For Kambing’s sake!

April 13, 2019

https://www.freemalaysiatoday.com/category/opinion/2019/04/04/for-goats-sake/

by Joe Samad

–

April 4, 2019 8:00 AM

 

 

 

 

Daim Zainuddin has advised the government not to take people for granted and treat them like idiots. “I have real faith in people, they are smarter than you think. If you are honest with them, they will understand. Do not take the rakyat for granted. People don’t like it if you treat them like idiots,” he said in an interview.

Even if we already know this, statements like this, coming from Daim who is close to the centre of power, do not help Pakatan Harapan’s (PH) image.

Disgruntled voters are saying in derogatory terms that the PH government is a one-term government. The honeymoon is long over and the feel-good factor is disappearing over the horizon. If people power could boot out decades of Barisan Nasional (BN) rule, it can do the same with the current government in the next general election. People now know that they can change governments by the collective power of their votes.

The BN government was good at treating people like village idiots. The blue water tanks gift is a good example. In the last two elections, thousands of blue water tanks were distributed to rural areas in Sabah and Sarawak. The blue water tanks were synonymous with BN rule.

Plastic tanks do not deteriorate and the kampung folk who were given the blue water tanks in GE-13 received the same in GE-14. What the people wanted was clean piped water and good roads, not another round of blue water tanks with a BN logo. Whenever you see huge truckloads heading for the rural areas, you know it’s election time.

While there are thousands of examples of BN’s arrogance and treating people like idiots, the same is being repeated by the PH government.

Idiocy has reached a dangerous level in Malaysian elections. Electoral watchdog Bersih 2.0 has called upon the Malaysian Anti-Corruption Commission (MACC) to investigate former Melaka chief minister Idris Haron for allegedly committing an election offence during the current Rantau by-election campaign.

Bersih said Idris’ promise to sponsor two goats for a feast in Taman Angsamas in the Angsamas polling district during a ceramah was tantamount to bribery.

The poor goats are now being used for election bribery. For Arians like me, it’s the greatest insult. The goat is the eighth in the 12-year cycle of the Chinese system. People born in a year of the goat are generally believed to be gentle, mild-mannered, shy, stable, sympathetic, amicable, and brimming with a strong sense of kindheartedness and justice. Being made the sacrificial lamb in a by-election is the greatest insult to the goat’s reputation.

Have we not “goat” better things to say and do? Does the constituency not have any real issues such as the need for better schools or more jobs? You are not talking about hundreds of goats for the slaughter, but two. Are we bankrupt of ideas? The voters deserve better.

If it’s not about a goat, it’s about race and religion. The goat was a short respite in an idiotic race to the finishing post.

PKR president Anwar Ibrahim has expressed hope that Rantau voters will not let Dr S Streram Sinnasamy’s race be an issue in the coming by-election and that they will see him for the work he has done.

“Why are we shunning him just because he is an Indian?” asked Anwar before reminding voters of all the good work he had done for the people.

So now the election boils down to an Indian and two goats. In an idiot’s narrative, the story ends when humans devour the goat in a celebratory feast. But is that the end of the story?

It was reported that former prime minister Najib Razak has been slapped with an extra tax bill of around RM1.5 billion by the Inland Revenue Board (LHDN). A financial daily quoted sources which said that a letter was sent to Najib by LHDN over backdated tax amount for the years 2011 to 2017. LHDN’s investigation assessment showed that Najib had not declared taxable income of close to RM4 billion for the period. Why is Najib not the main by-election issue? Why is “Bossku” still roaming freely?

Parliament is not spared the Malaysian idiocy. Recently, the entire opposition staged a walkout after a heated shouting match during Finance Minister Lim Guan Eng’s winding-up speech in the second reading of the Supplementary Supply Bill 2019.

The walkout was triggered after a shouting match between the opposition, the finance minister and government backbenchers, after Pengkalan Chepa MP Ahmad Marzuk Shaary (PAS) called Lim “pondan”. The Malaysian narrative has expanded to an Indian doctor, two goats and “pondan”.

Labelling someone as “pondan” or LGBT could have serious consequences if Lim were to visit shariah-compliant nations such as Brunei. But our tourism minister saved the day for Lim.

According to media reports, Mohamaddin Ketapi denied the existence of LGBT people in the country. Ahead of attending the ITB Berlin travel fair, he told German reporters that he wasn’t aware of LGBT people in Muslim-majority Malaysia.

Yes, we are all being treated like idiots. Could it be that we elected idiots to represent us in the first place?

The views expressed are those of the writer and do not necessarily reflect those of FMT.

Business as usual: regime change and GLCs in Malaysia

March 14, 2019

By Dr. Edmund Terence Gomez

https://www.newmandala.org/business-as-usual-regime-change-and-glcs-in-malaysia/

 

• Edmund Terence Gomez is Professor of Political Economy at the Faculty of Economics & Administration, University of Malaya. His publications include Malaysia’s Political Economy: Politics, Patronage and Profits (Cambridge University Press, 1997), Political Business in East Asia (Routledge, 2002), The New Economic Policy in Malaysia: Affirmative Action, Horizontal Inequalities and Social Justice (National University of Singapore Press, 2013) and Minister of Finance Incorporated: Ownership and Control of Corporate Malaysia (Palgrave-Macmillan, 2017).

  When Pakatan Harapan unexpectedly secured power after Malaysia’s 14^th General Elections (GE14) in May 2018, voters expected the coalition and Prime Minister Mahathir Mohamad to dismantle an extremely well-entrenched government–business institutional framework that had contributed to extensive clientelism, collusion, nepotism and embezzlement. After all, the institutionalisation of more transparent and accountable governance was a Pakatan campaign pledge.

  However, barely nine months after taking control of government, Pakatan appears to be re-instituting the practice of selective patronage in the conduct of politics and through the implementation of public policies. In this inter-connected domain of public policies and selective patronage, government-linked companies (GLCs) will play a key role.

  The core institutions employed by the Barisan Nasional coalition and the hegemonic party at its helm, the United Malays National Organisation (UMNO), that allowed for extensive profligacy are what are collectively known as GLCs. These GLCs are, in fact, a complex ensemble of statutory bodies, foundations, trust agencies, investment enterprises, a sovereign wealth fund, as well as companies, with representation in a wide array of industries. These institutions, controlled by the central and 13 state governments in the Malaysian federation, officially function primarily as “enablers” of domestic firms, to nurture a dynamic privately-owned enterprise base. But GLCs also constitute an estimated 42% of total market capitalisation of all publicly-listed firms. 67 quoted firms can be classified as GLCs, as the government, through various institutions, has a majority equity interest in them.

  Federal ministries, under the ambit of cabinet ministers, also control a vast number of quoted and unlisted GLCs that do a variety of things, including promoting development of strategic economic sectors, redressing spatial inequities by developing rural areas and industries, and financing research and development to drive industrialisation. However, of the 25 ministries in the federal cabinet in 2017, before the fall of Barisan, three in particular, the Prime Minister’s Department, Ministry of Finance (MoF) and Ministry of Rural and Regional Development (MRRD), had control of a huge assortment of companies that were deployed to channel government-generated rents to UMNO members and well-connected businesspeople.

  At the state level, different public institutions own GLCs through the states’ chief ministers, through holding firms known as Chief Minister Incorporated (CMI). CMIs establish companies to undertake activities in specific constituencies to mobilise electoral support. Party members are liberally appointed as directors of these GLCs, a major source of political financing as their stipends are used for political activities. Through the CMIs, what had emerged was the fusing of bureaucratic and party apparatuses, allowing politicians to selectively channel government resources in a manner that would help them consolidate or enhance their political base.

  Another factor shaped modes of GLC development: a communal perspective to policy implementation, in keeping with the government’s longstanding affirmative action-based redistributive agenda to transfer corporate equity to the Bumiputera (Malays and other indigenous groups). However, rents meant for poor Bumiputera were hijacked by UMNO members. Eventually, these GLCs became sites of political struggles among elites attempting to consolidate power through patronage, a reason why critics have persistently excoriated them as inefficient and loss-making concerns.

  Interestingly enough, this GLC framework became entrenched in the economy as well as the political system during Mahathir’s long 22-year reign as prime minister, from 1981 until 2003. Other key figures who shaped how this political–business nexus evolved while they served with Mahathir previously include then-Finance Minister Daim Zainuddin (1984–1990), now his economic advisor, and Anwar Ibrahim (1990–1997), then and now the designated prime minister-in-waiting. By the time of GE14, this GLC structure had become so huge—and so abused by Barisan—that Mahathir himself described it as a “monster”.

  Despite Pakatan’s promise of a new approach to shaping Malaysia’s political economy, experience thus far suggests a surprising degree of continuity. Rather than give up an appealingly effective lever for consolidating power, Pakatan leaders seem inclined to borrow the same tools on which Barisan had so detrimentally relied.

  

  Power struggles, persistent patronage

  Soon after Pakatan formed the government, a disturbing series of events occurred. Shortly after the election, Prime Minister Mahathir inaugurated the Ministry of Economic Affairs (MEA), led by Azmin Ali, deputy president of Parti Keadilan Rakyat (PKR), Anwar’s party. Even before GE14, PKR was mired in a serious factional row, reportedly due to problems between Anwar and Azmin. Meanwhile, Mahathir is widely thought to be uncomfortable with transferring power to Anwar, who he had removed from public office in 1998.

  

  A PKR insider insists that the party is split into two factions, one loyal to party supremo Anwar Ibrahim and the other to deputy president Mohamed Azmin Ali.

  The newly-minted MEA took control of numerous GLCs from the Ministry of Finance (MoF), under the jurisdiction of Lim Guan Eng, leader of the Democratic Action Party (DAP). In this discreet shuffling of GLCs between ministries, Malaysia’s only sovereign wealth fund, Khazanah Nasional, was channelled from MoF to the Prime Minister’s Department, under Mahathir’s control. The government did not explain why these GLCs were shifted between ministries, but MoF’s enormous influence over the corporate sector has been significantly diminished. Under Barisan, the Prime Minister had also functioned as the Finance Minister, a practice Mahathir had started in 2001, but Pakatan, while in opposition, had pledged to ensure the same politician would not hold both portfolios.

  Even though Khazanah was under the Prime Minister’s Department, Mahathir appointed himself as its chairman, which is, by convention, the practice. The convention also is that the Finance Minister serve on Khazanah’s board of directors. Instead, Minister of Economic Affairs Azmin was given this appointment. The appointment of Mahathir and Azmin as Khazanah board members was contentious as Pakatan had pledged in its election manifesto that politicians would not be appointed as directors of government enterprises.

  

  Next, in September 2018, Azmin’s ministry convened a Congress on the Future of Bumiputeras & the Nation. Mahathir stressed at this congress the need to reinstitute the practice of selective patronage, targeting Bumiputera, a plan his economic advisor, Daim, endorsed. The following month, when Pakatan, through the MEA, released its first public policy document, the Mid-Term Review of the 11^th Malaysia Plan, it emphasised the Bumiputera policy as being imperative. In the past, GLCs have been central to government efforts to advance Bumiputera interests.

  Meanwhile, numerous ministers began actively calling for the divestment of GLCs, an issue also in the 2019 budget. Subsequently, when Khazanah began reducing its equity holdings, including in CIMB, Malaysia’s second largest bank, rather than seeming simply a step toward the larger goal of scaling back government ownership, this divestment raised the question whether it marked the commencement of a transfer of control of key enterprises to well-connected business people, even proxies of politicians, a common practice by UMNO in the 1990s. In fact, in ensuing debates about such divestments, the question was raised whether such divestments were an attempt to create a new influential economic elite, even oligarchs, who could check politicians in power in the event of a leadership change.

  Then, another contentious issue occurred. Minister of Rural & Regional Development Rina Harun, of Mahathir’s Parti Pribumi Bersatu Malaysia (Bersatu), appointed politicians from her party to the boards of directors of GLCs under her control. Under UMNO, this ministry had persistently been embroiled in allegations of corruption, undermining the activities of its GLCs that had been created to redress spatial inequalities and reduce poverty. The practice of patronage through GLCs to draw electoral support was rampant under this ministry as its enterprises have an enormous presence in states with a Bumiputera-majority population. So important is this ministry, in terms of mobilising electoral support, that it was always placed under the control of a senior UMNO leader. Hence, the minister’s directorial appointments suggested a worrying trend of continuity of irresponsible practices of the old regime.

  In December 2018, Bersatu leaders openly declared their intent to persist with the practice of selectively-targeted patronage. At its first convention after securing power, when its president, Muhyiddin Yassin, declared that “Bersatu should not be apologetic to champion the Bumiputera Agenda”, his statement was enthusiastically supported by members, suggesting an element of opportunism, even self-interested rent-seeking, in the party. UMNO leaders had made similar arguments in the past to justify state intervention, including through GLCs, a process that they abused to transfer government-generated rents to party members, to the detriment of poor Bumiputera. These trends suggested that Bersatu’s primary concern was its immediate need to consolidate power, not instituting appropriate long-term socioeconomic reforms, which might do less to muster support.

  The problem of instituting real change

  All told, then, these specific, sometimes discreet, steps since GE14 have called into question the extent of political economic reforms expected of Pakatan, based on its own manifesto. Moreover, under Pakatan, by its own admission, the volume of state intervention in the economy will still be substantial. Industrial development will be fostered through GLCs, as will attempts to nurture dynamic domestic Bumiputera-owned enterprises. Worryingly, what is absent is a coherently-structured industrial plan to cultivate entrepreneurial private firms. There is similarly no roadmap to reform these GLCs, or even to get them to target specific core industries requiring heavy capital investments and extensive research and development funding to rapidly industrialise the economy. Since politicians will control most of these GLCs as directors, they will determine the recipients of rents distributed to nurture domestic enterprises.

  The current state of play raises an important question about an interesting phenomenon: what happens, in terms of dismantling rent-seeking and patronage and instituting reforms to curb corruption, when a new regime comprises politicians who see this framework as a mechanism to consolidate power? A link between two core issues remains in place after regime change: elite domination and the continued practice of selective patronage, legitimised by advocating race-based policies that are to be implemented through GLCs. Under UMNO, elite domination was obvious, with Barisan component members subservient to then-Prime Minister Najib. In Pakatan, a multi-party coalition, Prime Minister Mahathir and Daim appear to have disproportionate influence when it comes to decision-making on core issues, though the parameters of their power remain unclear.

