Malaysia: 2022 Budget Racially Configured, Election Targeted – Analysis

Racial Configuration 

Perhaps the most depressing takeaway from the budget presented in Parliament is that it is the most racially configured of budgets in the nation’s history.  Former de facto law minister Zaid Ibrahim has tweeted: “Nice to be Bumiputeras… billions set aside,” noted Zaid in a tweet. “(This) must be the only country in the world where (the) Budget is race-specific”. He also added that it was also “nice” to be a civil servant since they were “always getting cash handouts” 

According to official estimates, budget 2022’s allocation for the Bumiputera community comes up to RM11.4 billion, while the amount for the non-Bumiputera communities is about RM300 million. 

It is possible that even this lopsided Bumiputera figure may be an under-estimate. Does it, for example, include the allocations of RM1.5b for Islamic Affairs, RM140 million for Islamic amd ‘pondok’ school maintenance, and various other Bumiputera allocations ‘accidentally’ missed out, hidden or disguised? 

We know how official data is manipulated to provide the impression of even-handedness and fairness on racial issues. The current budget statistics may be no exception to the racial sleight of hand practiced by our policy makers to give the impression of an inclusive and non-discriminatory society. 

Also unjustifiable and unconscionable is the so-called one-off RM700 for civil servants. 1.3 million civil servants are to receive this besides being also given 5 extra days of unrecorded leave. Amounting to over RM1 billion, this in fact is not the first handout to civil servants during the pandemic period. ‘More money for less work’ seems to be the new motto that the Perikatan government is advocating for the nation’s civil servants.

Election Targeting     

There are other reasons to be concerned about the budget. Development expenditure of RM 76.6 is the largest amount ever budgeted under this heading in Malaysian history and as noted it will be financed broadly from borrowings. The claimed rationale offered is that “pump priming” on this scale is needed to jump start the economy and accelerate growth. In brief, the multiplier effects from public sector investment are needed to get the economic recovery. These expectations are simplistic and flawed.  

In the first place not all of the projected development expenditure will go into real(physical) investment as a sizable chunk will be monetary transfers to loss making GLCs and other entities. Furthermore, the implementation capacity in place is inadequate to take on and deliver projects. The historical record bears testimony to this contention. 

Additionally, the desired multiplier effects are unlikely to be available in full as a sizable portion of the development expenditure will be devoted to procurements from abroad e.g. aircraft, weaponry, heavy equipment etc. 

The Government takes an over optimistic view regarding private investment. Many of the SMEs that have suffered egregiously as result of the pandemic are unlikely to be able to get into a recovery mode rapidly; new enterprises are unlikely to emerge at a slow pace; and there are uncertainties about FDI flows.  

The macro- economic picture painted to show GDP growth rising 5.5%-6.5% in 2022, up from 3%-4% in 2021. This optimistic growth rate needs to be interpreted with caution as it incorporates the statistical effects of a low base. The issue is: where is the growth going to come from?

The feel good  Budget was purely and simply crafted with an eye on an election in the first half of 2022. Other concerns include:  

• For the private sector, it represents business as usual with big projects to keep the cronies and the current elite fed with projects
• The budget has focused on spending but ignored any effort to try and fix the revenue side
• No new policies were announced e.g, rationalization of loss making GLCs; labor market reforms; fixing the problems linked with household debt; addressing the looming challenges associated with an aging population.,
• Inadequate attention to the needs of SMEs in revival

This budget, as with RM12, has missed opportunities to restructure the economy, make it more competitive, reform education, etc. Instead it is funding a system that needs revamping, and restructuring the revenue side of government fundraising. More tragically, this budget has failed to deliver relief packages for those in dire need from the Covid crisis. 

Looking at the responses across the media by numerous commentators, this first Ismail Sabri budget has failed to satisfy most sections of Malaysian society. The budget is just more of the same.

Conclusion: 

It is also time to take a close look at how the budget is formulated each year. Ministries send in their funding estimates each year, just increasing their requests in expectation, the MOF will approve. There needs to be a more holistic and rigorous scrutiny of spending by a core overviewing team that could utilize ‘zero based budgeting’ scrutiny of ministry and agency requests.

The borrowing needed to formulate this budget will not be repaid by this generation of politicians and civil servant leaders. They are leaving the future generation of Malaysians with the burden of repaying debt. 

The budget is also rewarding the unworthy and making the wrong people pay. Those who have been working within a bloated bureaucracy with security have been rewarded, while citizens who have felt the brunt of the Covid crisis are basically left to fend for themselves. Successful corporations that have made profits from innovation are punished. 

The budget fails to address the looming challenges the nation faces. It avoids taking on much needed reforms. No thought has been given to addressing how the nation is to cope under stark circumstances when 97 percent of ageing citizens will face a dire future without savings to sustain themselves. Nor was there a hint in the budget or its surrounding ministerial hoop-la that the government intends to reform the fifty year old failed NEP. 

In brief, the budget serves neither the short term nor the long term needs of the nation. It is disappointing that the Pakatan opposition has condoned the crafting of the budget.  

Ramesh Chander is a former chief statistician of Malaysia and a senior statistical adviser at the World Bank in Washington, DC. Murray Hunter is an independent researcher and former professor with the Prince of Songkla University and Universiti Malaysia Perlis. Lim Teck Ghee is a former senior official with the United Nations and the World Bank.