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NOW that we have the manifestos of the two major coalitions we can take a broad overview of what is on offer in terms of economic development.
The standout policy comes from Barisan Nasional (BN). Its pledge to eradicate absolute poverty by 2025 with an assistive basic income (ABI) scheme is quite simply the most important social protection reform in the last 20 years.
It is essentially a universal basic income that provides a direct, automatic credit every month to households below the poverty line income of RM2,208. Around 57,500 households are in this group and since many have income from other sources the cost of the top-up will not be excessive, as many sceptics might fear.
The most important aspects of this policy are the credible and affordable commitment to poverty eradication; the use of a universal, automatic, and direct cash transfer scheme; and the possibility of raising the threshold over time to include more people.
In principle, this could replace all other forms of welfare support and be fully financed through existing budgets.
Another standout pledge from BN is free higher education for the B40 group, income-contingent National Higher Education Fund Corp loan repayments, and significant reforms for higher education financing. These are much needed and will help to underpin the poverty eradication pledge in the long-term as well as stabilise higher education funding.
Pakatan Harapan (PH) has similar pledges on B40 scholarships, targeted debt relief for the B40 group, and repayments linked to income.
In principle, these could deliver the same outcome as BN but they do not guarantee free higher education for the B40 nor do they provide an alternative for how higher education financing will be handled.
A significant market reform pledge by BN is to place limits on investment and the involvement of government-linked companies (GLCs) in certain industries to prevent crowding out and create opportunities for private companies. The recognition of GLC over-involvement in the economy is an important step to freeing up market space for private investment.
Reforms to visas, foreign worker protection, and wider employment protection through the Employment Insurance Scheme and a new Employment Retention Fund all point to a direction of travel in labour market reforms, which are again much needed.
Although PH promotes a strong social agenda within its “humane economy” framework, there is no clear overall strategy in their social protection plans.
Instead we have a long list of projects, targeted schemes, and a “deserving and undeserving poor” philosophy – help for some but not for others depending on whether they like you or not.
This falls short of BN’s universal approach, which automatically provides direct help to everyone who needs it.
By contrast, PH appears to be stronger on economic reforms necessary to underpin growth and recovery.
Central to this is its pledge to eradicate cartels and promote competition – especially in the food sector – reduce bureaucracy in government agencies; introduce export tax incentives to encourage international trade, and gazette more free trade zones. These are more in the spirit of free enterprise as part of much needed supply-side reforms.
There are further pledges of support for micro, small, and medium-sized enterprises (MSMEs) through digitalisation, productivity, and venture capital grants – but these must be designed to reflect the needs of MSMEs to avoid the redundancy of existing programmes.
The standout policy for PH from an economics perspective is the establishment of a parliamentary budget office to provide support, analysis, and oversight on economic policies and pledges. This will allow for independent scrutiny of policies and a layer of credibility in assessing the costs, benefits, and overall impact of any economic proposals.
There are three big holes in both the manifestos so far. First, pension reform is almost completely omitted. The early intervention proposals of PH will not help those in their 40s or 50s who have wiped out their retirement savings or never had any to begin with. The ABI from BN can in principle help those in retirement but is not presented as a pension reform.
Second, governance reform in healthcare is severely lacking. Both BN and PH commit to raising healthcare spending to 5% of gross domestic product – without any justification as to whether that is the right amount – but neither commit to governance reforms to ensure the healthcare system is properly managed.
Strangely, BN has only two other health commitments – as if they have abandoned the health reforms of the previous health minister – while PH has a long list of health reforms straight out of the former health minister’s script before the election.
Finally, tax reform is also ignored. There is no discussion on the goods and services tax or sales and service tax, or even a wider tax reform agenda necessary to provide fiscal assurances on how to pay for the pledges. This will be a key area of debate after the election, especially if the economy slows as expected.
For now, it looks like a buy-now-pay-later offer from all the parties and we will have to wait for the outcome to see which, if any of these proposals, actually come to fruition.
If combined, we would have the makings of a transformative economic agenda for Malaysia after the general election. – The Vibes, November 11, 2022
Prof Geoffrey Williams is an economist at Malaysia University of Science and Technology. The views expressed are his own