  Meanwhile, elite domination of the economy at the state level varies as several different parties are in power. State governments are controlled by UMNO, Bersatu, PKR, DAP, Parti Warisan Sabah, Parti Islam Se-Malaysia (PAS) and Parti Pesaka Bumiputera Bersatu (PBB). The latter two parties have long governed Kelantan and Sarawak respectively, while Bersatu and Warisan are new parties run by UMNO factions, though ostensibly with a reformist agenda. The governance dynamics of these parties in these state governments will differ, specifically in terms of how they employ GLCs, further indicating the ubiquity of these enterprises in the economy. These GLCs have persistently been used to distribute different types of rents such as financial aid, contracts, permits, licences, etc., to party members as well as others in the electorate in key constituencies. Even with regime change, the presence of covert networks of power created through GLCs in these states is unlikely to be reformed, thus contributing to continued serious wastage of scarce resources.

  There is plainly no clear method to the madness of how the new federal or state governments employ GLCs. Different sets of political and business elites operate at the national and state levels. In fact, before GE14, business elites were known to be creating ties with politicians in both UMNO and Pakatan parties, specifically PKR and DAP. Meanwhile, in Sarawak, wealthy businessmen had long since begun entering politics, even getting elected as parliamentarians, thus giving them access to federal government leaders. This diversity in political–business ties, where government institutions figure, is an indication of how complex the GLC problem has become. However, GLCs remain an opaque form of state intervention in the economy. And, since there is little public knowledge of GLCs, the opacity of these enterprises has allowed for their abuse by politicians.

  

  Fragile state and political economic outcomes

  Since Pakatan is a coalition of parties led by politicians who coalesced only because they had a common agenda—the removal of Najib from power—what prevails in the post-GE14 period can be described as a “fragile state”. This fragility is also because of the uneasy relationship between Mahathir, who leads the second-smallest party in Pakatan, and his long-time-nemesis-now-political-ally Anwar, who leads the party with the highest number of parliamentary seats. PKR, however, is ridden with serious factionalism, including an uneasy truce between Anwar and Azmin, who apparently is closely associated with Mahathir.

  What is emerging is new forms of power relations through the unhealthy circulation of political elites from the old regime into Pakatan, as well as alliances between leaders from different parties in this coalition. UMNO parliamentarians are lining up to join Bersatu, a quick route back to power for them after their unexpected ouster. By co-opting them, Mahathir’s new party can swiftly fortify its extremely weak base in Bumiputera-dominant states. Bersatu’s co-optation of discredited UMNO members is, however, seriously undermining support for Pakatan among the urban middle class, as well as Mahathir’s credibility. In fact, there has been recent talk in the public domain that a no-confidence motion against Mahathir as Prime Minister may be tabled in the March sitting of parliament, led apparently by leaders within Pakatan. Because of this complex situation of political in-fighting, there is much fear that politicians in power may move to create, through the divestment of GLCs, powerful

  Since a structural framework that allowed politicians to exploit institutions in various ways to serve vested political and economic interests remains in place, a key question has emerged. What are the possible political outcomes to this situation, in which contending elites in the new regime struggle to consolidate their respective power bases? Political outcomes can involve protecting the property rights—through ongoing and much-needed institutional reforms—of business elites who acquire privatised GLCs, thereby preventing expropriation of these companies by the government in the event of a change of premiership. Political outcomes can also entail endorsing entitlements that give one large segment of society privileged access to government-generated rents, as is already actively occurring. Inevitably, a related issue is the necessity of targeted race-based policies. These policies serve as a mechanism to retain patronage-based networks and consolidate power bases. This approach can, however, stymie domestic investments by non-Bumiputera, a serious and persistent problem during Barisan’s rule.

  Ironically, it was these forms of unproductive government–business networks that Pakatan had promised to dismantle when in opposition, in order to forge a “New Malaysia”. This New Malaysia was supposed to be devoid of race-based political discourses and policies, with the GLCs deployed to promote equitable development and redress social inequities. The GLCs were not to be led by politicians who have no clue how to utilise them productively in the economy. These pledges have been broken. Evidently, consolidating power is more important for Malaysia’s new political elites than restructuring an economy in dire need of reform.
  itutions, has a majority equity interest in them.
  The core institutions employed by the Barisan Nasional coalition and the hegemonic party at its helm, the United Malays National Organisation (UMNO), that allowed for extensive profligacy are what are collectively known as GLCs. These GLCs are, in fact, a complex ensemble of statutory bodies, foundations, trust agencies, investment enterprises, a sovereign wealth fund, as well as companies, with representation in a wide array of industries. These institutions, controlled by the central and 13 state governments in the Malaysian federation, officially function primarily as “enablers” of domestic firms, to nurture a dynamic privately-owned enterprise base. But GLCs also constitute an estimated 42% of total market capitalisation of all publicly-listed firms. 67 quoted firms can be classified as GLCs, as the government, through various institutions, has a majority equity interest in them.

  At the state level, different public institutions own GLCs through the states’ chief ministers, through holding firms known as Chief Minister Incorporated (CMI). CMIs establish companies to undertake activities in specific constituencies to mobilise electoral support. Party members are liberally appointed as directors of these GLCs, a major source of political financing as their stipends are used for political activities. Through the CMIs, what had emerged was the fusing of bureaucratic and party apparatuses, allowing politicians to selectively channel government resources in a manner that would help them consolidate or enhance their political base.
  Another factor shaped modes of GLC development: a communal perspective to policy implementation, in keeping with the government’s longstanding affirmative action-based redistributive agenda to transfer corporate equity to the Bumiputera (Malays and other indigenous groups). However, rents meant for poor Bumiputera were hijacked by UMNO members. Eventually, these GLCs became sites of political struggles among elites attempting to consolidate power through patronage, a reason why critics have persistently excoriated them as inefficient and loss-making concerns.
  Interestingly enough, this GLC framework became entrenched in the economy as well as the political system during Mahathir’s long 22-year reign as prime minister, from 1981 until 2003. Other key figures who shaped how this political–business nexus evolved while they served with Mahathir previously include then-Finance Minister Daim Zainuddin (1984–1990), now his economic advisor, and Anwar Ibrahim (1990–1997), then and now the designated prime minister-in-waiting. By the time of GE14, this GLC structure had become so huge—and so abused by Barisan—that Mahathir himself described it as a “monster”.
  Despite Pakatan’s promise of a new approach to shaping Malaysia’s political economy, experience thus far suggests a surprising degree of continuity. Rather than give up an appealingly effective lever for consolidating power, Pakatan leaders seem inclined to borrow the same tools on which Barisan had so detrimentally relied.

  Power struggles, persistent patronage
  Soon after Pakatan formed the government, a disturbing series of events occurred. Shortly after the election, Prime Minister Mahathir inaugurated the Ministry of Economic Affairs (MEA), led by Azmin Ali, deputy president of Parti Keadilan Rakyat (PKR), Anwar’s party. Even before GE14, PKR was mired in a serious factional row, reportedly due to problems between Anwar and Azmin. Meanwhile, Mahathir is widely thought to be uncomfortable with transferring power to Anwar, who he had removed from public office in 1998.
  The newly-minted MEA took control of numerous GLCs from the Ministry of Finance (MoF), under the jurisdiction of Lim Guan Eng, leader of the Democratic Action Party (DAP). In this discreet shuffling of GLCs between ministries, Malaysia’s only sovereign wealth fund, Khazanah Nasional, was channelled from MoF to the Prime Minister’s Department, under Mahathir’s control. The government did not explain why these GLCs were shifted between ministries, but MoF’s enormous influence over the corporate sector has been significantly diminished. Under Barisan, the Prime Minister had also functioned as the Finance Minister, a practice Mahathir had started in 2001, but Pakatan, while in opposition, had pledged to ensure the same politician would not hold both portfolios.
  Even though Khazanah was under the Prime Minister’s Department, Mahathir appointed himself as its chairman, which is, by convention, the practice. The convention also is that the Finance Minister serve on Khazanah’s board of directors. Instead, Minister of Economic Affairs Azmin was given this appointment. The appointment of Mahathir and Azmin as Khazanah board members was contentious as Pakatan had pledged in its election manifesto that politicians would not be appointed as directors of government enterprises.

  Next, in September 2018, Azmin’s ministry convened a Congress on the Future of Bumiputeras & the Nation. Mahathir stressed at this congress the need to reinstitute the practice of selective patronage, targeting Bumiputera, a plan his economic advisor, Daim, endorsed. The following month, when Pakatan, through the MEA, released its first public policy document, the Mid-Term Review of the 11th Malaysia Plan, it emphasised the Bumiputera policy as being imperative. In the past, GLCs have been central to government efforts to advance Bumiputera interests.
  Meanwhile, numerous ministers began actively calling for the divestment of GLCs, an issue also in the 2019 budget. Subsequently, when Khazanah began reducing its equity holdings, including in CIMB, Malaysia’s second largest bank, rather than seeming simply a step toward the larger goal of scaling back government ownership, this divestment raised the question whether it marked the commencement of a transfer of control of key enterprises to well-connected business people, even proxies of politicians, a common practice by UMNO in the 1990s. In fact, in ensuing debates about such divestments, the question was raised whether such divestments were an attempt to create a new influential economic elite, even oligarchs, who could check politicians in power in the event of a leadership change.
  Then, another contentious issue occurred. Minister of Rural & Regional Development Rina Harun, of Mahathir’s Parti Pribumi Bersatu Malaysia (Bersatu), appointed politicians from her party to the boards of directors of GLCs under her control. Under UMNO, this ministry had persistently been embroiled in allegations of corruption, undermining the activities of its GLCs that had been created to redress spatial inequalities and reduce poverty. The practice of patronage through GLCs to draw electoral support was rampant under this ministry as its enterprises have an enormous presence in states with a Bumiputera-majority population. So important is this ministry, in terms of mobilising electoral support, that it was always placed under the control of a senior UMNO leader. Hence, the minister’s directorial appointments suggested a worrying trend of continuity of irresponsible practices of the old regime.
  In December 2018, Bersatu leaders openly declared their intent to persist with the practice of selectively-targeted patronage. At its first convention after securing power, when its president, Muhyiddin Yassin, declared that “Bersatu should not be apologetic to champion the Bumiputera Agenda”, his statement was enthusiastically supported by members, suggesting an element of opportunism, even self-interested rent-seeking, in the party. UMNO leaders had made similar arguments in the past to justify state intervention, including through GLCs, a process that they abused to transfer government-generated rents to party members, to the detriment of poor Bumiputera. These trends suggested that Bersatu’s primary concern was its immediate need to consolidate power, not instituting appropriate long-term socioeconomic reforms, which might do less to muster support.

  The problem of instituting real change
  All told, then, these specific, sometimes discreet, steps since GE14 have called into question the extent of political economic reforms expected of Pakatan, based on its own manifesto. Moreover, under Pakatan, by its own admission, the volume of state intervention in the economy will still be substantial. Industrial development will be fostered through GLCs, as will attempts to nurture dynamic domestic Bumiputera-owned enterprises. Worryingly, what is absent is a coherently-structured industrial plan to cultivate entrepreneurial private firms. There is similarly no roadmap to reform these GLCs, or even to get them to target specific core industries requiring heavy capital investments and extensive research and development funding to rapidly industrialise the economy. Since politicians will control most of these GLCs as directors, they will determine the recipients of rents distributed to nurture domestic enterprises.
  The current state of play raises an important question about an interesting phenomenon: what happens, in terms of dismantling rent-seeking and patronage and instituting reforms to curb corruption, when a new regime comprises politicians who see this framework as a mechanism to consolidate power? A link between two core issues remains in place after regime change: elite domination and the continued practice of selective patronage, legitimised by advocating race-based policies that are to be implemented through GLCs. Under UMNO, elite domination was obvious, with Barisan component members subservient to then-Prime Minister Najib. In Pakatan, a multi-party coalition, Prime Minister Mahathir and Daim appear to have disproportionate influence when it comes to decision-making on core issues, though the parameters of their power remain unclear.
  Meanwhile, elite domination of the economy at the state level varies as several different parties are in power. State governments are controlled by UMNO, Bersatu, PKR, DAP, Parti Warisan Sabah, Parti Islam Se-Malaysia (PAS) and Parti Pesaka Bumiputera Bersatu (PBB). The latter two parties have long governed Kelantan and Sarawak respectively, while Bersatu and Warisan are new parties run by UMNO factions, though ostensibly with a reformist agenda. The governance dynamics of these parties in these state governments will differ, specifically in terms of how they employ GLCs, further indicating the ubiquity of these enterprises in the economy. These GLCs have persistently been used to distribute different types of rents such as financial aid, contracts, permits, licences, etc., to party members as well as others in the electorate in key constituencies. Even with regime change, the presence of covert networks of power created through GLCs in these states is unlikely to be reformed, thus contributing to continued serious wastage of scarce resources.
  There is plainly no clear method to the madness of how the new federal or state governments employ GLCs. Different sets of political and business elites operate at the national and state levels. In fact, before GE14, business elites were known to be creating ties with politicians in both UMNO and Pakatan parties, specifically PKR and DAP. Meanwhile, in Sarawak, wealthy businessmen had long since begun entering politics, even getting elected as parliamentarians, thus giving them access to federal government leaders. This diversity in political–business ties, where government institutions figure, is an indication of how complex the GLC problem has become. However, GLCs remain an opaque form of state intervention in the economy. And, since there is little public knowledge of GLCs, the opacity of these enterprises has allowed for their abuse by politicians.

  Fragile state and political economic outcomes
  Since Pakatan is a coalition of parties led by politicians who coalesced only because they had a common agenda—the removal of Najib from power—what prevails in the post-GE14 period can be described as a “fragile state”. This fragility is also because of the uneasy relationship between Mahathir, who leads the second-smallest party in Pakatan, and his long-time-nemesis-now-political-ally Anwar, who leads the party with the highest number of parliamentary seats. PKR, however, is ridden with serious factionalism, including an uneasy truce between Anwar and Azmin, who apparently is closely associated with Mahathir.
  What is emerging is new forms of power relations through the unhealthy circulation of political elites from the old regime into Pakatan, as well as alliances between leaders from different parties in this coalition. UMNO parliamentarians are lining up to join Bersatu, a quick route back to power for them after their unexpected ouster. By co-opting them, Mahathir’s new party can swiftly fortify its extremely weak base in Bumiputera-dominant states. Bersatu’s co-optation of discredited UMNO members is, however, seriously undermining support for Pakatan among the urban middle class, as well as Mahathir’s credibility. In fact, there has been recent talk in the public domain that a no-confidence motion against Mahathir as Prime Minister may be tabled in the March sitting of parliament, led apparently by leaders within Pakatan. Because of this complex situation of political in-fighting, there is much fear that politicians in power may move to create, through the divestment of GLCs, powerful business elites or even oligarchs to check other political elites.
  Since a structural framework that allowed politicians to exploit institutions in various ways to serve vested political and economic interests remains in place, a key question has emerged. What are the possible political outcomes to this situation, in which contending elites in the new regime struggle to consolidate their respective power bases? Political outcomes can involve protecting the property rights—through ongoing and much-needed institutional reforms—of business elites who acquire privatised GLCs, thereby preventing expropriation of these companies by the government in the event of a change of premiership. Political outcomes can also entail endorsing entitlements that give one large segment of society privileged access to government-generated rents, as is already actively occurring. Inevitably, a related issue is the necessity of targeted race-based policies. These policies serve as a mechanism to retain patronage-based networks and consolidate power bases. This approach can, however, stymie domestic investments by non-Bumiputera, a serious and persistent problem during Barisan’s rule.

