Malaysia's budget for 2021 is its biggest ever. Will it cushion the impact of COVID-19?

Malaysia's budget for 2021 is its biggest ever. Will it cushion the impact of COVID-19?

The budget has proposed to raise the ceiling of the COVID-19 Fund, distribute cash aid worth RM6.5 billion and allow those in the low-income group to defer loan payment for three months.

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Malaysian Finance Minister Tengku Zafrul Tengku Abdul Aziz delivering the 2021 budget speech on November 6, 2020. (Photo: Malaysia Information Department)

KUALA LUMPUR: Malaysian finance minister Tengku Zafrul Tengku Abdul Aziz tabled the 2021 national budget in parliament on Friday (Nov 6). 

The budget, which was the biggest ever for Malaysia, was entitled "Resilient As One, Together We Triumph". It is aimed at helping the country cope with the economic impact of COVID-19. 

"Understanding the issues and grievances of the people is the basic point. The well-being of the people remains paramount," said Mr Tengku Zafrul in his speech, which lasted around two hours. 

He also noted that during the Movement Control Order phase imposed between March and May, during which the country was placed under partial lockdown to curb the spread of the coronavirus, Malaysia’s national bank suffered daily losses between RM2 billion (US$480,000) and RM2.4 billion with the economy at a standstill. 

The budget was also tabled as Prime Minister Muhyiddin Yassin is facing political uncertainty in the country. 

Mr Muhyiddin’s leadership has been tested recently, as opposition leader Anwar Ibrahim claimed that he managed to garner enough support from parliamentarians to topple the Perikatan Nasional (PN) government.

Some of the Members of Parliament (MPs) backing Mr Anwar were believed to be from the United Malays National Organisation (UMNO), a PN component party. Some UMNO figures are perceived to have been seeking a fairer redistribution of government positions and ministerial posts, as UMNO has the largest number of lawmakers in the ruling coalition. 

With this poltical context in mind, it is important for the government to table a strong and effective budget.

CNA interviewed experts to discuss the effectiveness of the budget in overcoming the pandemic, addressing livelihood concerns and how it might be perceived by the opposition. 

READ: Malaysia reports biggest daily jump in COVID-19 cases, with 1,755 new infections

IS THE BUDGET SUFFICIENT TO OVERCOME COVID-19? 

In his budget speech, the finance minister said the government will propose to raise the ceiling of the COVID-19 Fund by RM20 billion to RM65 billion. The main purpose is to fund aid packages and the needs of frontliners as well as to procure vaccines, he added. 

A total of RM1 billion will be set aside next year to fight the third wave of the pandemic. These funds will finance the purchase of test kits, personal protection equipment as well as hand sanitiser for medical frontliners, among other things.

The government also expects the purchase of COVID-19 vaccine to exceed RM3 billion. 

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Malaysia's Finance Minister Tengku Zafrul Tengku Abdul Aziz (centre) holds a briefcase containing the 2021 budget speech outside the Finance Ministry building in Putrajaya before leaving for the parliament on November 6, 2020. (Photo: AFP/Mohd Rasfan) 

Commenting on this allocation, Professor James Chin, who teaches Asian Studies at the University of Tasmania, noted that the government has set aside more funds for the Health Ministry. 

“I don’t think the government is denying any resources requested by the Health Ministry, it is doing whatever is necessary to help the frontliners combat COVID,” said Prof Chin. 

He also noted that for 2021, Mr Muhyiddin’s government has allocated RM322.54 billion for total expenditure. This is about 8.6 per cent more than the RM297.02 billion allocated for 2020.

“This is a conservative budget. The government is not spending that much to help the country get out of the COVID-19 crisis. I think they can afford to set aside more this year to help Malaysians get through the pandemic and restart the economy,” said Prof Chin. 

Health workers wearing protective suits work at Emergency Department in the Kuala Lumpur Hospital,
FILE PHOTO: Health workers wearing protective suits work at Emergency Department in the Kuala Lumpur Hospital, amid the coronavirus disease (COVID-19) outbreak, in Kuala Lumpur, Malaysia May 23, 2020. REUTERS/Lim Huey Teng

Professor Yeah Kim Leng, an economics professor at Sunway University, holds a contrary view. He opined that the increase in expenditure was sufficient, as current health capacity and resources were adequate to contain the current third wave.

He said that in line with expectations, the proposed budget prioritised the containment of COVID-19, with increased allocations.

“Besides tripling the COVID-19 fund from RM20 billion, there is also higher provision for medical supplies and equipment to combat the pandemic should it extend through next year,” Prof Yeah said. 

“But if it continues into next year on a larger scale, there is a strong possibility that the allocation and resources may be exhausted before the end of the year,” the analyst added. 

Dr Oh Ei Sun, a senior fellow with the Singapore Institute of International Affairs said that the government is trying its utmost.

“The government is patching here and there to scrap whatever resources they have to put out the budget,” he said.

“I notice the percentage of administrative expenditure has gone down to 73 per cent, when it is usually around 80 per cent. That combined with the large budget, its seems to be the best the government could do.”

