BUDGET 2009 – BN’s Answer to Textbook Populist Policies

Of late, the national conversation has been centered on the turbulent political scene. Although a section may feel enthused by these developments, few would disagree that the intense politicking over the past months has relegated the discourse on governance in the eyes of citizens and politicians alike.

If we scrutinize the political scenario, the central theme of the current debate is the extent to which Pakatan Rakyat’s populist proposed policies appear relevant and in sync with the sentiment of the people. Budget 2009 reveals Barisan Nasional’s answer to Pakatan’s proposals that at face value, appear to have captured the hearts of many.

Public transportation – Investing in a Much-Needed Public Good

To be sure, the Barisan Nasional knows that it has much on its plate if it is to steer the country forwards in a time of global uncertainty. The state of public transportation is a case in point.

The infrastructure development in Malaysia has long been touted by the Barisan Nasional government as an indication of how far the nation has come from its humble beginnings. However an area of infrastructure development that has fallen short of expectations is that of public transportation.

The restructuring of subsidies in June appeared to elevate the issue of public transportation in the national debate, erstwhile affecting mostly the lower-income group.

The measures revealed to tackle the public transportation woes in Budget 2009 however, offer hope to the many urban dwellers of all income groups – who now more than ever, yearn for a public transportation comparable to the rest of the nation’s infrastructure.

The introduction of new rail cars, buses and LRT lines costing RM35 billion over 5 years is a welcome relief considering the sheer congestion that commuters face everyday during peak hours. The problem of services arriving late may also be alleviated with such a measure.

Necessary as that step may be, the government is smarter than to think that the public transportation issue is merely one about the lack of physical trains or buses. Moreover, government cannot pretend to be the most efficient economic agent I satisfying the public’s demand. A comprehensive strategy would require policies that incentivise the private operators to improve their services. For grouses characterising means of public transport as troublesome, slow and not consumer-friendly to go away, cooperation – artificial as they may be – must be gotten from the profit-making firms themselves. It is thus comforting that the government has taken note of this and afforded bus and taxi operators through tax exemptions for asset purchases as well as road tax reduction to only RM20.

Social Safety Net and Disposable Income

The Budget also contains a catalogue of services in the forms of welfare aids and provisions of public goods to ensure the less well-off get a better chance at life. The Abdullah administration incidentally, has a rather impressive record in alleviating poverty, with the overall incidence of poverty of Malaysians reduced from 5.7 percent in 2004 to 3.6 percent in 2007. This decline is the result of steady economic growth as well as the implementation of various poverty eradication programmes and projects.

According to the Ninth Malaysia Plan, “hardcore poor” in Peninsular Malaysia, Sabah and Sarawak is benchmarked at a monthly household income of RM398, RM503 and RM482, respectively. A review of 2009 Budget shows an upward revision to reflect higher cost of living and inflationary pressures for a new benchmark level of RM720, RM960 and RM830 for Peninsular Malaysia, Sabah and Sarawak, respectively or generous improvements of 81% for Peninsular Malaysia, 91% for Sabah and 72% for Sarawak.

The Budget contains other orchestrated plans of the Government to eradicate poverty at all levels. The aspect of rural development for example, sees the Government continuing efforts to provide basic infrastructure so that poor rural communities can be best equipped to work themselves out of despondency – an example of a government that understands both its responsibilities and its limitations.

It is important to note that such provisions in the Budget act as supplements to the already comprehensive and targeted measures taken by the government after the oft-misunderstood subsidy restructuring exercise in June 2008, which included expenditures of RM4.0 bilion for food security, RM1.5 billion for cooking oil, RM400 million for imported rice, RM200 million for flour and RM100 million for bread.

Whilst indirect and complex steps to improve the standard of living have their merits, the government also recognises that on some level, simplicity can often win the day. The Budget reflects this understanding as it contains a reduction of income tax from 28% to 27% and 13% to 12% - depending on income categories – and an increase in the rebate amount (for those who earn those who earn RM35,000 a year and are thus taxable) from RM350 to RM400. With such direct measures that affect the disposable income, localised worldwide inflationary pressures can be faced with more readily by the taxable middle class who too, desire the government to be on their side as much as it has been with the lower-income groups.

The Government magnanimously proposes to reduce import duties on various consumer durables from between 10% and 60% to between 5% and 30% to mitigate the impact of rising prices on consumers. These include blender, rice cooker, microwave oven and electric kettle. Also, the Government proposes full import duty exemption on several food items, which currently attract import duties of between 2% and 20%. These include vermicelli, biscuits, fruit juices and canned sweet corn.

Currently, private passenger vehicles with diesel owned by in individuals and companies are subject to a higher road tax compared with those with petrol engines. The Government proposes to reduce the road tax on private passenger vehicles with diesel engines to be the same as those with petrol engines, effective 1 September 2008, to reflect a fairer approach given the current retail diesel and petrol prices.