  Ironically, it was these forms of unproductive government–business networks that Pakatan had promised to dismantle when in opposition, in order to forge a “New Malaysia”. This New Malaysia was supposed to be devoid of race-based political discourses and policies, with the GLCs deployed to promote equitable development and redress social inequities. The GLCs were not to be led by politicians who have no clue how to utilise them productively in the economy. These pledges have been broken. Evidently, consolidating power is more important for Malaysia’s new political elites than restructuring an economy in dire need of reform.

     

UMNO, PAS can’t stand in the way of progressive Malay politics

December 29, 2019

https://www.malaysiakini.com/news/458191

by  Dr. Rais Hussin

 

COMMENT | A train will eventually carry less and less cargo when the single track on which it operates begins to sag. But this is not a problem with a double-track system.

UMNO and PAS have erred by using such a single-track system( Money Politics). The mechanisms which they have used or intend to use to take Malays, Muslims and Malaysians forward will falter – either before they can reinvent themselves as parties that put the people’s welfare first, or before they perish from hauling too much for too long while struggling for their survival.

Similarly, if Bersatu sticks to the mentality of old, it too will fail. By privileging cash, connections, contracts and concessions, UMNO has become nothing but a cabal – a party defined and driven by the politics of what political scientists call kaumiyah or tribes.

These tribes may align themselves to current, former or prospective presidents of UMNO, but they will all sink as Umno is now officially a party associated with thieving and thuggery.

Even when the International Convention on the Elimination of All Forms of Racial Discrimination (Icerd) was not ratified, UMNO still insisted on a street rally. By urging its remaining war horses to take to the streets of Kuala Lumpur, the party has become a throbbing and bleeding sore.

And as the above was done, another elite group of UMNO putera and puteri, also working for their own benefit, are hard at work trying to upstage their elders in the party – making UMNOo Youth into a spear against the shield of the old aristocracy.

With such internal warfare, UMNOo can no longer vouch for bangsa, agama dan negara (race, religion and country). It is now hollowed out, with its only legacy the attempted misuse of every GLC and GLIC under its watch, from Permodalan Nasional Bhd to Lembaga Tabung Haji to Ministry of Finance Inc.

PAS, having formed a quasi-pact with UMNO that seeks to salvage what remains of the former’s vote bank, has either directly and indirectly tried to sanitise the soiled legacy of the former ruling party.

Instead of speaking out against the excesses of 1MDB, and the many ‘mini 1MDBs’, PAS has chosen to remain solemnly quiet on all fronts. Such connivance is done in order to benefit PAS, both as the future kingmakers and spoilers of parliamentary democracy of Malaysia.

Bersatu cannot claim to be a white knight. As a new party, it is bound to have many chinks in its armour. Nor can it claim to be invincible and undefeatable. If May 9 demonstrated anything, it is the power of the people to get rid of the old and tiresome kleptocrats.

But as a Malay party – whose associate members can be non-Malays – Bersatu understands the importance of creating a ‘New Malay’ mindset to steer Malays, Muslims and Malaysia forward. This is where Bersatu has a double-track system in every single endeavour.

In the public sector, Bersatu is not obsessed with dominating every branch and twig of the government. No Malay cronies have sprung up in Bersatu. Indeed, Bersatu believes a strong and stable government that is also smart. As and when needed, a government led by Bersatu, with the blessing of Pakatan Harapan, will be pro-private sector.

In the private sector, Bersatu does not want to dominate the entire business landscape. Bersatu wants Malay entrepreneurs of all stripes to flourish together with people of other races in Malaysia.

The fact that Bersatu can work with the Finance Minister from DAP is a case in point. Whatever pro-Malay agenda Bersatu may have, it has the option to stick by its allies that are also pro-Malaysia.

Insofar as Islam is concerned, Bersatu has also worked closely with Amanah, a party that believes in rahmatan lil alamin (Islam as a blessing for all). Neither Bersatu nor Amanah believes in any ideas that are racially chauvinistic: both parties believe in working closely with people of all faiths, not just ‘other’ faiths.

Thus, when the unrest in Seafield erupted, Home Minister and Bersatu president Muhyiddin Yassin was quick to condemn the incident, indeed to contain it as a non-racial issue stemming from a land dispute that was politicised by Umno and PAS as an affront to Malayness.

The only thing Malay in the riots was the heroism of the late Muhammad Adib Mohd Kassim and his colleagues to rush in to douse the fire of the burning cars where none dared to tread.

If Bersatu in the post-May 9 landscape has any specific inspiration, it is the courage and bravery of Muhammad Adib. Unsurprisingly, Dr Siti Hasmah Mohamad Ali even dedicated a violin recital to him. Why? Precisely because of his selflessness to live up to the creed of New Malaysia.

Prime Minister and Bersatu chairperson Dr Mahathir Mohamad hasn’t said much, for he too believes that mere words would have tarnished Adib’s deeds, and how he led by example just weeks prior to the second annual general assembly of Bersatu.

‘Berani kerana benar’ (in truth we find courage) the old Malay proverb goes. And ‘Bersatu kerana benar‘, as the New Malaysia and all Malays must be.

---

RAIS HUSSIN is a supreme council member of Bersatu. He also heads its policy and strategy bureau.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

 

 

 

When it comes to ICERD, New Malaysia is the Old Racist Devil again

November 25,2018

When it comes to ICERD, New Malaysia is the Old Racist Devil again–BACK TO UMNO 1946. This time with PAS

By S Thayaparan

http://www.malaysiakini.com

I said the old devils are at it again,

And it’s right now like it was back then,

The old devils are at it again.

– William Elliot Whitmore, ‘Old Devils’

–

COMMENT | In an interview, DAP’s Lim Guan Eng was reported to have said “the situation needed to be pacified, it should not stop people from continuing to express their views on ICERD (International Convention on the Elimination of All Forms of Racial Discrimination).”

Really? So, let me get this straight.

ICERD–MY  WAY or JUST HIT The North-South Highway

 DAP, which has not given its official stand on the ratification of ICERD, wants people to express their views on this issue?  DAP, who routinely mocks MCA for being subservient to UMNO wants people to express their views even though it has not declared its own position on the issue after the cabinet decided (by consensus) not to ratify Icerd?

DAP, the purveyors of the Bangsa Malaysia Kool-Aid, wants people to express their views, even though it has warned the Chinese community (and others) to be wary until after the December 8 anti-ICERD celebration?

So, the Finance Minister of this country, who has made these tirades about speaking the ‘truth’ even though it is economically or politically disadvantageous to do so, suddenly seems to have lost his ability to speak when it comes to the issue of ICERD.

But don’t worry folks, I am sure you will speak up on this issue, even when Lim, if asked to comment, will just deflect, leaving you holding the bag.  Another DAP leader, says this country needs a vision which highlights the virtue of the middle ground.

When politicians babble on about the middle ground, what they forget to tell you is that it is contextual. Here in this country, when I talk to people about what they think the middle ground is, they speak of middle Malaysia with two definitions.

The first is the social contract. It is not a real document but rather it is an unspoken understanding. The middle ground is that there are policies and ideologies in place that benefit the majority, and as long as minorities can exist comfortably, albeit with limited freedoms, they must not question the inequalities of the system, even if that system which claims to “uplift” the majority is in reality detrimental to the community.

The second definition was borne out of the political turmoil that split the Malay community when Anwar Ibrahim was ejected from the UMNO paradise. Or at least, that’s the narrative that we are most familiar with.  This middle ground is defined by concepts like equality, secularism and numerous other progressive ideas championed by the urban educated electorate.

So when people talk of Bangsa Malaysia for instance, they are really talking about the idea that everyone is equal in law and the aspirations to certain fundamental freedoms that people in other countries take for granted.

Here’s the thing though, ICERD was that vision of a middle ground that Pakatan Harapan claimed fidelity to. It is in their manifesto and the rhetoric of the more outspoken members of its coalition.

Rational (Harapan-aligned) critics of ICERD did not make the argument that the treaty would destroy the Malay community because they could not point to anything that did that.

What they argued was that the ratification of ICERD would be politically disadvantageous – or so they claim – and that the present government would lose its credentials as protectors of race and religion. This neatly falls into the first definition of the middle ground.

The reality is that ICER was a symbol and a declaration which is actually a baseline for functional democracies for the second definition. The religious far-right who oppose Icerd did so because they believed in the supremacy of their race and religion. What Icerd did was to say everyone should be equal.

Threats of violence work

By not ratifying Icerd, the government did two things. First, it legitimised the views of people like PAS president Abdul Hadi Awang. This really does not bother me. Hadi is the politically incorrect face of Malay supremacy.

As I said earlier – “The funny thing is that state governments controlled by the opposition bend over backwards to accommodate Muslim preoccupations and have to continuously defend themselves against charges of racism and yet the mainstream Malay establishment does not disavow someone like Hadi.”

Think of it this way. Has any Malay-Muslim Harapan politician come out and say that Hadi is wrong when it comes to issues of race and religion? Have any of these politicians offered an antithetical view of Hadi’s numerous toxic narratives?

Sure, some political operatives have made meek protestations and gingerly attempted to offer a counterview, but nobody has had the cojones to say Hadi’s view of Islam is wrong.

So I am not so worried about the first point because the foundation of mainstream Malay politics is racial supremacy, but what has happened over the years is that mainstream Malay power structures have done a reasonable job in balancing Malay and non-Malay expectations so we did not turn into just another failed Islamic state.

The second point is far more dangerous. When Harapan rejected ICERD, they sent a message to the religious far-right that their threats of violence work.Now, some would say, hasn’t this always been the case? No, this time is different because Harapan, which claimed to be a progressive force, caved in to the religious far-right.

This was not the UMNO decades-long hegemon playing to the gallery. This was a supposed multiracial coalition telling the racial and religious far-right that they were afraid to confront them even though they had federal power.

It sent a signal that the Harapan government could be brought to its knees when the issues of race and religion are used. The problem here is that the racial and religious far-right could turn every issue into a religious or racial issue and by attrition, bring down a democratically-elected government.

If this sounds scary, it really isn’t. What the Harapan government should do is determine which kind of middle ground they want to occupy. This would mean jettisoning those ideas which they have long promulgated to rile up the base.

Chin Tong is wrong when he talks about a non-Malay periphery electorate wanting to fight fire with fire. What they want – and I doubt they are a periphery – is for Harapan to occupy the second definition of the middle ground. This puts them in conflict with those who view the first definition as pragmatic and conducive to maintaining power in this system.

Harapan, and the DAP specifically, has to find its scrotal sac and define the middle ground even if it means acknowledging that there is no new Malaysia, only a BN Redux.

---

S THAYAPARAN is Commander (Rtd) of the Royal Malaysian Navy.The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

 

Welcome to Malaysia’s Brave New World

November 5, 2018

by: John Berthelsen

https://www.asiasentinel.com/econ-business/malaysia-brave-new-world/

“Euphoria is dying off and bodies like Bersih, he continued, have started criticizing the new government. Many from civil society are keeping silent. “I suppose the saving grace is that Najib and his cohorts are gone. But that can’t console people forever.”_- J. Berthelsen

Six months into the rule of Malaysia’s new reform government, the bloom has started to fade as the Pakatan Harapan coalition attracts growing criticism while it seeks to find its feet against the political and economic debris left by the outgoing Barisan Nasional, driven from power on May 9 after six-plus decades in office.

The problems the government faces were starkly outlined on Nov. 1 by Finance Minister Lim Guan Eng in a marathon 14,000 word speech outlining the 2019 budget, in which he stated that the previous government, which he characterized as “kleptocratic,” had understated debt and liabilities by nearly 40 percent, rising to a stunning RM1.05 trillion (US$256.8 billion) in an effort to hide corruption, and that debts from the scandal-scarred 1Malaysia Development Bhd development fund could total as much as RM43.9 billion, not including RM7 billion in interest secretly paid on 1MDB debts using taxpayer money illegally.

To Malaysia’s credit, the frighteningly poisonous racial equation, in which ethnic Malays make up about half the population, the Chinese 23 percent and Indians 7 percent, with the rest split between expatriates and bumiputera tribes in East Malaysia, seems to have cooled markedly. The previous government’s attempt to use fundamentalists Islam to pound minorities has largely ceased although UMNO and the fundamentalist Parti Islam se-Malaysia continue to attempt to fan the flames. It remains to be seen what strains there are between the Chinese-dominated Democratic Action Party, Mahathir’s Parti Bersatu Pribumi, and Anwar Ibrahim’s moderate, urban Malay Parti Keadilan Rakyat – and what internal strains there are inside PKR.

The country is faced with a long series of monumental tasks – rebuilding a judiciary that was thoroughly corrupted by the previous government’s 61 years in power. The education system is a shamble, built on Malay privilege instead of academic achievement.  Lim called attention to educational shortcomings with a long series of measures allocating funds to lower-income students, upgrading failing schools and educational infrastructure, training and vocational education programs. Other sources say the government is being hamstrung to a certain extent by a civil service loyal to the previous government.

A series of murders including that in 2006 of Mongolian translator and party girl Altantuya Shaariibuu, AMBank founder Hussain Najadi and prosecutor Kevin Morais (pic above), all believed to be at the hands of high government officials, remain to be solved or even looked into.

The new government, caught by circumstances, has compounded its problems by campaigning against a deeply unpopular Goods and Services Tax (GST) implemented by the government of former Prime Minister Najib Razak, and then actually repealing it once in office, leaving a gigantic hole in government revenues.

‘–at the same time it has agreed to go along with Mahahir’s ill-conceived hobby horse, another national car project.

…That is despite 30-odd years of his previous ill-conceived hobby horse, the Proton national car, which cost the treasury billions of ringgit and billions more to consumers in lost opportunity costs from paying through the nose for heavily tariffed competitors. “- J. Berthelsen

It is seeking to fill the hole with a variety of piecemeal taxes – at the same time it has agreed to go along with Mahahir’s ill-conceived hobby horse, another national car project. That is despite 30-odd years of his previous ill-conceived hobby horse, the Proton national car, which cost the treasury billions of ringgit and billions more to consumers in lost opportunity costs from paying through the nose for heavily tariffed competitors.

“There was a lot of euphoria when Pakatan won the elections, but expectations were also very high,” said a prominent business source in Kuala Lumpur. “They have a small window. If they don’t deliver, that window will start closing.  But unfortunately, politicians will be politicians. They are inexperienced, and the euphoria is wearing off. So far, we have had no exciting government programs. New Malaysia is like Old Malaysia, minus Najib Razak and his 40 thieves.”