READ: KL-Singapore HSR - Malaysia intends to continue with project given the ‘positive multiplier effect’ on economy, says finance minister

ARE THE MEASURES SUFFICIENT IN PROTECTING LIVELIHOODS?

With the pandemic dragging on, a major concern has been the  loss of jobs and underemployment. 

In his speech, Mr Tengku Zafrul outlined various approaches to reduce the economic downturn’s impact for those who had lost their jobs or income.

These include refining the previous Targeted Payment Assistance scheme for specific B40 (bottom 40 per cent of households) and M40 (middle 40 per cent of households) borrowers and micro-entrepreneurs. 

Employee Provident Fund (EPF) account-holders will also be allowed to withdraw up to RM500 per month, for one year from their EPF Account 1, which is usually restricted until the account holder is 50 years old before allowing withdrawal.

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People wearing face masks shop for clothes at an open market area in downtown Kuala Lumpur, Malaysia on Nov 3, 2020. (Photo: AP/Vincent Thian)

“Currently, the consumer price inflation is negative, but it’s forecasted in the budget to edge up 2.5 per cent in 2021,” Prof Yeah noted, explaining that this uptick would impact lower-income groups, especially those who have experienced losses in income and jobs.

“The income support for B40 households has been increased, and wage subsidies extended on a selective basis. These will ease the economic hardships but only temporarily," he said. 

A sustained economic recovery is needed to enable the affected households and retrenched workers to rebuild their livelihoods and savings,” Prof Yeah said.

The proposed budget, he said, provided the necessary short-term reliefs, but long-term upliftment would depend on the success of the budget programmes, aimed at upskilling and reskilling displaced wage earners, especially those in lower-skilled groups. 

In a press statement released on Friday evening after Mr Tengku Zafrul’s budget presentation, Mr Muhyiddin stated that the government vows to achieve the target of 500,000 new employment opportunities, including through these upskilling and reskilling programmes. 

READ: Commentary - What struggling Malaysians need from this budget is a stronger safety net – and higher taxes

In line with the above, a National Jobs Council, chaired by the prime minister, is to be formed and will coordinate all ministry and government initiatives in creating job opportunities and upskilling and reskilling programmes. 

In Mr Tengku Zafrul’s speech, there were also allocations, either one-off or on a monthly basis, for disadvantaged and at-risk groups, from single mothers to disabled citizens and their carers, senior citizens, and patients with chronic conditions. 

Prof Yeah said: “Actually, you can see a targeted approach in this budget, and I think taxpayers will welcome the inclusion and increased allocations for this group. If not, these groups would be caught in either a poverty trap, or a still very distressed economic situation.” 

In addition, Prof Yeah noted, lack of funding would have meant these groups would have to resort to public charity and social enterprises. 

“The latter might be more efficient, but right now, public donations are also hard to come by as a result of the economic downturn,” the analyst said.

IS THIS A UNITY BUDGET? 

After the budget was tabled, all eyes are on the MPs and whether they would throw their weight behind it.

There have been fears earlier that lawmakers would block the passage of the budget and turn it into a no-confidence vote against Mr Muhyiddin. But the crisis appears to have been averted after the king urged MPs from both sides of the political divide to support the Bill.

Inputs have been sought from the opposition lawmakers on the formulation of this budget, the first time in the country’s history.

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Malaysian Prime Minister Muhyiddin Yassin as seen at the Dewan Rakyat on November 6, 2020 after the tabling of budget 2021. (File photo: Malaysia Information Department)

READ: Malaysia king urges MPs to give 'solid support' to budget 2021 for people's well-being and economic recovery

In a Facebook video post after the budget was tabled, Mr Anwar thanked the finance minister for including some suggestions that were surfaced by members of the Pakatan Harapan (PH) coalition. 

However, he also pointed out that opposition MPs would debate a few issues such as the need for  more corporate income tax rebates and the perceived lack of a “stimulus” or “boost” to recover the economy and resolve unemployment.

Anwar Ibrahim
This handout photo from Malaysia's Department of Information taken and released on November 6, 2020 shows Malaysia’s opposition leader Anwar Ibrahim at the parliament for the tabling of the 2021 budget. (Photo: Malaysia Department of Information) 

Prof Chin said that national budgets are historically never bipartisan, as it is usually based on how the government of the day “sees and solves problems that the government prioritises”. 

However, he noted that for this budget that was tabled, the government is likely to make further changes and improvements based on suggestions from MPs across the political divide.

“This is just the tabling, the first reading of the budget. The government may make additional changes to it before it is being passed. This is the usual practice,” said Prof Chin. 

READ: Commentary - Malaysia’s political chess games are not over

Meanwhile, Prof Yeah said the budget appeared to be a unity one - a compromise among all MPs from all sides. Certain issues like the targeted loan moratorium were earlier flagged by the opposition as important issues to be addressed.

“Some compromise was evident in the more targeted loan moratorium, as well as increased income support for the low-income households, relief for small-medium enterprises, beside the expansionary budget needed to support the recovery process,” Prof Yeah said.

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Source: CNA/am(aw)

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