THE overall budget strategy is in the right direction on the following:

* Expressed concerns for the welfare of the vulnerable sectors (B40, the disabled, women, youth, Orang Asli, unemployed) affected by the pandemic. It introduces various relief schemes to ease their hardship.

* Highlight job retention, job creation and income subsidies, and the need for reskilling, retraining and various vocational education.

* The imperative of industrial transformation. It aims to enhance technological capacity (IT, automation) of the industries and enterprises.

* Cushion the impact on the business sector by providing tax reliefs to compensate market downturn.

* Infrastructure and construction to stimulate growth and job creation.

Should we be worried about debt and deficit?

We should not be unduly concerned over the rise of deficit and public debt. In any recession, the prudent thing to do is to expand public spending and money supply to the market.

Thus, serious effort must be directed towards building resilience of the people, industries and enterprises. The success to economic recovery lies in the government channelling sufficiently large resources to generate multiplying effects. Limiting fiscal deficit will not have any positive impact on the market.

During a recession, a contraction of government spending will further dampen market confidence, and the economy could be stranded in a downward spiral.

Is it really ‘expansionary’?

The finance minister declared the amount of RM332.5 billion as an expansionary budget. By the size of the expenditure, it is the largest ever budget delivered in Malaysian history. However, it is far from being a “big-spender” budget.

Let’s look at the actual numbers. Budget 2019 totalled RM314.6 billion. Budget 2020 was initially set at RM297 billion, however, it was revised to RM314.7 billion.

In summary, Budget 2021 is only RM7.8 billion more than 2020 and RM17.5 billion more than 2019. If one examines closely, the allocation of operation expenditure stands to be 15.1% of GDP in 2021.

In other words, the funding for development expenditure and Covid-19 is equivalent to just 5.5% of GDP.

These numbers have greatly constrained the government’s ability to induce a strong fiscal boost for a depressed market.

Thus, it is unfortunate that Budget 2021 short of providing convincing funding to boost infrastructure, especially for rural areas, Sabah and Sarawak.

Infrastructure development is supposed to be the quickest route to a positive revival of the economy. Massive investment in infrastructure (for the peninsula east coast and Borneo) can increase job opportunities for small contractors. This in turn improves connectivity and logistics flow, hence it will elevate the living standard of the rural folks.

Although the minister rhetorically recognised the importance of infrastructure development, obviously his budget is not “expansionary” enough to cover the cost of those urgently needed projects in the rural areas.

Recovery plan? Reforms?

We can complement Budget 2021 for being innovative in proposing new ideas such as environmental sustainability, social entrepreneurship and voluntarism. However, its economic recovery strategy lacks sectoral focus.

Most of the countries affected by Covid-19 introduced much larger spending on health, social protection, and employment creation.

We need much more robust stimulus policy in order to counter the cyclical downturn caused by the pandemic. In comparison, the MoF approach to economic recovery is relatively conservative.

More than 98% of Malaysia’s business establishments are SMEs or micro enterprises. The majority of them are struggling and in dire need of government assistance to survive the crisis.

These small and fragmented business establishments spread across different trades and industries. Budget 2021 does not appear to address their respective difficulties and different circumstances.

The government has to be proactive in devising aid packages for specific categories of enterprises. Meanwhile, policies must be reformed to create conducive conditions for market recovery. Reforms and recovery go hand in hand.

Perhaps the biggest weakness of Budget 2021 is that it offers no prospect of redistribution of wealth. It seems to be dependent on tax exemption and reduction as the sole instrument to support businesses.

Micro enterprises and SMEs need financial support and credits. The SMEs sector is doubtful that the funds allocated in the budget are adequate to address the colossal problems.

Regrettably Budget 2021 does not show any will or determination to reform the imbalances of profit structure in the corporate economy.

Hardship and responsibility are not evenly spread among the enterprises. The concessions given by the banks and the big financial institutions are too minimum.

MoF is clearly very reluctant to slash the profits of the big corporations and banks in order to give the “B40” of the business community some genuine relief.

Helicopter money vs institutionalised aid?

Budget 2021 provides an impressive range of support schemes to various disadvantaged groups. Such policy intends to reflect the caring (prihatin) aspect of the budget.

Injecting cash handouts could create an effect like “helicopter money” to boost domestic consumption.

We should also be mindful that the effect is temporary. A more beneficial model would be strengthening social protection institutions. The government should seize this critical moment to reform our rather archaic social welfare system.

It is good to hand out cash to help the unemployed, the disabled and the destitute. But the one-off or short-term measures are merely painkiller.

The government fails to take the extra steps to provide sustainable security and stability of income for the vulnerable. The country needs a long-term solution to the continuous threats of the Covid-19 pandemic or any other future unpredicted turmoil.

The expansion and institutionalisation of social protection is not just for the sake of compassionate values. In fact, more importantly it will enlarge the domestic economy and propel developmental growth. –November 8, 2020.

* Tian Chua is the former Batu MP.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.