Najib and his wife Rosmah Mansor have both been arrested and are expected to go on trial next year. Hundreds of millions of dollars have been confiscated by Malaysian and US authorities although hundreds of millions more, perhaps billions, remain outside he government grasp.  Jewelry, handbags, watches, cash and other riches belonging to Rosmah that have been confiscated total at least US$273 million, putting her in a league even above Imelda Marcos, the wife of the late Philippine strongman Ferdinand Marcos, who held the public record for corruption. It remains to be seen if the Najibs surpass it.

The businessman’s assessment could be a bit pessimistic.  The government has abolished with capital punishment and the press appears to remain largely free despite reluctance on the part of the government to abolish a “fake news” bill pushed through at the last minute by the previous administration in an effort to muzzle pre-election critics.

But a sedition act used against the previous government’s foes remains on the books and has been used against critics. Civic organizations including Suaram have called attention to government inactions on a variety of rights issues. There is also concern on the part of the Coalition for Free and Fair Elections, known as Bersih, and others that MPs from the thoroughly disgraced United Malays National Organization are migrating to Parti Pribumi Bersatu Malaysia, headed by once and current Prime Minister Mahathir Mohamad, diluting the reformist zeal of the Pakatan Harapan coalition.  Although as many as 40 UMNO MPs are said to be contemplating such a move, Mahathir said they would be vetted individually and known crooks would be kept out.

But, said Kim Quek, a spokesman for opposition leader Anwar Ibrahim’s Parti Keadilan Rakyat in an email, “I foresee mounting tension when UMNO MPs slip into Bersatu, one after another quietly, causing endless suspicion…and mounting public disapproval.”

The headwinds outlined by Finance Minister Lim paint a pessimistic picture for both business and government. With the Trump administration cracking down on trade in Washington, DC, and the global economy beginning to slow, the budget, at a record RM314.6 billion, is forecast to run 3.7 percent of GDP in the red with economic growth expected to slow to 4.8 percent from 5.9 percent in 2017.  The ringgit, Malaysia’s currency, has fallen by 10 percent against the US dollar, in line with troubles across the world as interest rates rise in the United States, causing a flight out of emerging markets.

Lim, in his speech, set out a series of measures designed to help business and vowed to get government out of commerce, saying “clearly, government owned companies have been competing directly with private companies in non-strategic sectors. The outcome was the apparent ‘crowding out’ of private sector investments where private companies are unable to grow and compete.”

The private sector, he said, must lead, and the finance ministry is expected to establish a task force designed to evaluate and reduce duplication of functions,  a ray of hope that the country’s notorious rent-seeking government-linked companies, which funneled millions from inflated contracts to UMNO, could be cut back and its even more notorious cronyism could be reduced.

“Going forward, the government will focus its expenditure and investments only in strategic sectors and areas where the markets are unable to meet the needs of the people,” he said..

Nonetheless, business investment remains lackluster while the sector tries to figure out which way the government is going to go.

“Malaysia will undoubtedly be affected by the US-China trade war given that both these countries are among our top three trading partners,” Lim said in his budget speech. Exports remain a significant driver of the economy, particularly including electronics, oil and gas and palm oil.

Comeback kids: Like Dr M, other political figures have had second and even third acts during their careers, including (from left) Netanyahu, Abe, Berlusconi and Churchill    

Leadership remains somewhat unsettled, with Mahathir, at 93 the world’s oldest government leader, committed to staying for two years after the formation of the government. Anwar Ibrahim, now 71, has been waiting in the wing for decades, from the time when he was Mahathir’s chosen successor only to be fired and jailed after disagreements in 1998. Although he said he would study abroad and recover from his most recent imprisonment, he forced a by-election to return to parliament a few weeks ago, disconcerting some of his followers, who accused him of acting too quickly.

In the meantime, two of Anwar’s deputies – Mohamad Azmin Ali, the Minister of Economic Affairs, and Rafizi Ramli, the Parti Keadilan general secretary,  are staging their own internecine squabble to become deputy party leader with an eye to succeeding Anwar, raising concerns over party – and coalition – unity.  Pakatan Harapan remains a work in progress. Azmin is said to be aligned with Mahathir, Rafizi with Anwar.

That raises the spectre of Mahathir and Anwar continuing to try to do in each other despite public pledges of amity, including Mahathir campaigning for Anwar in the Port Dickson by-election that brought him back into the parliament.

“The Harapan guys thought that since they couldn’t get worse than Najib, people would continue to support them,” another source said. “They forget that there will always be alternatives; if not in the next five years, then in the next 10 maybe.  Inflation is creeping up; wages have not gone up; new taxes are being introduced and people still struggle to put food on the table. Business is slow; businessmen are not re-investing as they are unsure of this government’s policies.”

Award winning Journalist John Berthelsen

Euphoria is dying off and bodies like Bersih, he continued, have started criticizing the new government. Many from civil society are keeping silent. “I suppose the saving grace is that Najib and his cohorts are gone. But that can’t console people forever.”

Malaysia: 2018-2019 Budget Speech

November 4, 2018

 

INTRODUCTION.

Greetings, Salam Harapan and Salam Sayangi Malaysiaku, I bid to Mr Speaker, the Honourable Members of Parliament of both the Government and the Opposition and fellow Malaysians. Indeed, we are truly fortunate to have been given the trust, support and opportunity for the Pakatan Harapan Government to reshape the administration of this nation in a more developed, competitive and transparent manner.

3. I stand before you on this momentous day to table Budget 2019 which is the first budget under the Pakatan Harapan Government. I wish to firstly thank the Malaysian people who displayed great tenacity, bravery, and an undying love for the country in replacing a global kleptocracy government with a clean and democratic government.

You, the people have created history after sixty-one years by choosing a new government which is led by not only the oldest Prime Minister in the world but also one of the most respected statesmen internationally.

ECONOMIC PERFORMANCE AND CHALLENGES

4. The new Government has inherited a worrying state of financial affairs which was in dire straits. Our actual debt and liabilities as at end June 2018 stand at RM1,065 billion, a debt burden that is nearly RM350 billion higher than that officially disclosed by the previous government.The breakdown constitutes 3 RM725.2 billion in direct federal government debt, RM155.8 billion in committed contingent liabilities and RM184.9 billion in other liabilities including leased payments for Public Private Partnership (PPP) projects.

5. The trillion ringgit debt was caused by financial scandals disguised as investments and mega debts masked as mega projects. We discovered that the Federal Government was secretly paying for the debts of 1MDB amounting to nearly RM7 billion as at 30 April 2018. Despite that, we have also confirmed that we may be liable to pay up to RM43.9 billion more, to settle all of 1MDB’s debts. We discovered aberrant contracts such as the Trans-Sabah Gas Pipeline and Multi-Product Pipeline projects which were to cost approximately RM9.6 billion, where RM8.3 billion has already been paid despite less than 10% of the work being completed. Mega projects such as the East Coast Rail Link (ECRL) will cost up to RM81 billion, and tens of billions of ringgit more in recurring operational losses.

 

6. Further, the Accountant-General has confirmed the disclosures by both the Royal Malaysian Customs (Customs) and the Inland Revenue Board (IRB) that the Government revenues have been overstated for the past few years, by not paying back the Goods and Services Tax (GST) and Income Tax refunds. As at 31 May 2018, the GST refunds of RM19.4 billion and income tax refunds of RM16 billion, totalling RM35.4 billion of tax refunds. These refunds belong to the tax payers and were misused without their permission or knowledge. Unlike the debts accruing to 1MDB and other financial scandals, which can be repaid over a longer 4 period of time, the Government has a moral imperative that these tax refunds must be returned in 2019 to their rightful owners, companies and the people of Malaysia.

7. This is the high price that Malaysians have to pay as a result of becoming a global kleptocracy. To restore our fiscal health, the Prime Minister has asked Malaysians to be prepared for sacrifices for the nation. Therefore, while we are committed towards fiscal consolidation, we will equally prioritize economic growth to improve the socio-economic well-being of the rakyat.

8. The International Monetary Fund has revised downwards the global economic growth forecast from 3.9% to 3.7% in 2018. Next year, the global growth is expected to remain at 3.7%. The global trade growth forecast has also been reduced from 4.8% to 4.2% for 2018 and 4% in 2019.

9. The rising prospect of a full-blown trade war between the United States of America (US) and the People’s Republic of China (PRC), as well as a hawkish US monetary policy, has already precipitated massive capital outflows from Emerging Markets back into the US. Countries with twin deficits (current account deficit and fiscal deficit) are hit hardest. The Turkish Lira has lost 32.1% of its value this year against the US dollar up to 31 October 2018. Argentina which lost 48.7% on its currency had to raise interest rates to 72% to stem capital outflows. Meanwhile, the Indonesian Rupiah has fallen by 11.3% against the US dollar.

10. Malaysia, as an emerging economy, will face the inevitable prospect of net foreign outflows. While this puts pressure on the Ringgit, confidence in the Malaysian economy and the current account surplus, will provide support to our currency and avoid steep interest rate hikes.
As a result, the Ringgit has been one of the best performing Emerging Markets currency this year up to 31 October 2018. We have appreciated against the Indian Rupee by 12.3%, Indonesian Rupiah by 8.1%, Filipina Peso by 3%, China Renminbi by 3.2% and Singapore Dollar by 0.6%.

11. In addition, the Malaysian equity market has also proven to be resilient with the FBM KLCI declining by 4.1% YTD this year as at 31 October 2018, as opposed to the MSCI Emerging Market Index, which has fallen 17.7% since the start of 2018.
In the other key regional markets, Singapore has declined by 12.0%, Hong Kong by 18.3%, South Korea by 18.2%, the Philippines by 18.2%, Indonesia by 8% and Thailand by 6.2%. This is a vote of confidence from domestic and foreign investors in the new Pakatan Harapan government.

12. In light of the above global headwinds and consistent with IMF’s cut in global economic growth rate, Malaysia will be revising downwards our projected GDP growth rate from the previously announced 5.0-5.5% to 4.8% for 2018. Our exports have continued to grow at 6.9% for the period between January to June this year contributing to a healthy current account surplus of RM18.9 billion or 2.8% of the GDP. As at 15 October 2018, our international reserves are at US$102.8 billion or RM426 billion, 6 which is sufficient to finance 7.3 months of imports. Our inflation rate remains low, recording only 1.2% for the period from January to September, allowing our monetary policy to remain accommodative and conducive for economic growth.

13. In presenting this year’s Budget, Malaysia is mindful of an increasingly hostile global environment that compels us to prioritise sustainable economic growth as much as urgent fiscal consolidation and discipline. We expect the GDP to continue to grow healthily despite the global economic uncertainties in 2019 at 4.9%.

FOCUS OF THE 2019 BUDGET

14. The theme for the 2019 Budget is “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society” will have three focus areas with twelve key strategies to map out a path to restore the Malaysian economy as an Asian Tiger.

The three focus areas are:

FIRST : TO IMPLEMENT INSTITUTIONAL REFORMS;

SECOND : TO ENSURE THE SOCIO-ECONOMIC WELL BEING OF MALAYSIANS;

AND THREE : TO FOSTER AN ENTREPRENEURIAL ECONOMY.

FOCUS 1: IMPLEMENTING INSTITUTIONAL REFORMS

15. The weakest link in Malaysia’s macroeconomic management is in the mismanagement of our public finances, exemplified by the RM50 billion 1MDB scandal and explicitly outlined in the book “Billion Dollar Whale”.

We shall implement institutional reforms that promote transparent fiscal discipline which will not only prevent repeats of such malfeasance, but also ensure overall macroeconomic stability and the sustainability of our economic growth.

Strategy 1: Strengthen Fiscal Administration

16. ONE: The Federal government is implementing a ‘zero-based budgeting’ exercise for this Budget. Improved effectiveness, greater efficiency and higher cost-savings are achieved by firstly, ensuring spending is justified by objectives rather than the previous year’s budget; secondly, review alternative scenarios to achieve the same objectives; and thirdly, all discretionary spending is planned from zero.

17. TWO: We will table a Fiscal Responsibility Act by 2021 to avoid reckless mega spending that entails mega debts.

18. THREE: We intend to table a new Government Procurement Act next year to govern procurement processes to ensure transparency and competition, while punishing abuse of power, negligence and corruption. Open tenders will not only achieve more value for money for the tax payers, it will also breed a more efficient and competitive private sector.

19. FOUR: To ensure full disclosure of our debts and liabilities, as well as the value of our assets, the current cash basis of accounting shall be converted to an accrual basis by 2021.

Strategy 2: Restructuring and Rationalising Government Debt

20. Over the past decade, the Federal Government had increasingly relied on less transparent government guaranteed borrowings or lease financing programmes known as the Public Private Partnership (PPP) projects, to fund its expenditure.

The value of the Government guaranteed borrowings increased from RM69.2 billion in 2008 to RM238 billion in 2017, a massive increase of 244%. In contrast, the official federal government debt has only increased by 124% over the same period of time.

21. Essentially, the budget deficits announced and achieved in the previous years never truly reflected the real deficits incurred. Hence, in spite of our best efforts to reduce cost and postpone non-critical expenditures, it was unrealistic to achieve the 2018 deficit target of 2.8%. The 2.8% deficit target can only be attained if we continued the previous practice of hiding our expenses off-balance sheet.

22. Therefore, the fiscal deficit is projected to be 3.7% for 2018. The increase in fiscal deficit arises after we have taken into account previously unbudgeted items such as RM1 billion interest servicing cost for 1MDB debts, RM1.3 billion in compensation for 9 the acquisition of Eastern Dispersal Link in Johor which was announced last year, RM1 billion for Prasarana, RM1.4 billion for Ministry of Transport rail projects and paying back some GST refunds of RM3.9 billion.

23. For the next three years, the Harapan administration is committed to maintain a path of fiscal consolidation to achieve a deficit of 3.4% in 2019; 3.0% in 2020 and 2.8% in 2021. Over the medium term, we expect the deficit to be reduced further to the region of 2%.

24. Going forward, the Federal Government will still be issuing Government Guarantees, but only for existing infrastructure projects to be completed such as the MRT2 and LRT3 projects, as well as for selected agencies which are able to demonstrate a degree of financial sustainability.

25. To ensure a successful fiscal consolidation exercise on our RM1 trillion debt, this Government will reduce our debt as a percentage of our GDP via the following measures:

26. ONE: We will set up a Debt Management Office responsible for reviewing and managing the government and its agencies’ current and future debt and liabilities.

The Office shall have oversight over debt issuance by the Federal Government, statutory bodies and Special Purpose Vehicles. The government intends to avoid higher debt service charges because of poor coordination of debt issuance.

The Office will also streamline Government funding sources as a whole, centralising management of funds such that 10 statutory bodies with surplus can help meet the funding requirements of other agencies at a more competitive cost.

