BUDGET 2023 shows good direction. The tax structure has been reformed to raise revenue, and economic stimulus assistance is focused on high value-added industries, SMEs, automation and digitalisation.

The cost-of-living burden was highlighted and environmental sustainability was broached. However, the reforms efforts invite scrutiny.

The federal budget is not only about revenue and expenditures as well as taxes.

What else should the government pay more attention to?

Aspects of the budget that will be discussed here are economic growth, inequality and regional imbalance, social protection, cost of living, and environmental, social, governance (ESG) framework.

Economic growth

Tax incentives and emphasis on infrastructure are intended to stimulate economic growth.

Tax and investment incentives will be given to high value-added industries such as electrical and electronics and aerospace.

Digitalisation and automation are emphasised in the budget for SMEs as well as for the plantation sector.

Grants will be provided to SMEs to automate their processes or subscribe to applications to digitise their businesses, such as point-of-sale systems, accounting and inventory management.

Automation via robotics and artificial intelligence is encouraged for the plantation sector.

This will likely help to achieve cost efficiency (increase productivity yield in the face of limited agricultural land and diverse food demand).

Regional imbalance and inequality

Infrastructure development, such as the expansion of Penang and Subang (Selangor) airports, a new mega-port in Carey Island near Port Klang Selangor (privately funded), Sanglang Port in Perlis for petroleum cargo, seeks to balance the interests of each state.

The government aims to make the Kuala Lumpur Tun Razak Exchange and the Iskandar Johor financial centre international hubs for finance and banking.

Economic development in Johor has undergone a paradigm shift, especially after Covid-19 pandemic.

With the establishment of the Iskandar financial hub, data centres, road projects in Senai (where the airport is located), Johor has gradually moved towards more sustainable economic development instead of focusing only on attracting the super-rich to stay, spend, study or work in the state.

The controversial sharing of oil-related revenues and more equitable development funding between the region and the states was not mentioned in the budget.

In a situation of economic uncertainty, the emphasis on economic growth is understandable and reflects the government’s attempt to provide grants to different states for high-impact infrastructure projects.

Subsidies and social assistance are more in line with the status quo, given the financial pressures when operating expenditure has to be covered only by revenue and half of the operating expenditure is related to public services.

Social protection

Employment incentives are offered through Socso to improve the employability of vulnerable groups such as people with disabilities, ex-convicts, the homeless and the hardcore unemployed.

In the long run, this will reduce these groups’ dependence on social welfare programmes.

Cost of living

Low-cost housing continues to be built, but affordability for the middle class, such as the Rumawip programme, deserves more attention.

On public transport, it is good to see the high potential of MRT3 and the extension of the monthly pass programme to more states.

But at the same time, maintenance of the public transport system needs to be regular expenditure items in every budget.

The government’s ability to reduce food prices is questionable. From a food production perspective, tax incentives on capital expenditure and a RM50 million grant for plantation automation to increase productivity yields are not enough.

Environmental, social and governance framework

As economic development cannot be sacrificed to the environment, the government has adopted the ESG framework. One of the key measures is the allocation of RM80 million to the palm oil industry to improve its sustainability practices and counter the anti-palm oil campaign.

The RM80 million grant needs more public scrutiny so that most of the funds do not end up being used to counter the anti-palm oil campaign instead of for sustainability research. – February 27, 2023.

* Nick Tan Beng Teong graduated with Bachelor of Economics at University of Malaya. A member of Agora Society, Tan believes in policy reforms in order to build a better nation.

* 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.