THE government must not turn Budget 2023 into an election budget and allocate funds for the wrong purposes, an economist said.

Prof Rajah Rasiah of Universiti Malaya said the government must continue to prioritise the lower- and middle-income groups in Budget 2023 as they are bearing the brunt of inflation.

Rasiah outlined four main initiatives – food security, income inequality, digitalisation and the manufacturing of pharmaceuticals locally – which must be addressed in the budget.

“While the government has always been generous with supporting the business sector, it should continue to pay attention to the B40 and M40 groups in the way it has done from 2020 till now. Inflation has hit them the hardest,” he said.

“All initiatives in the budget preparation process must include a profound review of current policies, including achievements, shortcomings and recalibration.

“The government should introduce a voucher system that is tied to only purchases of essential goods. This should then be distributed to the B40 group. 

“These vouchers can be fixed in a range so that they reach the upper band during crises like this and hit the lower band during good times.”

Malaysia’s inflation, as measured by the Consumer Price Index, rose 4.4% year-on-year in July as the index’s food and non-alcoholic beverage component remained as the main contributor to inflation, the Department of Statistics Malaysia said.

Rasiah said the Federal Agricultural Marketing Authority, Fisheries Department and the various smallholders’ associations dealing with food are offered subsidised access to Industry 4.0 (IR4.0) technologies, including fertigation systems, robots and drones as well as training to reduce reliance on imports and strengthen local food production.

“The two reasons why such intensive farming systems have declined are a lack of emphasis by the government since the 1980s and the availability of cheap imports,” he said.

“Malaysia has faced chronic food trade deficits since 1989, and the depreciating ringgit has increased imported inflation facing the B40 and M40 groups.

“The budget should look into giving guaranteed but reasonably priced inferior goods such as padi, vegetables, fish and chicken. Taiwan (which has a self-sufficient rate of more than 90% for rice and over 80% for horticultural products) does this.”

On income inequality, Rasiah said the government should consider imposing a small capital gains tax on share trading and allowing only one home in a lifetime for exemption from the capital gains tax.

“Such an exercise will also bring revenue to the government, apart from reducing speculative conduct in the housing market,” he said.

For digitalisation to truly be effective, Rasiah said there needs to be training on digital literacy and IR4.0 competence.

“This will incur spending but must be seen as compulsory to move the IR4.0 and food security agendas,” he said.

Rasiah said lessons could also be learnt from the Covid-19 pandemic, wherein it showed the glaring lack of pharmaceutical innovation and manufacturing in the country.

Malaysia had to buy Covid-19 vaccines from Pfizer and AstraZeneca, among others.

“It is pertinent to review Malaysia’s efforts in raising the design and manufacture of medicines,” said Rasiah.

“Pharmaniaga Bhd was given that task after the TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) agreement of the World Trade Organization. However, Malaysia’s trade deficit on medicines is growing.

“Hence, the budget should require drug manufacturers in the country to engage researchers at Malaysian universities to ensure upgrading takes place to reverse the current trade imbalance on drugs.

“The government must make it mandatory for the research and development grants to involve companies and university researchers, and a stringent review process to ensure the upgrading milestones are met.”

Budget 2023 was initially scheduled to be tabled in parliament on October 28, but has since been brought forward by three weeks to October 7.

Prime Minister Ismail Sabri Yaakob said the budget will touch every segment of society, with a focus on preparing everyone to face the challenges of the world economy, which is expected to be bleak next year.

The engagement process for budget preparation is underway and will involve several parties. – September 12, 2022.