27. TWO: In order to rationalise our debts, we must not only review our existing debts, we must also review our future debt commitments that include recurring operational leases amounting to tens of billions of ringgit.Therefore, the Government has taken the decision to cancel the RM15 billion Multi-Product Pipeline and Trans-Sabah Pipeline projects. The construction of the RM81 billion East Coast Rail Link (ECRL) is suspended, and is pending renegotiation of the cost of the project.

28. We have cancelled the RM60 billion MRT3 project for now, pending the completion of MRT2. We have also postponed the implementation of the Kuala Lumpur – Singapore High-Speed Rail which would have cost us at least RM110 billion.

29. The Government has decided to proceed with several infrastructure projects which will be able to deliver high economic multiplier effects after carrying out renegotiations with the respective vendors.

For the 37km LRT3 project carried out by Prasarana Malaysia Bhd, we were able to reduce the overall cost of the project from RM31.6 billion to RM16.6 billion. This represents a savings of 47% or RM15 billion. For the MRT2 project managed by MRT Corp, we have successfully reduced the cost of the construction contract by RM8.8 billion from RM39.3 billion to RM30.5 billion, representing a savings of 22.4%.

30. The Klang Valley Double-Tracking 2 project which was awarded via direct negotiations just before the last general election for RM5.2 billion, has been terminated. The project will be retendered via an open tender exercise and is expected to realise a substantial reduction in cost.In addition, various Government agencies are in the process of renegotiating contracts entered into by the previous government amounting to RM19 billion. These RM19 billion contracts were awarded via direct negotiations or limited tenders. The government has left it to the Ministries to decide whether to proceed with these contracts. These projects can continue provided that there is a 10% reduction on the construction cost. The Government expects to save RM1.9 billion from this exercise. The billions of ringgit saved from these projects significantly reduced our future debt burden.

31. THREE: The Government will take all necessary actions to recover funds lost and stolen from 1MDB. On 30 October 2018, we have applied to the Courts of England for an order to set aside a Consent Award recorded on 9th May 2017 by an Arbitration Tribunal sitting in London between International Petroleum Company (IPIC) with Aabar Investments PJS, and 1MDB with our Minister of Finance Inc. Malaysia is using fraud as a reason not to pay the balance of the US$4.32 billion to IPIC or Aabar under the Consent Award, and recover the US$1.46 billion already paid. 32.

The Government is also working hand-in-hand with foreign governments to recover seized cash and assets related to 1MDB. We have successful seized a billion-ringgit luxury yacht, 12 Equanimity, and will commence its 1-month international auction on 5 November 2018.

33. FOUR: The Federal Government will track and publish not only the direct Federal Government debt ratios, but also provide the necessary transparency to disclose our total debt and liabilities. The direct federal government debt of RM687 billion stood as 50.7% of the GDP as at 31 December 2017. The direct federal government debt has increased to RM725 billion as at 30 June 2018, but maintained at 50.7% of the GDP.

34. Once committed contingent liabilities and leased payments are taken into account, our overall liabilities to GDP stands at 80.3% in 2017 and is expected to reduce to 74.6% at the end of 2018. Going forward for 2019, we expect our direct Federal Government debt to GDP ratio to be 51.8% while our total liabilities to reduce to 73.5%.

Strategy 3: Raising Government Revenue

35. To achieve the above objective, we will first, leverage on Government assets and second, review our taxation policies. The measures to leverage on Government assets are: Leveraging Assets 13

36. ONE: Where the opportunity arises and when the Government is able to realise the full value of our non-core assets, we will seek to reduce our stake in these non-strategic companies and utilise the proceeds to pare down debt.

37. TWO: The real Public Private Partnership (PPP) model for public projects based on land swap transactions would be implemented using an open tender mechanism and not direct negotiations.

Previously, through the direct negotiation model, the real value of the government land is invariably under-priced while the cost of the public works project is over-priced.

38. The real PPP model based on open tenders will enable the government to achieve the highest revenue for the asset disposed while receiving the best value for the project to be awarded.Based on this new model, twenty-four PPP projects such as schools, army camps, police and fire stations as well as affordable housing, worth RM5.2 billion will be implemented and the Government expects to gain an excess of RM800 million over the cost of the public works from the land sales.

39. THREE: We will plan scheduled and staggered land sales via auction to the highest bidders, based on conditions imposed on the land, to maximise revenue for the Government.

40. FOUR: To privatise infrastructure assets, the Government intends to set up the world’s first “Airport Real Estate Investment Trust (REIT)”. The investors of the Airport REIT will receive income arising from user fees collected from Malaysia Airports Holdings 14 Bhd (MAHB) which has the concession to operate these airports.The Government hopes to raise RM4 billion from selling a 30% stake of the REIT to private investing institutions, while these investors will gain an invaluable opportunity to invest in top quality infrastructure assets.This REIT exercise will only be carried out after the new Regulated Asset Base and user fees structure has been negotiated and finalised.

41. Going forward, the Airport REIT will have the opportunity to raise funds publicly either by issuing new REIT units or via borrowings in order to fund the improvement and expansion of airports, especially those facing over-capacity. This financial structure will significantly reduce the debt burden of the Government to fund all of these projects on its own, while maintaining MAHB as an asset light operator not bogged down by heavy capital investments and debt. Other projects could also benefit from similar funding and investment structures, such as hospitals, or rail infrastructure.

Reviewing Taxation

42. As promised in our Harapan Manifesto, we have Zero-Rated the GST as at 1 June 2018 and replaced the GST Act with the Sales and Services Tax (SST) on 1 September 2018. Under the GST, only 545 items are zero-rated whereas under the SST, almost 10 times the number of items are exempted. Perhaps the biggest impact is to businesses, where 472,000 companies were previously required 15 to collect GST. In contrast, only around 100,000 companies are required to collect the SST, greatly relieving the burden from many small and medium enterprises. According to an initial study by the Ministry of Domestic Trade and Consumer Affairs, 70% or 291 items from 417 inspected goods and services are found to have a reduction in prices in September 2018 when compared against the prices during the GST regime in May 2018.

43. Nearly all operational issues and teething problems associated with the SST have been resolved by the Customs Department and the Ministry of Finance through public interactions involving 50,000 people and tens of thousands of questions. I have personally attended 18 SST dialogues with more than 15,000 business people nationwide.

44. To further improve the efficiency and effectiveness of the SST, starting 1 January 2019, the Government will grant exemptions for specific business-to-business Service Tax for registered Service Tax entities. This will prevent the increase in the cost of doing business as a result of compounded taxation and protect the competitiveness of our local service industry.

45. To assist the problems faced by small manufacturers who purchase their products from importers instead of other registered manufacturers, the Government will introduce a credit system for Sales Tax deduction starting 1 January 2019. Again, this will prevent compounded taxation and in turn will decrease the cost of doing business.

46. On top of the above, the Tax Reform Committee was set up in September 2018 to identify and propose improvements and additional measures to create a more progressive and effective taxation system. Amongst the tax reforms proposed are:

47. ONE: Imported services will be subjected to Service Tax so as to ensure that our local service providers such as architecture, graphic design, Information Technologies (IT) and engineering design services are not unfairly disadvantaged against their foreign competitors starting 1 January 2019.

48. TWO: For online services imported by consumers, the foreign service providers will be required to be registered with the Royal Malaysian Customs, charge and remit the relevant Service Tax on the transactions with effect from 1 January 2020. Examples of these services will include, but are not limited to downloaded software, music, video or digital advertising.

49. The above measures will neutralise the cost disadvantage faced by physical retailers against their virtual storefront counterparts, especially those operated by foreign entities.

50. THREE: The Government will launch a Special Voluntary Disclosure Program to offer an opportunity for taxpayers to voluntarily declare any unreported income for Malaysian tax purposes, including that which is in offshore accounts.

51. During this year, Malaysia is now a participant of the Organisation for Economic and Co-Operation and Development (OECD) Common Reporting Standards, where we will receive automatic exchange of financial account information (of non-resident persons) with the tax authorities of a person’s country of residence.

52. The Special Voluntary Disclosure Program will be offered from 3 November 2018 until 30 June 2019 where taxpayers will receive reduced penalty rates. If disclosure of unreported income is made from 3 November 2018 until 31 March 2019, the penalty will be 10% of the tax-payable. If disclosure is made from 1 April 2019 until 30 June 2019, the penalty will be 15% of the tax payable. After the program ends on 30 June 2019, the penalty rates will range from 80% to the maximum of 300% as provided for in the existing tax laws. With a clean and transparent government, Malaysians will be more than willing to pay their taxes because they know that the leaders of this Government will not cheat and steal their money.

53. FOUR: IRB will scrutinise and investigate unexplained extraordinary wealth displayed by possession of luxury goods, jewellery, handbags or property. The IRB will use all necessary measures permitted by the law to recover such monies, whether in the form of additional taxes, penalties or fines.

54. FIVE: The Government will also be reviewing the existing reliefs and incentives under the various tax acts to make them relevant and cut down leakages. The Government will also now 18 place a time limit on the carrying forward of losses and allowances for tax reliefs to a maximum of 7 years. This would apply to unutilised business losses, capital allowances, reinvestment allowance, investment tax allowance and pioneer losses.

55. SIX: We will also carry out a thorough review of the over-130 types of fiscal schemes to support investments, administered by 32 approving authorities with the intention to expire incentives which are no longer relevant or are duplicitous.

56. SEVEN: The Royal Malaysian Customs after having successfully launched the SST system, will step up enforcement against cigarette smuggling. Currently, the Government collects less revenue due to the widespread availability of much cheaper contraband alternatives or even illicit products packaged with fake custom duty labels. The Government hopes to recover at least RM1 billion in tax losses as a result of clamping down on smuggling and fraudulent activities.

57. EIGHT: To encourage domestic tourism, the Government proposes to impose a departure levy for all outbound travellers by air starting 1 June 2019. The proposed rate is 2-tiered, RM20 for outbound travellers to ASEAN countries and RM40 to countries other than ASEAN. The rate proposed is consistent or not more than what many other countries are charging, including Thailand at USD20, Hong Kong SAR at USD15 and Japan at USD10.

58. NINE: The Real Property Gains Tax rates will be revised for disposals of properties or shares in property holding companies after the fifth year as follows:

• for companies and foreigners, the rate shall be increased from 5% to 10%; and

• for Malaysian individuals, the rate shall be increased from 0% to 5%. However, low cost, low-medium cost and affordable housing with prices below RM200,000 will be exempted.

59. TEN: The stamp duty on the transfer of property valued at more than RM1,000,000 will increase from 3% to 4%.

60. ELEVEN: Since 1999, tax exemption for interest earned on wholesale money market funds was granted to develop the unit trust industry. In Malaysia, the growth of these funds has been substantial, at 24% annually since 2010 to achieve a total fund size of RM42.9 billion as at December 2017.

Hence the tax exemption granted for these funds will cease beginning 1 January 2019.

61. TWELVE: The Labuan International Business and Financial Centre was set up as an offshore and mid-shore services centre to provide a wide range of business and investment structures facilitating cross-border transactions, business dealings and wealth management needs.

The Government will continue to enhance Labuan’s competitiveness by removing restrictions on 20 trade in Malaysian Ringgit, transactions between Labuan and Malaysian residents as well as maintaining the current tax rate of 3%. However, the tax ceiling of RM20,000 under the Labuan Business Activity Tax Act 1990 will be removed.

62. THIRTEEN: The taxes, fees and levy on the Gaming Industry which have not been increased since 2005 are increased as follows:

• casino license to be increased from RM120 million to RM150 million per annum;

• casino duties to be increased up to 35% on gross collection;

• machine dealer’s license to be increased from RM10,000 to RM50,000 per annum; and

• gaming machine duties to be increased from 20% to 30% on gross collection. However, the number of special draws will be reduced by half.

63. Overall, for 2019, the Federal Government is expecting to receive revenue of RM261.8 billion. This includes a one-off special dividend of RM30 billion from Petronas which will go towards repaying the GST and income tax refunds of RM37 billion.

We are grateful that Petronas, as a company has been run in an extremely prudent fashion and has been able to accumulate the above reserves which can be shared with the Government, without jeopardising its ability to invest for its future growth.

21 FOCUS 2: TO ENSURE THE SOCIO-ECONOMIC WELL-BEING OF MALAYSIANS

64. Improving the socio-economic well-being of the rakyat will be the key performance indicator of whether this new government is successful. We will seek to meet this objective by ensuring welfare and quality of life, improving employment and employability, enhancing wealth and social welfare protection, raising real disposable income and education for a better future.

Strategy 4: Ensuring Welfare and Quality of Life

65. ONE: We will continue the Government support for the B40 households via the “Bantuan Sara Hidup” (BSH) cash grants. However, the program will be targeted to those in need, and enhanced according to the size of the family.

Starting January 2019:

• every household with a monthly income of RM2,000 and below will receive the sum of RM1,000;

• households with a monthly income between RM2,001 and RM3,000 will receive RM750;

• while those earning between RM3,001 to RM4,000 monthly will receive RM500.

66. However, for every child 18 years old and below or is disabled in the family (hence, with no age limit), there will be an additional top-up of RM120 per child of up to a maximum of four children.

Therefore, in a family of four children with a monthly household income of less than RM2,000, the household will receive a total RM1,480 annually. This is more than the existing RM1,200 BR1M payment for the same household.

67. Hence, 4.1 million households will continue to receive financial assistance from the Government, totalling RM5 billion.

68. TWO: For housewives under the e-Kasih programme, we have put in place an EPF i-SURI contribution scheme where we incentivise caring husbands to contribute for their wives’ retirement savings with an allocation of RM45 million.

For the e-Kasih beneficiaries whose husbands contribute at least RM5 monthly into their wives’ accounts, the Government will contribute RM40 a month.

69. THREE: The Pakatan Harapan Manifesto has promised to provide targeted fuel subsidy to individual car owners with engine capacity of 1,300cc or less and motorcycle owners of 125cc or less.

However, the Government has decided to improve on our promise by expanding the scheme to vehicle owners of 1,500cc and below. Owners with multiple cars will not receive this benefit.The Government has decided that each car and motorcycle owner will 23 enjoy up to 100 litres and 40 litres of RON95 petrol per month with a subsidy of at least RM0.30 per litre, depending on the market price of petrol. As many as 4 million car owners and 2.6 million motorcycle owners will benefit from this targeted subsidy which will cost the Government the sum of RM2 billion for 2019.Non-subsidised vehicles will have to pay pump prices for fuel determined on a weekly basis based on the Automatic Price Mechanism (APM). This scheme is expected to commence in the second quarter of next year. This new scheme will also ensure that leakages arising from fuel price arbitrage and cross-border smuggling will be stopped.

