NOVEMBER 11 — 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). Their 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 as 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 to raise the threshold over time to capture more people in the social protection system.
In principle this can replace all other forms of welfare support and could be fully financed from existing budgets.
Another standout pledge from BN is free higher education for the B40 group, income contingent PTPTN repayments and significant reforms of higher education financing.
This is much needed and will help to underpin the poverty eradication pledge in the long-term as well as stabilising higher education funding.
Pakatan Harapan (PH) has similar pledges on B40 scholarships, targetted debt relief for the B40 groups 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 GLC investment and involvement in certain industries to prevent crowding out and create opportunities for private companies.
The recognition of over involvement of GLCs 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 (EIS) and a new Employment Retention Fund (ERF) all point to a direction of travel in labour market reforms which are again much needed.
Although PH promotes a strong social agenda within their Humane Economy framework there is no clear overall strategy in their social protection plans.
Instead we have a long list of projects, targetted 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 provides direct help automatically to everyone who needs it.
By contrast, PH appears to be stronger on economic reforms which are necessary to underpin growth and recovery. Central to this is their pledge to eradicate cartels and promote competition, especially in the food sector, reducing bureaucracy in government agencies, export tax incentives to encourage international trade and gazetting more free trade zones. These set a more free enterprise spirit 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 of economic policies and pledges.
This will allow for independent scrutiny of economic policy 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 who 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 per cent of GDP, 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 Minister for Health whereas 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 of GST or SST 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.
Actually, if they combined their ideas we would have the makings of a transformative economic agenda for Malaysia post-GE15.
* Professor Geoffrey Williams is an economist at the Malaysia University of Science and Technology. The views expressed are his own.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
