(Printed in The Edge on November 7th. 2022)
Malaysia’s traditional reading of the proposed 2023 Budget was brought forward earlier to October 7th, 2022, and the surprising announcement of the dissolution of Parliament happened literally the next day, sending many economists and financiers into a tizzy. “What happens to the Budget just read?” was one of the big questions on everyone’s mind. The vague answer from the Government was that it may be the same Budget or a different one was not reassuring.
Mind you, the proposed 2023 Budget has not been approved by Parliament and the current Prime Minister (PM) stated it would be presented again after the 15th. General Elections.
As it is, Malaysia’s government is an unprecedented patchwork one. After 61 straight years in power, the ruling Barisan Nasional (BN) coalition lost to the Pakatan Harapan (PH) one in the 14th General Elections. However, barely two years after the historic win, the PM then resigned and pulled his party, Bersatu, out of the PH coalition, collapsing the Government. This was in the teeth of the highly dangerous CoVid-19 pandemic, then just starting. Unable to hold a General Elections at that time without endangering millions of people, His Majesty the King with the full support of Their Majesties the Rulers’ Council (Malaysia has 9 Sultans, each taking 5-year turns at being the King of the country), asked every Member of Parliament who they would support as Prime Minister. The majority declared for the new leader of Bersatu, a veteran politician himself, and so a new coalition of formerly opposition parties of mainly BN and Bersatu joining together to form one government, called Perikatan Nasional (PN). Dogged by uncertainty as to whether Bersatu’s chief did actually have the majority of Parliamentarians behind him (all this during a raging pandemic, no less), he resigned and passed the PM-ship to one of his Deputy PMs, a capable man from BN. A year or so later, after the CoVid-19 lockdowns were lifted nation-wide, Parliament was dissolved.
With three different lead parties forming the government, one must ask, what kind of a Budget would come to Malaysia for 2023 given, for the first time ever, Malaysia had three different parties leading the Government? In just about every other country in the world, a political party has its own distinctive foci on the economy; hence, who is in charge pretty much has a different Budget compared to another party who was in charge earlier.
So, let us look at the 3 major spending categories for the Budget in Chart 1 and the 5 major Sector categories in Chart 2 below to see if there were indeed major changes applied by each of the 3 governments, first by BN in 2017, then by PH in 2018 and 2019, then Bersatu in 2020 and 2021, and then back to BN in 2022. Here we define it by which party the sitting PM is from, rather than the coalition per se. We arbitrarily define a “major change” as changing the proportion of the Budget assigned to it by at least 10 percentage points, e.g. if the Economic Sector’s allocation moved from 8% to 18%.
Table 1 Division of Expenditure by Federal Malaysian Government by Use
| Year | Percent of Annual Budget | |||||
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
| Supply | 60.2 | 61.3 | 61.5 | 57.9 | 53.4 | 50.3 |
| Obligations | 21.5 | 21.7 | 20.6 | 22.7 | 23.5 | 24.8 |
| Development | 18.3 | 17.0 | 17.9 | 19.4 | 23.1 | 24.9 |
Source: Respective Treasury Budget Reports
It is rather obvious from Table 1 that there was no major change on a year-to-year or administration-to-administration basis. However, for the “Supply” category, there was a significant change from 2017 to 2022, i.e., over 6 years. The peak was during PH’s term in 2018 and 2019 at 61+% of the national Budget, before the PN government (led both by Bersatu and BN respectively) brought down “Supply” spending, most probably to spend on the CoVid-19 fight and aid to those worst affected by what turned out to be a 2-year national lockdown. We investigated the veracity of this assumption and display the results below.
Table 2 Operational Expenditure by Sector
| Year | Percent of Annual Budget | |||||
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
| Economy | 7.7 | 8.7 | 6.0 | 7.1 | 7.2 | 8.1 |
| Social | 40.0 | 38.4 | 35.3 | 40.5 | 41.0 | 41.1 |
| Security | 11.4 | 11.2 | 9.0 | 11.2 | 10.9 | 10.8 |
| Administration | 5.3 | 6.9 | 6.1 | 7.8 | 8.2 | 5.3 |
| Others | 35.6 | 34.8 | 43.6 | 33.4 | 32.7 | 34.7 |
Source: Respective Treasury Annual Reports
It appears there is one major change, between 2019 and 2020, where the “Others” was reduced from 43.6% to 33.4% but it was done by the same Bersatu government, and hence, isn’t a reflection of economic philosophy of the party.
Otherwise, the structure of the Budget appears rigid and relatively inflexible year-to-year.
A review of the 2020, 2021, and 2022 Budget papers at the Treasury website does not reveal how the aid spending for the pandemic was accounted for. Indeed, many of the Ministerial accounts were not even posted for 2021 and 2022. Given the lack of clarity, we can only conclude that these drops did happen but the why is unknown.
Hence, one must come to the conclusion that throughout basically 3 different parties leading the government since 2018, no imprint was made on the Budget for the country that would show their respective distinctive economic strategies. This means that, for 2023, the Budget that Malaysia is going to get is the same old, same old.
The problem is that in Budget 2023, there was no visible economic strategy other than handing out money to the less fortunate and most vulnerable. One is reminded of the saying, “Give a man a fish and he eats a meal, teach him how to fish and he eats for a lifetime”. The real danger is to generate dependency, and this would be a heavy burden to carry forward. Missing rather visibly is what has happened to the steps on the continuous journey towards Malaysia becoming a Developed Nation? Or has that been abandoned already, defeated are we by the Middle-Income Trap?
Here’s the tough part: the IMF (International Monetary Fund) recommends that post-pandemic fiscal budgets be as flexible as possible, to meet any unforeseeable contingencies, like war (look at what happened to Ukraine) or natural disasters. Can Malaysia cope without such flexibility? It is too easy to resort to additional borrowing; those have its limits and Malaysia is awfully close to them. Disaster awaits beyond the rim….