70. FOUR: To minimise the price differences between urban and rural areas in Peninsula Malaysia, as well as in Sabah and Sarawak, the Government will allocate RM150 million to equalise prices of critical goods. They are wheat flour, processed sugar and cooking oil in 1kg packs, local rice with 15% broken grains in 10kg packs, and for RON95 petrol, diesel and liquid petroleum gas (LPG).

71. FIVE: The Government is also adopting the latest technology and techniques to be more efficient and effective in price monitoring. Instead of hiring thousands of “price-checkers”, we call upon all consumers to download the Price Catcher mobile application and be part of a vigilant crowdsourcing effort to collect information on the prices of goods and services. This service will benefit not only all consumers in knowing the best prices in town, it will help the authorities monitor against unlawful pricing practices. The Government will allocate RM20 million towards better enforcement.

72. SIX: Currently, all households which consume RM20 or less of electricity usage per month are fully subsidised by the Government. The Government intends to make this policy more targeted where only the poor and hardcore poor registered with eKasih will qualify. In doing so, the Government is able to increase the subsidy to RM40 per month benefiting 185,000 accounts, with the allocation of RM80 million.

73. SEVEN: The Government will identify and collaborate with NGOs and social enterprises to support their efforts in uplifting the underprivileged and marginalised communities. Examples of such partnerships will include the Government procurement of envelopes from Persatuan Pemulihan Orang Kurang Upaya. The government will allocate RM10 million for this initiative.

74. EIGHT: Income tax deductions will be provided for contributions from any parties to any social enterprise subject to a maximum of 10% of aggregate income of a company or 7% of aggregate income for a person other than a company.

Strategy 5: Improving Employment and Employability

75. With an unemployment rate of only 3.4%, Malaysia is considered to be enjoying full employment. However, there are structural problems causing long-term unemployment especially among the youth.

We will tackle these problems:

76. ONE: The Human Resource Development Fund (HRDF) will launch 2 new programmes, “Apprenticeship” and “Graduate Enhancement Programme for Employability” (GENERATE) to provide skills to school-leavers as well as to increase the marketability of our graduates from the institutions of higherlearning. HRDF will allocate RM20 million in matching grants for these programmes which will benefit at least 4,000 youths.

77. TWO: The government will introduce policies to encourage the employment of those past the retirement age of 60. By 2020, there will be an estimated 1 million Malaysians aged between 61 and 65 years old who will still be active and productive. We propose that the employer portion of EPF contributions be cut to 4% from the current 6% effective 1 January 2019. To boost the disposable income of working retirees, it is also proposed that the current mandatory employee contribution for this group be zeroed. We also propose to provide additional tax deduction to employers who employ this group up to a monthly salary of RM4,000. This provides an incentive for employers to hire or retain retirees, particularly among the B40.

78. THREE: To ensure that ex-convicts are not left behind as the country moves forward and are able to contribute to economic growth, the Government will provide an additional tax deduction for companies who employ ex-convicts up to a monthly salary of RM4,000 each. I wish to thank those who shared their inputs and suggestions, including this measure, through the Budget 2019 portal.

79. FOUR: Amongst the elderly, we also have many government pensioners who are receiving pensions of less than RM1,000 per month. We hear their appeals for assistance. Hence the Government will provide a one-off RM500 assistance to the qualified recipients.

80. FIVE: Amidst those working with the Government and serving the nation, there are nearly 30,000 ‘contract of service’ officers who do not enjoy most of the benefits extended to the civil service. As such the Government will allocate RM10 million per annum to make available healthcare service for the parents of these ‘contract of service’ officers. In addition, these officers may apply for ‘Quarantine Leave’ when their children suffer from infectious diseases commencing 12 November 2018.

81. SIX: The Government currently approves Unrecorded Leave for Muslim officers to perform their umrah for up to 7 days for the entire duration of service. To appreciate the fact that we have 201,600 non-Muslims in the service, the Government has agreed to similarly allow for up to 7 days of Unrecorded Leave throughout the duration of service for the purposes of performing their religious pilgrimage and functions.

82. SEVEN: The Government is also cognizant of the need and importance of a living wage in an environment of rising costs. As a first step, the minimum wage shall be raised to RM1,100 per month for the whole of Malaysia starting 1 January 2019.

83. EIGHT: To reduce wage disparity, regulations will be implemented requiring public-listed companies in Malaysia to publicly disclose key pay metrics each year in their annual report. This will include ‘the lowest wage paid’, ‘average wage per worker’, the ‘highest and lowest wage ratio’ as well as a statement by the company of how they intend to improve their employees’ average pay.

84. NINE: The Government will review our labour laws to improve the labour market, workers welfare and ban discriminatory practices by employers. We will also expedite the resolution of industrial disputes between employers and employees by setting up Industrial Appeals Court.

Strategy 6: Enhancing Health & Social Welfare Protection

85. ONE: The Government also wants to assist those who have lost employment with the full implementation of the Employment Insurance System (EIS) starting 1 January 2019. The Social Security Organisation (SOCSO) will pay compensation to those who have lost their jobs, including employment-seeking and skills training allowance.

The EIS would also provide advice and help these workers find new jobs at the fifty-four SOCSO offices around the country.

86. TWO: The Government is committed to helping Malaysian households become more financially resilient through insurance 28 and takaful protection. Financial emergencies such as a critical illness in the family can cause severe financial stress. Insurance and takaful can act as a safety net by providing financial support and enabling households to get back on their feet especially for the lower income groups. In partnership with the private insurance industry, the Government will pilot a national B40 Health Protection Fund to provide free protection against top 4 critical illness for up to RM8,000 and up to 14 days of hospitalisation income cover at RM50 per day starting 1 January 2019.In other words, hospitalisation income of RM700 per annum is available. We are grateful to Great Eastern Life Insurance for agreeing to contribute the initial seed funding of RM2 billion to this Fund to be managed by Bank Negara Malaysia. We are expecting the fund size to grow with more partnership and contributions with other insurance companies. This is a big step for Malaysia because for the very first time, together with the Employees Provident Fund and the Social Security Organisation, we are starting a more comprehensive social welfare protection coverage, particularly for the middle- and lower-income groups.

87. THREE: It is also our wish and intent that as the B40 households learn the benefit of insurance and takaful, they will over time acquire their own protection policies.For this purpose, Bank Negara Malaysia has launched ‘Perlindungan Tenang’ in 2017 to make available affordable, accessible and simple insurance and takaful products for Malaysians costing as little as less than a packet of cigarettes a month.The Government proposes to waive stamp duty for all Tenang Insurance products for two years beginning 1 January 2019.

88. FOUR: To encourage higher insurance take up rate, the combined tax relief for EPF contribution and life insurance or takaful deduction will be separated into RM4,000 for EPF contribution and RM3,000 for takaful or life insurance premiums. For civil servants under the pension scheme, the tax deduction will be up to RM7,000.

89. FIVE: The Government will be allocating nearly RM29 billion for Ministry of Health, which is an increase of 7.8% compared to the previous year. This includes an allocation of RM10.8 billion to provide medicine, to upgrade and improve the quality of health services at our clinics and hospitals.

90. SIX: The Health Ministry will pilot a nationwide health screening programme, Skim Perlindungan Kesihatan (PEKA) for 800,000 individuals aged 50 and above in B40 households at a cost of RM100 million.

91. SEVEN: To protect women’s health, we are allocating RM20 million to provide free mammogram screening, PVHPV vaccination as well as pap smear tests for 70,000 women.

92. EIGHT: The Government will also allocate RM50 million for the specific purpose of treating rare diseases, Hepatitis C virus, stunted growth among children, providing more haemodialysis treatments and Enhanced Primary Healthcare (EnPHC).

93. NINE: The Government will widen the Public-Private Partnership programs where the Government will invest in the healthcare facilities while the private sector will also invest to deliver the best quality of service to the people.

The examples of such partnerships include Pusat Katarak Majlis Agama Islam Wilayah Persekutuan (MAIWP), Selayang. 94. TEN: Statistics from the Ministry of Health showed that nearly one out of two Malaysians were overweight or obese.

Therefore, the Government has decided to add as a start, ‘sugar sweetened beverages’ to the list of manufactured goods subject to excise duty in an effort to help address this issue.

The duty proposed will be at RM0.40 per litre to be implemented on 1 April 2019:

• for non-alcoholic beverages containing added sugars of more than 5gm per 100ml drink;

and

• for fruit or vegetable juice containing added sugars of more than 12gm per 100ml drink.

95. ELEVEN: The Ministry of Health has also set 2045 as the year to achieve our goal to be a “Smoke-free Malaysia”. As such, the Ministry will expand the number of locations where smoking will be disallowed starting 1 January 2019. 96. We can only enjoy the fruits of economic growth and the country’s prosperity if we are safe and secure.

The Government will strengthen our national security by allocating development 31 expenditure of RM5.9 billion to the Ministry of Defence and Ministry of Home Affairs.

Strategy 7: Raising Real Disposable Income

97. Based on the study by Khazanah Research Institute, in 2016, households with income below RM2,000 spent 95% of their incomes in consumption respectively.

The income remaining after accounting for inflation is only RM76 in 2016, as compared to RM124 in 2014. The two largest expenditure components other than food, is housing and transport.

Therefore, besides attempting to increase real disposable income of ordinary households with the measures mentioned earlier, this Government wants to specifically address the cost and affordability of housing and transport for Malaysians for both the B40s and M40s. Housing for All

98. We will continue to support the construction and completion of affordable homes with an allocation of nearly RM1.5 billion for Program Perumahan Rakyat, Perumahan Penjawat Awam Malaysia, PR1MA and Syarikat Perumahan Nasional Bhd to ensure the availability of supply.

99. However, without the necessary availability and accessibility of loans from financial institutions, the supply of these affordable homes will fail to meet the pent-up demand for housing.

To assist 32 the lower income group earning not more than RM2,300 per month to own a house for the first-time, a fund amounting to RM1 billion will be established by Bank Negara Malaysia, to help them to purchase affordable homes priced up to RM150,000.

The fund will be made available from 1 January 2019 at participating financial institutions, namely AmBank, CIMB, Maybank, RHB and BSN through a concessionary financing rate as low as only 3.5% per annum.

This will significantly reduce the monthly financing instalment of borrowers to own a house, and make it easier to qualify for the required financing. The RM1 billion fund is available for two years or until the allocation is exhausted.

100. For first-time home-buyers purchasing residential properties priced up to RM500,000, the Government will exempt stamp duty up to RM300,000 on sale and purchase agreements as well as loan agreements for a period of two years until December 2020.

For first-time home-buyers with household income of RM5,000 or less, the Government will allocate RM25 million to Cagamas Berhad to provide mortgage guarantees to enable borrowers to obtain higher financing from financial institutions, inclusive of down payment support.

These measures are expected to give between 7% and 11% cost savings to the house buyers, before taking into consideration any promotional discounts which may be offered by the property developers.

101. In line with the Government’s intent to assist civil servants acquiring their homes, the Public Sector Housing Financing Board will extend the loan repayment period from 30 to 35 years for the first loan, and from 25 to 30 years for the second loan.

102. The Government will also allocate RM400 million for the upgrading, repair and maintenance of government housing quarters of the police, armed forces and teachers to improve the living conditions and ensure their fitness for occupation.

103. The Government has already announced that we have exempted construction and building materials from SST. In return, we have secured the commitment from the Real Estate Housing Developers Association (REHDA) that there will be a 10% reduction in the price of houses that are not subjected to price control in new projects.

104. There is an existing over-hang of RM22 billion worth of residential properties as at 31 March 2018, a 65% increase as compared to RM13.3 billion last year. To address this, the Government will for a limited time of 6 months only, starting 1 January 2019, waive all stamp duty charges for first time purchases of homes valued between RM300,001 and RM1 million.

This will be part of a National Home Ownership Campaign, where in return, developers will offer a minimum price discount of 10% for these residential properties.

105. Finally, as a demonstration of this Government’s willingness to explore new, technology-enabled and innovative mechanisms to solve our housing problems, we will be approving private sector driven ‘Property Crowdfunding’ platforms which will serve as an alternative source of financing for first time home buyers. These exchange platforms will be regulated by the Securities Commission 34 under the peer-to-peer financing framework.

As an example, the buyer will be able to acquire a selected property for 20% of the price of the property, while the balance 80% will be fulfilled via potential investors who are interested to fund the acquisition in exchange for the potential appreciation in value of the property over a particular period of time.

106. In simple terms, Ah Chong will be able to own and stay in a RM250,000 property by paying up RM50,000 without having to procure a mortgage. Ali who might only be interested in investing in a new property for capital appreciation will fund the balance of the RM200,000 via the peer-to-peer Property Crowdfunding exchange.

This financial innovation will be the first in the world, and if successful, will transform the affordability of homes for firsttime home buyers in the country. The first exchange is expected to go live in the first quarter of 2019, after all necessary approvals are obtained from Securities Commission.

Encouraging Public Transport Adoption

107. After housing expenses, transport is the next biggest expense item. Many household don’t just own one car, they own at least two. The typical monthly expenses for just a Perodua Myvi would be approximately RM900 after taking into consideration the loan instalment, petrol, parking and maintenance. Therefore, a key solution to increasing the real disposable income of Malaysian 35 households is to migrate from private car ownership to the adoption of public transport.

108. To increase the utilisation of public transport, the Government will allocate RM240 million to introduce a RM100 unlimited public transport pass, to kick off initially on the RapidKL rail and bus network on 1 January 2019.

There will also be a RM50 monthly pass available just for RapidKL bus services only. The campaign will be expanded to other bus companies at a subsequent stage. This scheme will immediately increase the disposable income of households by hundreds of ringgit a month.

109. The Government’s wholly-owned public transport subsidiary, Syarikat Prasarana Bhd will also seek to improve its bus network by fully utilising and optimising its current fleet of 1,131 RapidKL, 408 RapidPenang, 69 RapidKuantan and 300 MRT feeder buses. The company will also work in partnership with other existing bus companies to manage routes and services as well as cost control, in order to maximise efficiency and the quality of service.

110. The reduction of LRT3 and MRT2 construction cost increases the operational viability of the projects, which in turn translates into lower public transportation fares. This will encourage public transportation usage.

111. Kuala Lumpur City Council, will allocate RM20 million next year to provide additional free GoKL free bus services from the existing 4 routes to further improve public transport coverage in Kuala Lumpur.

112. The Government will also make available RM500 million for a Public Transport Loan Fund with 2% interest subsidy via Bank Pembangunan Malaysia available to taxi and bus companies as well as other public transport operators.

113. The Government will freeze toll hikes on all intra-city tolls around the country for 2019 that will cost the Government approximately RM700 million. The Government will also abolish toll for motorcycles for the First and Second Penang Bridge, as well as the Second Link in Johor, costing approximately RM20 million per annum effective 1 January 2019.

