. The Najib administration has continuously missed its own growth targets. It promised an average 6% annual growth in its 10th Malaysia Plan and the reality is that growth has been languishing in the low 4% to middle 5% range. In 2014, we saw better than expected first and second quarters, hitting numbers above 6%. However the 2014 third and fourth quarters are expected to be much slower. As such, most economists are expecting the final growth numbers for 2014 to be in the region of 5.5% to 5.8%. Underlying the slowing economy is the continuous fall in crude palm oil (CPO) prices in the last six months. In September 2014, CPO prices dipped below the psychological barrier of RM2,000 per tonne. The impact of this drop is significant as palm oil is a RM80 billion annual export industry with some 400,000 jobs linked directly and indirectly to it. We know that most of the 113,000 elderly Felda settlers are engaged in share cropping and as such only realize about half of the net income from FFB sales. This being the case, low CPO prices will result in double the amount of hardship for rural folks. On the back of this bad news, we expect private consumption in the rural areas to drop significantly. In the urban areas, the macroeconomic numbers are also not rosy. Malaysian household debt is at a very high level, hitting 89.2% of GDP as of July 2014. Data from the Federation of Malaysian Consumers Association (FOMCA) show the breakdown of debts to be as follows: housing loans 29%, car loans 51%, personal loans 15% and student loans 33%. These numbers confirm that