MOVEMENT FOR MONETARY JUSTICE (MMJ)’S RESPONSE TO BUDGET 2021
The Finance Minister presented the Malaysian Budget 2021 on 6th November 2020 which was clearly a compassionate, Rakyat-centric budget. Some people are likely to call it even an Election budget.
The lockdowns imposed by the government to contain the spread of Covid19 destroyed much liquidity in the economy causing widespread economic distress and recession, which the country is still facing. Given such a background scenario, expectedly the Budget 2021 is a deficit one, the largest indeed in Malaysian history, i.e. RM322.5 billion with expected government revenue of only RM236.9 billion.
What is fundamentally needed to mitigate the overall situation is that the government must pump-in enough liquidity back into the economy in order to boost business activities; take care of the general Rakyat economically and psychologically and make sure every individual can easily access the economic networks, i.e. food, shelter, health, education, transportation and utilities (water, electricity and telecommunication). In our opinion, the Budget indeed covered these adequately.
Clearly, a lot of goodies have been put in for the Rakyat. The income tax reduction of 1 per cent point for resident individuals is much welcomed. The handouts for the poor and vulnerable individuals with the new Bantuan Prihatin Rakyat (BPR) can help the economy recover faster, and is therefore much welcomed. The B40 and micro-enterprise borrowers are assisted with the Targeted Loan Repayment Assistance (TRA) including extended loan moratoriums etc. However, Movement for Monetary Justice calls upon the government to write off the entire interest portion of all public and private debt, which is indeed an extraordinary measure, to counter an extraordinary unprecedented economic distress. In this aspect, the budget’s allocation of RM400 million to assist FELDA settlers to write-off the interest portion of their debt is much applauded.
The Covid19 pandemic has also caused much psychological suffering on the Rakyat. Accordingly, RM24 million has been allocated to address the mental health of the Rakyat. In our opinion, this is too low an amount since psychological issues are likely to peak in 2021 as the lagged effects of the pandemic emerged. At least RM50 million should be allocated for this purpose, in our view.
Economic development is indeed human development. In this respect, education and health are of paramount importance. The budget has taken care of both adequately. The Ministry of Education is provided with the largest allocation of RM50.4 billion (15.6 per cent of the total expenditure). Allocations for Skim Jaminan Penjanaan Pekerjaan, MySTEP, reskilling and upskilling programmes are all therefore commendable. Similarly, the government’s desire to uplift the TVET education is much laudable since an economy is developed through the various skills-set its people have. The allocation for the provision and upliftment of pre-school education is also praiseworthy for it is here characters are formed.
To empower Bumiputera entrepreneurs, a total of RM4.6 billion has been allocated. Such assistance should also be given to non-Bumiputera entrepreneurs who are in need of such assistance, for it is the provision of such liquidity to businesses that elevates the economic wellbeing of everyone in the economy, directly or indirectly.
Overall we applaud the Budget 2021. However, the following are MMJ’s wish list so that we may realize sustained prosperity, peace and security for every Malaysian.
One area we would like to see the government give more emphasis is the nation’s food security. The pandemic brought to surface this issue when some countries from which we import food stopped exporting their produce, thereby causing prices to hike substantially. Malaysia is a net food importer unlike our neighbours like Thailand and Indonesia that export a lot of food. While the Budget allocated funds for the development of the Agriculture sector, in our opinion it is not enough. Modern farming techniques at par with those of the advanced countries should be targeted. The Ministry of Agriculture can really bring agriculture to the level it should be. Technology-based animal husbandry, large-scale aquaponics, vertical farming and the like should be emphasized and aggressively pursued. National food security should be focused with priority, and not merely the local farmers’ income. In other words, local farmers must be groomed to become educated, more modern farmers because what is at stake is the nation’s food security.
The other areas we see lacking is in the sustainable development areas, like reforestation and waste management. Sustainable timber should be encouraged and therefore given some budget incentives. Reforestation, using bamboo or paulownia, for example, is attractive in this aspect. The promotion of advanced Municipal Solid Waste (MSW) management techniques for recycling, reuse etc. should have been covered in the budget,
Another paramount thing we would like to see is that the government declare a Debt Jubilee, i.e. write-off the interest portion of all loans, public and private. The implementation details can be articulated once the decision is made. The Temporary Measures to Reduce the Impact of Coronavirus 2019 (COVID-19) 2020 Act introduced recently, provides exemption or relief to individuals who are unable to fulfil their contractual obligations like rental payments etc. as a consequence of the pandemic. Settling of debt is indeed expected to be a major problem in 2021 and hence we call for the cancellation of the interest portion of all debt in the nation. In this respect, we also call upon the government to cancel about 50% of business tax in arrears. This is to give businesses some breathing space to allow them to stand-up, examine their wound and move forward post Covid19, otherwise, they would be shackled to pay past dues while business is just recovering.
Lastly, the budget could have covered more on social capital development, i.e. to increase the spirituality of the Rakyat, promote peace and racial harmony in the country.
Having said all the above, financing the deficit budget would surely be an issue. Through the Temporary Measures for Government Financing (Coronavirus Disease 2019) Act the government has raised the statutory debt level temporarily up to 60 per cent of GDP, from earlier 55 per cent, to allow further government borrowing to finance the budget. We are of the opinion that the government need not resort to borrowing since this would only burden the Rakyat later through higher taxes, levies and so forth. In fact, even borrowing domestically would further widen the wealth distribution gap in the country because the wealthy that buy the government bonds or sukuk would get rewarded through interest income or dividends, while the rest of the economy bear the burden of financing the economic recovery.
The following measures however can help increase government revenue. Firstly, the government should realize that it has the right to create the currency of the nation, i.e. the ringgit. Developed nations like the US use precisely that to inject liquidity into the economy, which they call Quantitative Easing For this purpose we propose a major reform of the Monetary System on the basis of Sovereign Money, and the removal of money creation ability from private banks. However as the initial measure towards this end we propose the formation of a new Bank of Malaysia, government-owned and parliamentary controlled, with current account and financing abilities. Unlike money creating private banks focussed on profiting via personal loans and housing, Bank of Malaysia will focus only on the real economy, the SME sector and any economy boosting funding in situations as demanded by the current Covid 19 affected economy. With some focused technical change funding of the SME sector will create an avalanche of new jobs to absorb all unemployment of youth and graduates.
Secondly, the government can gradually move towards 100% digital money. In such a system fraud, bribery, misappropriation of funds, tax evasion etc. would become very difficult. Hence this would increase government revenue substantially while improving transparency and governance. Thirdly, the government should itself run a nationwide payment and netting system. Even a minimal transactions fee would render the government with substantial revenue. With such actions taken, even the tax rate could be brought down to low levels.
Fourthly, to further improve revenue, the government could establish a TABUNG WAKAF NEGARA. This is a productive waqf fund that would grow through investments and continuously keep financing the necessary. Indeed Waqf is a powerful means to supplement government revenue that can be used for addressing socio-economic issues and financing projects of public interest. We, therefore, welcome the Budget 2021 allocation to enhance the management of endowment (wakaf) in the country to ensure a more efficient mobilization and management of endowment.
Lastly, the government could use crowdfunding mechanisms to borrow funds from the public, on qardhul hasan interest-free basis. We believe one would be surprised how much the Rakyat will be willing to lend money, interest-free, to the government when the need arises.
Movement For Monetary Justice / Gerakan Keadilan Monetari
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7 November 2020