114. In addition, the Government will prioritise solutions for both the Causeway and the Second Link to Singapore to ease congestion and hardship of Malaysians and residents who travel on a daily basis. It will include an allocation of RM10 million to upgrade the Autogate Malaysia Automated Clearance System and M-Bike.

Strategy 8: Education for a Better Future

115. The only sustainable and guaranteed mechanism to achieve higher income growth is through better quality education at all levels. The Education Ministry remains the single largest recipient of Budget allocation at RM60.2 billion or 19.1% of the total Budget 2019.

The measures will include:

116. ONE: A total of RM2.9 billion will be provided to help students from lower income groups in terms of food, text books and cash assistance.

117. TWO: The Government has allocated RM652 million for the purposes of upgrading of schools, as compared to RM615 million allocated in 2018, as follows:

• National Schools RM250 million • Chinese Schools (SJKC) RM50 million • Tamil Schools (SJKT) RM50 million • Full Boarding Schools RM50 million • Maktab Rendah Sains Mara RM50 million

• Government Aided Religious Schools RM50 million

• Mission Schools RM50 million

• Tahfiz Schools RM50 million

• Registered Religious Pondok Schools RM25 million

• Conforming Schools RM15 million

• Independent Chinese Secondary Schools RM12 million

118. THREE: All donations to national schools and public institutions of higher learning (IPTA) registered with the Ministry of Education for the purposes of upgrading infrastructure will be tax exempted starting 1 January 2019. This is to incentivise and recognise Malaysians who contribute directly towards nation building. For the other schools and institutions of higher learning registered with the Ministry of Education, the exemptions will be evaluated on a case-by-case basis.

119. FOUR: We will allocate RM100 million towards the reconstruction of dilapidated schools throughout the country, to be funded via competitively-tendered Public Private Partnership projects via land currently owned by the Ministry of Education.

120. FIVE: RM206 million will be allocated towards the development and provision of training programs in Polytechnics and Community Colleges.

121. SIX: We will also introduce a RM30 million the Training and Vocational Education and Training (TVET) Prestige Fund, a contestable fund where we will encourage the various training institutions to bid for funds to run competitive programs with specific KPIs on job placements for the graduates. There will also be an additional allocation of RM20 million to raise youth competency via a TVET sponsored Bootcamp.

122. SEVEN: Research funds amounting to RM400 million allocated will be allocated to our institutions of higher learning via a contestable fund. In addition, RM30 million will be disbursed in 39 the form of matching grants via the Malaysia Partnerships and Alliances in Research (MyPAIR) program.

123. EIGHT: The Government will continue to provide scholarships and lending to all Malaysians via various Ministries and Agencies with a total allocation of RM3.8 billion. RM2 billion of this amount is allocated to provide scholarship for Bumiputeras under the sponsorship of MARA.

124. NINE: The Government will allocate RM17.5 million over the next 5 years to Malaysia Professional Accountancy Centre (MyPAC) to produce 600 qualified Bumiputeras accountants towards meeting the goal of 3,000 Bumiputera accountants registered with the Malaysia Institute of Accounts from the 1,554 today.

125. TEN: The Government will allocate RM210 million as part of the Bumiputera Empowerment Agenda to strengthen education and human capital development programs via Program Peneraju Tunas, Program Peneraju Skil dan Program Peneraju Profesional which will be managed by Yayasan Peneraju Pendidikan Bumiputera.

126. ELEVEN: To ensure the sustainability of the National Higher Education Loan Fund (PTPTN), we plan to introduce:

• progressive loan repayment schedule with a percentage ranging from 2% to 15% of the borrowers’ monthly income depending on their income level. This repayment schedule 40 will only apply to those with at least RM1,000 in monthly income;

• tax relief for companies that help settle all the remaining loans of their employees for the year ending 2019;

• additional individual tax relief for all additional savings deposited in the PTPTN National Education Savings Scheme (SSPN) from RM6,000 to RM8,000;

• discounts on the loan will be given to students from B40 households who have successfully obtained first class honours in their studies;

• writing off the debt of those who are 60 years old and above with monthly income less than RM4,000, benefiting up to 350 debtors and costing RM4.2 million.

127. TWELVE: To instil good moral values and a strong sense of patriotism amongst our youth, a new program, PATRIOT will be introduced for youths aged 15 to 30 involving 70,000 participants a year with an allocation of RM70 million.

128. THIRTEEN: The Government congratulates all medal winners in the Asian and Asian Paralympic Games that have enhanced the good name of Malaysia and brought international goodwill.

The Government is allocating RM100 million to prepare our athletes for the Tokyo Olympics 2020 in hopes of bringing back our first gold medal.

129. FOURTEEN: We will also allocate RM10 million for E-Sports to Malaysia Digital Economy Corporation (MDEC), recognising that this is an activity and industry which is increasingly popular among the younger generation involving software engineers and gaming developers. Upholding Islam

130. As the religion of the Federation, Islam enjoys a unique constitutional position. Allocation for Islamic affairs for both development and operating expenditures has been increased from RM1.1 billion in 2018 to RM1.2 billion in 2019 to ensure the growth of the religion would not be impeded by the challenging economic conditions.

Moreover, RM150 million have been made available to carry out programmes such as building mosque and surau across the country, “Khaira Ummah” initiative to train more professionals among the huffaz and religious learning modules using braille.

FOCUS 3: TO FOSTER AN ENTREPRENEURIAL ECONOMY

131. We need to create an environment for our human talent to fulfill their potential. Strong and dynamic economic growth can be found especially by promoting an entrepreneurial state relying on innovation and creativity, and by embracing the new economy and digital economy.

132. The entrepreneurial state model will also adopt a collaborative approach by relying on the 4P partnership involving the Public, Private, Professionals and the People to manage and steer the project. There will be co-financing by the four principal partners but the project will be managed by the private sector or professionals and accountable to both the government and the people.

Strategy 9: Unleashing the Power of the New Economy

Embracing the Digital Economy

133. To support new technology developments and ensure sufficient funding for entrepreneurs via conventional and alternative financing sources, we propose the following initiatives:

134. ONE: The many venture capital funds managed by Government agencies – Malaysia Technology Development Corporation, Malaysia Debt Ventures Bhd, Malaysia Venture Capital Management Bhd, Kumpulan Modal Perdana Sdn Bhd and Cradle Fund Sdn.Bhd, will be streamlined and made more efficient in delivering capital to companies in various stages of financing needs. Therefore, to ensure that the funds are accessible to those who are most likely to succeed, the funding disbursements will be tied to the companies’ ability to secure matching funds from the private sector.

135. TWO: Government-Linked Investment Funds will similarly allocate RM2 billion in matching funds to co-invest with the private equity and venture capital funds. This Fund will focus on strategic sectors and new growth areas for Malaysia.

136. THREE: The Government will allocate RM50 million to set up a Co-Investment Fund (CIF) to invest alongside private investors via new alternative financing platforms via Equity Crowdfunding and Peer-to-Peer Financing.

137. The Securities Commission has approved the regulatory framework for these platforms. To date, almost RM170 million have been raised through these crowdfunding platforms, benefiting more than 450 companies across a broad cross-section of sectors. Almost 10,000 investors have participated in these crowdfunding campaigns thus far, where 45% of investors have been youths below the age of 35.

138. FOUR: The Capital Markets and Services (Prescription of Securities) Guidelines will be gazetted in early 2019 to set up a new regulatory framework to approve and monitor Digital Coin and Token Exchanges.

139. FIVE: To promote Malaysia as the hub and pioneer of the bond and sukuk markets, the Government will:

• extend the double tax deduction policy for additional expenditure incurred when issuing sukuk under the principles of Ijarah and Wakalah, as well as for additional expenditure incurred by the companies issuing retail bonds or sukuk. Both these policies will be made available for 3 years commencing in 2019 as the year of assessment; and

• set up a Special Committee on Islamic Finance led by the Ministry of Finance and comprised of member from Bank Negara Malaysia and Securities Commission.

140. SIX: To promote a world-class film production industry in Malaysia, we will continue the Film In Malaysia Incentive (FIMI) with an allocation of RM30 million. Moreover, Khazanah Nasional Berhad (Khazanah) will provide an allocation of RM100 million for FIMI specifically applicable to film production at the Pinewood studio in Iskandar Johor.

141. SEVEN: To support the growth of the digital economy, the Government will launch the National Fibre Connectivity Plan in 45 2019 with an allocation of RM1 billion. The plan will develop our broadband infrastructure to ensure more efficient spectrum allocation to achieve the targeted 30 Mbps speed at rural and remote areas in the country within 5 years as part of the overall plan to achieve world class infrastructure at affordable prices.

The Government has also enforced the Mandatory Standards for Access Pricing (MSAP) which will result in fixed broadband prices to be reduced by at least 25% by the end of 2018.

Accelerating Adoption of Industry 4.0

142. The Industry 4.0 blueprint, titled “Industry4WRD” aims to make Malaysia the prime destination for high-tech industries. The Government will initiate the following measures to support Industry4WRD:

143. ONE: We will allocate RM210 million from 2019 to 2021 to support the transition and migration to Industry4.0. We will assist the first 500 SMEs to carry out the Readiness Assessment to migrate to Industry4.0 platforms via Malaysia Productivity Corporation.

144. TWO: The Government will provide RM2 million in the Knowledge Resource for Science and Technology Excellence (KRSTE.my) to enable greater collaboration between public and private sector based on existing resources. In 2019, the Government will make available 250 facilities and 1,200 scientific 46 equipment and research data for the private sector to access and share. On top of that, we will start a Researcher-Mapping program to place at least 100 researchers at our research facilities with the private sector, with the cost borne by the Government.

145. THREE: To incentivise SMEs to invest in automation and modernisation which forms part of the Industry4.0, we have allocated RM2 billion under Business Loan Guarantee Scheme (SJPP) where the Government will provide guarantees of up to 70%.

146. FOUR: We will create a RM3 billion Industry Digitalisation Transformation Fund with a subsidised interest rate of 2% under Bank Pembangunan Malaysia Berhad.

The purpose of this fund is to accelerate the adoption of smart technology consisting of driving automation, robotics and artificial intelligence in the industry.

147. FIVE: MIDA will continue to provide matching grants through its High Impact Fund (HIF) with a specific emphasis of Industry4.0 initiatives. This includes activities such as Research & Development, initiatives to obtain international certification and standards, modernizing and upgrading of facilities and tools and licensing or purchase of new or high technology.

148. SIX: Khazanah will lead and develop an 80-acre development in Subang as a world class aerospace industry hub. Khazanah will also work with all relevant agencies, especially MARA to produce high-skilled workers to meet the demands of the industry.

149. On top of these measures, the Government also intends to upgrade the marketability of our graduates and the skill-level of the Industry4.0-related workforce by providing double tax deduction:

• For scholarships and bursaries provided by companies to students enrolled for technical and vocational training, diploma and degree courses in engineering and technology;

• For company expenses related to participation in the National Dual Training Scheme for Industry4.0 and other related programmes approved by the Ministry of Human Resources, or the Malaysia Investment Development Authority; and

• For company expenses in carrying out structured training programmes for students in the fields of engineering and technology which are approved by the Ministry of Human Resources.

Strategy 10: Seizing Opportunities in the Face of Global Challenges

150. Malaysia will undoubtedly be affected by the US-China trade war given that both these countries are among our top 3 trading partners.

However, the trade conflict between China and the United States has also created a unique opportunity for Malaysia, 48 where we are extremely well positioned as a safe haven for manufacturing investors.

151. Therefore, it is not surprising that Malaysia continues to attract Foreign Direct Investment (FDI) at a healthy rate. From January to August 2018, Malaysia recorded a total of RM61.6 billion in investment approvals, up from RM40.4 billion during the same time period in 2017.

152. The manufacturing sector continues to comprise the largest share of investment approvals – RM49.8 billion, or approximately 81% of total investments. These 411 projects have the potential to create more than 34,000 jobs nationwide. This shows that investor confidence in Malaysia has not wavered after the 14th general election.

153. In the World Bank’s Doing Business Report 2019 published this week, Malaysia’s ranking jumped from 24th to 15th in the world. To further enhance Malaysia’s competitiveness and ease of doing business, MoF and MITI will form a joint task force jointly chaired by both Ministers to drive regulatory reform, particularly in the areas of improving trade processes and tax administration. We will send the signal to the world that we are investment friendly and we are open for business.

154. To increase investments of companies already participating in the Principal Hub, we propose to improve the existing incentives by charging a concessionary 10% income tax rate on the overall 49 statutory income related to Principal Hub activities for a period of 5 years.

Strengthening Small Medium Enterprises (SMEs)

155. Small and Medium Enterprises (SMEs) constitute 98.5% of businesses in the country and is the heartbeat of the economy.

Therefore, to ensure that they continue to thrive, especially in the key targeted industries, we will implement the following measures:

156. ONE: A RM4.5 billion SME Loan Fund will be made available via commercial financial institutions with a 60% guarantee from Skim Jaminan Pembiayaan Perniagaan (SJPP), including RM1 billion for Bumiputera SMEs;

157. TWO: The corporate income tax rate for taxable income of up to RM500,000 and SMEs with less than RM2.5 million in paid up capital, will be reduced from 18% to 17%.

158. THREE: We will encourage exports through financing by EXIM Bank by making available RM2 billion worth of credit and takaful facilities to the SME exports.

159. FOUR: We will be allocating RM100 million to upgrade the capability of the SMEs in the halal industry via various programs in order to increase exports and to make Malaysia a global halal hub by 2020.

160. FIVE: There will also be a RM1 billion SME Syariah Compliant Financing Scheme made available via Islamic financial institutions where the Government will provide a subsidy of 2% profit rate.

161. SIX: Permodalan Usahawan Malaysia Berhad will also make available RM200 million for the wholesale and retail industry, as well as for the purchase of business premises to be rented to Bumiputera SMEs. Another RM100 million is allocated to TEKUN to finance small entrepreneurs.

162. SEVEN: The Government will allocate RM20 million to initiate a ‘Buy Malaysian First’ campaign to support local products and services.The campaign will be run at the grassroots level to provide a platform for local producers, manufacturers and service providers to market their products and services at hypermarkets, shopping centres and trade fairs. To take the lead, the Ministry of Finance will ensure Malaysian products and services, such as surgical instruments and medical implants which have received international certifications will not be discriminated against in our procurement processes.

163. To ensure the continued upgrading of our local corporations, the Government is also committed to reduce our dependency on low-skilled foreign labour. Therefore, we will implement a new tiered levy system where the levies charged will be higher for employers with a higher percentage of foreign workers.

164. The shortage of workers in the agriculture and plantation industry and the decline in prices of agricultural commodities have affected output in these sectors. The Government will assist these two sectors by reducing the extension levy for foreign workers who have served for 10 years or more, from RM10,000 to RM3,500 per worker per annum.

