Jeyakumar Devaraj takes a closer look at what the Budget has to say about housing, healthcare and tax collection.
The Socialist Party of Malaysia (PSM) wishes to congratulate the government for the Budget. It is on the whole a fairly responsible and sober handling of the government’s finances, given existing constraints.
We note that the Budget has maintained social expenditure on education, health, housing, the Bantuan Sara Hidup (Cost of Living Aid) programme and programmes addressing our traditional farmers and fishermen.
We also appreciate the efforts taken to promote small and medium-sized businesses and to address imbalances and build capacity in that sector.
It is good the Budget has several environmental friendly initiatives such as the decision to procure 500 electric buses to enhance public transport, allocations to improve forest management and programmes to prevent flooding.
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But PSM would like to point out several aspects of the Budget that give us serious cause for concern. These include:
Housing for poorest 20%
We know from government figures that around 25% of Malaysian families do not own their own houses. The majority of these 1.8 million-odd families would fall in the lowest 20% of the Malaysian socioeconomic pyramid ie they earn monthly household incomes of RM3,000 and below. There is nothing in this budget for their housing needs.
Skim Rumah Mampu Milik (Affordable Housing Scheme), launched in last year’s Budget, parked RM1bn under Bank Negara Malaysia. The scheme gives low-interest (3.5%) loans to families earning less than RM2,500 per month.
But it has witnessed very low uptake. As of June 2019, only about 300 families among those earning below RM2,400 had taken this loan. This clearly shows that the poorest families, who make up our bottom 20%, are not in a position to buy houses currently in the market.
The response by the government was to widen this scheme to cater for families earning up to RM4,300. It is true those in the next 20% above the bottom 20% also need help buying houses. But that should not distract us from the truth that this scheme was not properly conceptualised and that the housing problem among the bottom 20% remains unaddressed.
We need social housing. PSM suggests that the government develops a stock of social housing which can be rented at RM100-RM200 by the bottom 20%. These social housing schemes should have facilities for childcare, community activities and playing fields so that they do not degenerate into urban slums.
The example of Singapore’s Housing Development Board should be studied and implemented. But there is nothing in this budget along this direction. We seem to still be relying on the private market to do something that it has not been able to do until now.
Sending wrong message to developers
The decision to lower the threshold for sale of houses and apartments to foreigners from RM1m to RM600,000 will have an adverse effect: it will encourage property developers to continue building expensive houses that are out of reach for most Malaysian families.
Houses that are truly affordable (RM 300,000 and below) for the middle 40% of Malaysians are not being built in sufficient numbers. The building of expensive houses for expats is also driving up the price of land.
PSM recognises that the government needs to find a way out for the developers who have close to RM20bn of unsold residential property. But developers should be given a clear message that they cannot continue to build such expensive houses.
PSM’s suggestion is to allow developers to sell to foreigners but with the imposition of a penalty of 25% on the selling price to be paid to the government for use to develop the stock of social housing.
In other words, we give the developers a lifeline to prevent bankruptcy but at the same time not allow them
PSM is very disappointed with the allocation – mentioned in paragraph 85 of the finance minister’s speech – of RM25m for the promotion of health tourism.
The amount is puny in comparison to other budget items, but it is the thinking behind it that saddens us. The government seems to believe that healthcare can be treated like any commodity and be used to earn foreign exchange for Malaysia.
All the arguments made by healthcare activists and academicians – that the promotion of health tourism expands demand in private hospitals and that this in turns accelerates the brain drain from government hospitals – seem to have not been heeded by Lim Guan Eng and his team.
The reality is that the shortage of experienced specialists is a huge problem in government hospitals. It impairs the quality of treatment received by the bottom 40% and the middle 40% who go to government hospitals. Statistics show that 75% of Malaysians get inpatient treatment in government hospitals.
It is unacceptable that the government promotes business activities that undermine the quality of care in government hospitals.
The handling of MySalam is another cause of concern.
It is good that the Budget has widened MySalam coverage by increasing the number of critical illnesses covered from 36 to 45 and by extending the upper age limit to 65.
But it is very disappointing that health NGOs or even the Malaysian Medical Association were not consulted over the criticisms of the scheme. The ministy has gone ahead with a we-know-best-and-we-do-not-have-to-listen-to-you approach, which it has displayed since this scheme was launched last year.
We understand that the government paid Great Eastern RM400m for the coverage that MySalam provided for 2019. We also understand that MySalam’s payout to Malaysians is less than RM5m from 1 January 2019 until now.
We have not got clear answers about what is going to happen to the balance of the RM400m paid to Great Eastern for 2019. Who is going to hold it? What are the administrative charges that Great Eastern is deducting for its services? What is the government’s plan for the RM395m that is currently in Great Eastern’s hands? And will Great Eastern be paid another RM400m in January 2020 to cover us for 2020?
Hopefully, these issues will be answered in the parliamentary debate on the Budget and allay the perception that the whole MySalam scheme is merely a sweetheart deal between the Ministry of Finance and Great Eastern.
Declining tax collection
The finance minister mentioned towards the end of his speech that Malaysia’s tax collection is only 13.1% of GDP now. He seemed quite proud that it is lower than Vietnam’s 19%.
We in the PSM see this quite differently. In our understanding, while the free market economy creates a lot of wealth, given asymmetries in market power, the distribution of that wealth is often skewed towards the richest 1%.
So, one of the responsibilities of government is to use tax collections to not only pay for administrative costs but also to correct the imbalances in income distribution. To do that, the government need to collect enough taxes.
Tax collection in Malaysia was 21.4% in 2012, and it fell to 15.2% in 2019. Now it has dipped to 13.1%!
Malaysians should be alarmed by this decline in tax collection. It limits the extent to which our government can intervene to provide support for the bottom 20%, single mothers, the elderly and environment protection.
PSM understands that given the structure of the global economy we just cannot increase corporate taxes dramatically as this might lead to a relocation of companies. But this is an important issue that needs to be put on the national agenda and discussed as there are ways it can be handled.
We find it extremely disappointing that our current government does not even see the falling tax collection as a problem that it needs to handle holistically.
We have opinions on many other issues brought up in the Budget, but in the interest of space and time, we will stop now. More analysis will follow later.
PSM will continue to monitor the management of the economy, and we submit these comments and suggestions for the government’s and the public’s consideration.