Abridged from Lee Wei Lian( Malaysian Insider)
As an election budget, Budget 2012 announced on 8 October contained no great surprises though there were benefits galore for the people. No, no great departure in terms of policy shifts. It was a very safe budget to rein in election votes.
There was no deep structural reforms but a slew of selective liberalisations, incentives and cash grants to target groups.
Direct cash assistance, continued subsidies and expansion of government backed budget shops were the favoured tool to help with the cost of living hoping to ease the pain of the people in the midst of inflation woes.There was also no reduced taxes or widespread liberalisation of business and import licenses to boost competition.
As expected, 17 services subsectors were liberalised in terms of foreign equity, the major ones including the oil and gas sectors, retail sectors and financial sectors were not. Foreign banks were still fettered with restrictions in the scope of services they can provide and in terms of the number of branches they can open.
In terms of the long term transformation agenda, the main issue could be that Malaysia traditionally prefers quantitative rather than qualitative measures. While there were tax incentives and cash allowances for primary and secondary schools, none of them appeared strategic enough to boost the quality of the country’s education institutions into the top tier in the world.
Strategically the PM pulled off a nice touch by announcing tax incentives for contributions to all places of religious worship and all types of schools which should help him score significant points with Malaysia’s religious and ethnic minorities.
There were also little to no widespread fiscal reforms and incentives for Malaysian businesses to become more efficient and price competitive apart from the 17 services subsectors.
The most significant measure in the budget was the introduction of an exit system for underperformance in the civil service which could eventually shrink the government’s wage bill and boost government productivity and effectiveness although the budget expenditure for salaries rose from RM49.9 billion in 2011 to RM52 billion in 2012.
“A flexible remuneration system will be introduced to retain or terminate civil servants based on performance,” said Najib.
The prime minister also managed to keep on the path of deficit reduction by committing to cut the budget deficit to 4.7 per cent from 5.4 per cent.
All in all, a good band-aid budget.
For smokers and drinkers, it's another year of tax reprieve. Let's have a Guinness,then!
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