Lubricating the Logistics and Transportation Sector

165. The logistics sector plays an important role in the development of the country, particularly where both exports and manufacturing are key thrusts of the economy. The Government will allocate RM2.46 billion for upgrading and restoration works for railway tracks to upgrade the country’s transport infrastructure.

166. The government will also support the development and growth of the Kota Perdana Special Border Economic Zone in Bukit Kayu Hitam, Kedah as a strategic trading and logistic hub between Malaysia and Thailand. As an initial phase of the project, RM25 million will be allocated to develop a truck depot to catalyse development in the area.

167. The government intends to convert 380 acres of land in Pulau Indah into a Free Trade Zone to support and catalyse increased shipping and logistics activities in Port Klang. The new FTZ will 52 serve as a natural extension to Port Klang Free Zone.

The land will be developed through a joint venture or solely by the private sector.

Value-adding Commodities

168. Palm oil and rubber are the two export-oriented commodities which contribute significantly to our economy. The sector also provides a key source of income for our smallholders.

In order to raise the demand for palm oil and increase the sustainability of our energy resources, the Government will implement the Biodiesel B10 program (comprising a mix of 10% palm oil) for the transportation sector and B7 for the industrial sector in 2019. In addition, to raise the sustainability and export competitiveness of our palm oil industry, the Government will allocate RM30 million to assist smallholders to obtain the Malaysian Sustainable Palm Oil (MSPO) certification.

169. For the rubber industry, the Government is committed to increase the utilisation of local rubber as a new raw material for various industrial products. As an example, the Government will increase the use of local rubber as a composite material for the construction of roads in Malaysia to increase durability while at the same time reducing maintenance cost. To assist smallholders, the Government targets the use of Cuplumb Modified Bitumen (CMB) to build roads at ports and industrial areas in stages. The Government will allocate RM100 million for this purpose.

170. In addition, the Government will continue to provide Rubber Production Incentive with an allocation of RM50 million to protect the effects of the fall in rubber prices for smallholders. The smallholders would receive supplement income from the fund when rubber prices fall below RM2.20 per kilogram.

171. For the agricultural sector, the Government will allocate

• RM47 million for Research and Development to increase the productivity of our seeds, grains and fruits;

• RM18 million to incentivise the automation of the agrofood industry; and

• RM52 million to implement agricultural and agrofood industry, as well as entrepreneurship training for youths.

Boosting Tourism

172. The tourism industry is a key contributor to our services sector, constituting 14.9% of our GDP or RM201.4 billion in 2017. Given the importance of the tourism industry, especially as a foreign exchange earner, the Government will pay specific attention to achieve the Ministry of Tourism’s target of 30 million foreign tourists contributing RM100 billion by 2020.

173. To achieve these goals, the Government will allocate RM100 million in matching grants to the private sector for running promotional and marketing campaigns overseas to increase the number of visitors to the country.

174. The government will provide tax free incentives to Penang’s Swettenham Pier in the form of duty-free shops to cater to its booming cruise tourism and develop the tourism potential of Pulau Pangkor by declaring it as a duty free island. The duty-free island status of Pulau Langkawi has been enhanced and will be further expanded.

175. To assist the respective state governments in encouraging tourism activities, the Government will share 50% of the proceeds on tourism tax, estimated at RM50 million, with the states.

176. The Government will also make available RM500 million worth of loan facilities via the SME Tourism Fund with SME Bank at a 2% interest subsidy. This will assist handicraft makers and homestay operators to expand their businesses.

177. Khazanah Nasional Berhad will lead the public-private partnership to redevelopment and restoration of the Sultan Abdul Samad building in Kuala Lumpur into an arts, cultural and heritage hub. Such an urban regeneration project will be carried out by a local heritage company ThinkCity with an international organisation accredited with UNESCO.

178. Medical tourism in Malaysia continues to gain global recognition. The Government will also allocate RM20 million for the Malaysia Healthcare Tourism Council (MHTC) to generate 25% growth in a year to collaborate with reputable private hospitals to enable the branding of Malaysia as a destination of choice for medical tourism.

Strategy 11: Redefining the Role of Government in Business

179. The business of the Government is not to be in business. Clearly, government owned companies have been competing directly with private companies in non-strategic sectors. The outcome was the apparent ‘crowding out’ of private sector investments where private companies are unable to grow and compete.

180. For an entrepreneurial economy to succeed, the private sector must lead. For a start the Ministry of Finance will set up a Special Task Force to evaluate the role and functions of statutory bodies and companies owned by Ministry of Finance, Inc. to reduce duplication of functions and involvement in areas where the private sector is efficient and competent. Going forward, the Government will focus its expenditure and investments only in strategic sectors and areas where the markets are unable to meet the needs of the people.

181. We will tap on the quality of service and delivery, while making available our capacity and resources to the private sector. As an example, our TVET training institutes can offer the courses run by the private sector to ensure relevance and quality, while in exchange, we can offer our under-utilised infrastructure as shared facilities for them. The same can be done for Pusat Sains Negara and Planetarium at minimal cost to the Government.

Strategy 12: Ensuring Equitable and Sustainable Economic Growth

182. Malaysia can succeed at being a developed high-income nation when there is equitable, inclusive and sustainable growth for all regardless of race and religion.

Ensuring Balanced Development

183. As a responsible Government, we must ensure balanced development throughout the country, especially in the rural regions. Therefore, we will upgrade rural infrastructure facilities by:

184. ONE: An allocation of RM926 million to build and upgrade roads and bridges; 57

185. TWO: An allocation of RM694 million and RM738 million to supply electricity and water respectively to rural and remote regions;

186. THREE: We will allocate RM85 million to New Villages for the purposes of upgrading and maintaining basic infrastructure such as roads, community halls and open spaces;

187. FOUR: There will also be a RM100 million allocation to support the Indian community, including technical and skills training to improve the career advancement opportunities of the Indian youths;

188. FIVE: We will allocate RM100 million to strengthen the development of orang asli communities via the construction and upgrading of infrastructure for the supply of water, relocation, education, welfare and economic development.

189. SIX: The Government will allocate RM20 million to residents associations registered with the Registrar of Societies to carry out community, security and neighbourhood activities.

190. SEVEN: For FELDA developments, we will allocate RM100 million to upgrade roads, RM160 million to carry out water supply projects and RM35 million for buildings and basic infrastructure such as street lights. This represents an overall increase of 51% compared to the previous year’s allocation.

191. The Government will continue to ensure the development of Sabah and Sarawak. Development expenditure of RM5,009 million has been allocated to Sabah as compared to RM4,133 million in 2018. As for Sarawak, RM4,346 million has been allocated compared to RM4,336 million in 2018.

192. The Government will continue to implement the Pan Borneo Highway encompassing Sabah and Sarawak, subject to a cost rationalisation exercise.

In addition, projects in Sabah and Sarawak will include the construction and upgrading of water, electricity and road infrastructure, health and education facilities as well as the development of the respective economic corridors.

Women in the Workforce

193. Our current women participation rate in the labour force is only 53.5% in 2017 compared to 77.7% for men. Of the number who were not working, 60% or 2.6 million women cited housework as the reason why they did not join the labour force.

194. According to a report recently published by Khazanah Research Institute, raising women’s employment level by 30% would raise Malaysia’s GDP by around 7 to 12%. Hence, it is imperative for this Government to formulate policies to encourage women to participate in the workforce:

195. ONE: We will allocate RM10 million to set up another 50 childcare facilities in Government buildings to ease the burden of working mothers.

We will continue to encourage and incentivise the private sector to follow suit to ensure equal employment opportunities for women.

196. TWO: The Government is committed towards increasing women participation to 30% at leadership and decision-making levels in companies and organisations. We have led by example by electing the very first female Deputy Prime Minister in Malaysia, accompanied by 4 female Ministers. As of today, 36% of the senior officers in the public sector are women.

197. THREE: We will encourage higher women participation among the public listed companies as only 23.2% of the appointed Board of Directors are women today among the top 100 largest companies on Bursa Malaysia.

We call upon the private sector to emulate the Government by ensuring the objective of 30% women participation in the Board of Directors is achieved by 2020.

Environment and Energy for the Future

198. The Government is committed to take all necessary measures to protect our Environment, both as a responsibility to and a gift to our future generations. As forest and marine reserves are under the care of the State Governments, the Federal Government will 60 allocate RM60 million to help fund specific projects by the state governments to protect and expand our existing natural reserves.

199. The Government will take steps to list the Forest Research Institute Malaysia (FRIM) Forest Park in Selangor, and Royal Belum Perak as UNESCO World Heritage Sites.

200. We will allocate RM5 million for micro-grants to implement programs with the cooperation from United Nations Development Program (UNDP), to manage and protect the environment in Orang Asli and Orang Asal communities.

201. In addition, to attract environmentally-friendly investments and to reduce the usage of conventional plastic, the Government proposes Pioneer Status incentive of 70% or investment allowance of 60% for 5 years to be granted to companies which produces environmentally-friendly plastics based on bio-resin and biopolymer.

202. To incentivise investments in green technology, there will be a RM2 billion Green Technology Financing Scheme (GTFS) made available at selected commercial banks where the Government will subsidise the interest cost by 2% for the first 5 years.

203. Bank Pembangunan Malaysia Berhad will also provide a Sustainable Development Financing Fund of RM1 billion to support the Agenda 2030 for Sustainable Development as well as the 17 Sustainable Development Goals (SDG) under the United 61 Nations Development Programme. To this end, we will provide a subsidised interest rate of 2% as an incentive.

204. In order to encourage the use of green energy, the Government will expand the list of green assets which qualifies for the Green Technology Investment Allowance (GITA) from 9 assets to 40 assets in the MyHijau directory.

Conclusion

105. This 2019 Budget will allocate a total of RM314.5 billion in expenditure as compared to an estimated RM290.4 billion in 2018. From the total, RM259.8 billion is for Operating Expenditure while RM54.7 billion is provided for Development Expenditure. This does not take into consideration the Contingency Fund of RM2 billion.

206. For Development Expenditure, the Economic Sector received the highest allocation of RM29.2 billion encompassing transport, trade, industry, energy and public utilities and agriculture. The Social Sector will receive RM15.2 billion, followed by the Security Sector, RM7.1 billion and General Administration, RM3.2 billion.

207. The Development Expenditure has increased from RM44.9 billion in 2017 to a projected RM54.9 billion and RM54.7 billion in 2018 and 2019 respectively. The key reason is due to a reclassification of what was previously classified as Operating to 62 Development Expenditure amounting to RM6.9 billion and RM 9.7 billion in 2018 and 2019 respectively.

208. Examples of reclassified items are payments to Prasarana for LRT construction and to Suria Strategic Energy Resources for the gas pipeline projects. They were treated as transfers under operating expenditure when they are actually development expenditures. Other similar expenditures were lease or maintenance payments for the construction of PDRM buildings and capital refurbishment of schools.

209. To ensure that the Government is able to meet the objectives expressed in the Mid-Term Review by the Prime Minister as well as this Budget, we will need to have an effective and efficient public sector. Policy making and implementation must have clarity, certainty and engender confidence. Only then can we build public trust amongst investors and our people in our institutions.

210. We will increase the reach of alternative service providers to reduce the role of the government in providing non-core services. This will be pioneered in the welfare sector by working together with NGOs. For example, children from orphanages will be transferred to family-based care.

211. The Government is allocating RM286.8 million for Malaysian Anti-Corruption Commission operating expenses, an 18.5% increase from RM242.1 million allocated last year. In 2019, the staffing will be increased by 100 personnel. This is to ensure that the MACC has all the necessary resources and manpower to 63 combat corruption in both the private and public sector, and follow the money trail to recover stolen funds.

212. The Government records its appreciation to the Malaysian Armed Forces, Royal Malaysian Police, Fire Rescue Department, Royal Malaysian Customs Department for ensuring the security, peace and safety of the country. In appreciation of the efforts and dedication of the civil servants and for those serving at grades 54 and below, the Government would like to announce a bonus of RM500.

For government pensioners a bonus of RM250 will be paid. Unlike the previous government that likes to make bonus payments only one year later, these bonus payments will be made by the end of December 2018. These bonus payments will cost the Government RM1 billion.

213. The government wishes to thank Malaysians who donated to the Tabung Harapan Malaysia set up to allow Malaysians to display their patriotism by donating to pay off our country’s debts. Your love for Malaysia has allowed us to collect RM196.5 million and the Tabung Harapan will be closed on 31 December 2018.

214. There is no doubt that the new Malaysia under the dynamic and forward-looking leadership of Yang Amat Berhormat Prime Minister (Langkawi) has caught the imagination of the rakyat and the world. In fact, there is now renewed confidence in Malaysia that we will overcome our economic challenges and take on a new trajectory of growth.

215. The confidence in Yang Amat Berhormat Prime Minister (Langkawi) and in Malaysia cannot be better expressed than the offer by the Japanese Government to guarantee JPY200 billion of 10-year Samurai bonds, or approximately RM7.4 billion, via Japan Bank of International Cooperation at an indicative coupon of 0.65%.

This JPY200 billion Samurai Bond will be issued before March 2019. We wish to record our appreciation to the Japanese government for guaranteeing the JPY200 billion samurai bond.

216. Despite facing fiscal challenges, our financial sector remains healthy and monetary sector is stable. Sustainable economic growth must be maintained to improve economic well-being, and the higher revenues generated will also help to address our public finances.

217. In conclusion, the historic moment on 9 May 2018 will only matter if the government’s fiscal health can be restored and the people are better off economically in the form of higher wages, better jobs and more money to spend.

218. As long as we are clean, people-centric and focused on carrying out institutional reforms, we can restore Malaysia back to fiscal health in three years. Let our love for our country unite us, our challenges make us stronger and our confidence awaken Malaysia as an Asian Tiger all over again.

219. Malaysians are special that despite our differences, whether by race, religion or background, we continue to work with and 65 believe in each other. The choice made by the people has been proven correct yet again yesterday after two former Goldman Sachs bankers, Tim Leissner and Roger Ng, were arrested and charged by the US Justice Department.

220. These are the unscrupulous bankers who engineered the US$6.5 billion or RM26 billion of 1MDB bonds, by colluding with thieves in Malaysia to steal from the people of Malaysia. Better news yet, Jho Low, the architect of the fraudulent scams, has been indicted in absentia in the United States.

221. To those who have stolen our money, you should not only return the money back but you must also be severely punished. To those who still support these thieves, you should apologise and resign from public office.

222. Malaysia is clean and we are proud that Malaysia is clean again. For those who have strayed, return back to the righteous path. Amar makruf nahi mungkar. Now, Malaysians dare to dream again of our country that belongs to the people and that the future of our children will never be stolen again. Let us begin our journey of hope, “Malaysia Wibawa, Ekonomi Dinamik, Rakyat Sejahtera”.