CME on the GE15 manifestos: BN’s stronger on the economy, PH’s on social issues
FRIDAY, 11 November 2022: The Center for Market Education (CME) has analyzed the GE15 Electoral Manifestos proposed by two of the main political coalitions (Barisan Nasional and Pakatan Harapan). CME focused its analysis on the economic contents of the manifestos to identify strength and weaknesses of the different platforms, trying to understand if and how they would benefit Malaysia in terms of a stable economic growth and in terms of international competitiveness.
A general and preliminary consideration is that both manifestos are weak on the implementation part and often stop at the desiderata; however, the art of policymaking consists in going beyond intentions, desires and even targets, in order to evaluate those elements at the light of the relevant trade-offs. Which means: how much is going that target to cost (not only in monetary terms but also in terms of other targets that need to be abandoned to achieve that one)? How is that target going to be implemented in a financially sustainable way? These are the fundamental questions that the winning coalition could not avoid when moving from the announcement stage to the implementation moment.
These are the general conclusions CME draws from the analysis explained below:
- Both manifestos are silent on a general tax reform, while – according to us – this would be the moment to push for a holistic approach which includes not only – and eventually – the reintroduction of GST, but also a special scheme for microbusinesses, better enforcement strategies and a plan for targeted subsidies.
- PH’s manifesto is more widely devoted to “social issues” such as family, youth, elderly, freedom of speech and environment protection, while it contains less details on economic topics and in particular it lacks a comprehensive strategy for re-building a pro-investment ecosystem.
- BN’s manifesto, while including a good hint on Federalism and a clear shift from race-based to need-based affirmative action, it introduces good points for rebuilding the pro-investment vocation of Malaysia, points that, if properly developed, may give a good competitive advantage to the country by creating good conditions for attracting FDIs.
- On education PH’s manifesto appears to be wider, while BN introduces a very important accent on the future (new) role for humanities and stresses on free national early childhood education as part of a pro-social mobility strategy.
- Both manifestos introduce a strategy for food security, with BN leaning slightly more on the importance of free trade, a pillar that CME considers fundamental for a true food security strategy.
The biggest hole in BN manifesto is the silence on tax reform. In the most recent years, despite the lack of practical actions, a vibrant debate has emerged on the reintroduction of the Good and Service Tax (GST) and on the shifting toward a system of targeted subsidies. At the light of the increasing fiscal deficit and the need for a sustainable growth trajectory, CME has talked in favour of the reintroduction of a multi-tier GST, paired with a slight reduction of income tax. Furthermore, CME welcomes the debate on targeted subsidies, which would build a system of support truly based of intra-national solidarity. The proposed income tax cut (2% for the M40, as per point 2. of the manifesto) – which CME welcomes – should be accompanied by a general strategy on spending cut and improving revenue collection. CME would have expected to see more at this regard.
Another weak point is point 1., which introduces the Assistive Basic Income Scheme to fight poverty: as argued in the recent book “Assessing and Addressing Urban Poverty in Malaysia”, in the fight against poverty CME favours a system of entrepreneurship promotion rather than income redistribution.
In line with what was proposed in the same book, CME instead welcomes the push for Federalism (point 3.) and the recognition of the need of a new balance between science and humanities in education (point 19.). If properly implemented, these initiatives can both spur entrepreneurship and develop a more effective system for fighting poverty, grounded in the principle of subsidiarity. Solidarity instead should inspire the proposal of free national early childhood care (point 16.): improving access to early education surely is a key tool for social mobility and needs to be approached with attention to the financial sustainability of the reform.
CME favourably evaluates some of the points on social security such as the Employment Insurance System (point 33.), the reskilling initiatives (point 35.) and the Employment Retention Fund (point 36.). The Youth Entrepreneurship Fund (point 41.) is also a positive initiative if properly designed so that the youth can benefit from the interaction with successful entrepreneurs.
We have a mixed judgement on the food security strategy: while the creation of the food valleys, characterized by formation initiatives (points 52. and 53.), is good, it should be done with less government action and more involvement of the private sector. The removal of APs (point 57.) goes in the right direction and more should be done for the promotion of free trade as a fundamental pillar for food security.
The new strategy on FDIs seems to be the biggest added value of BN proposal. CME welcomes a foreign worker policy centred on human security (point 60.), which should gradually move toward a higher degree of labour market liberalization at ASEAN level. Similarly good is the proposal of bilateral free trade negotiations between Malaysia and regional partners (point 61.), to possibly achieve a global strategy for a truly free trade. CME judges very positively also the limits to GLCs investments in certain industries (point 62.) and the idea of a comprehensive immigration reform which could truly aim at attracting investors (point 63.), to be clearly distinguished by wealthy individuals. This section of BN manifesto seems to be the most promising for the relaunch of Malaysia as an international hub for investments.
Welcome is the shift toward a need-based rather than racial-based policy, while a spur for investments can also come from point 74. on the modernization of the rail system. CME hopes that the development of megaprojects and infrastructure can be rethought at the light of the Entrepreneur Rail Model, whereby urban planning goes hand in hand with real estate development for a different and sustainable way to finance infrastructure.
Like BN’s, PN’s manifesto lacks a comprehensive proposal for tax reform.
In the cost-of-living issue, CME welcomes the fight against cartels if, however, this means an approach against privileges that have been acquired through government protection, rather than oligopolies that have naturally developed bringing technological development and price advantages for consumers. More clarity is necessary at this regard.
A good set of proposals is advanced for food security, in particular with regard to modern farming and attracting young entrepreneurs: we hope that PH could promote this by favouring private entrepreneurship and consolidation in the industry, rather than with more government regulation or government direct economic activity.
PH develops in detail a strategy on poverty, worker protection and affordable homes. However, the proposed initiatives seem to entail a stronger role for government intervention via income redistribution, rather than the approach embraced by CME, which aims to spur social mobility by promoting entrepreneurship. In particular, the strategy on affordable homes seems intended to give back the government the role of developer, when CME would like to see more a support to rental schemes.
PH proposes a very good approach to education by promoting TVET, which are very much needed to rebalance the gap between workforce skills and employers’ expectations, but CME looks with skepticism at the proposed ‘zero reject policy’, which may nurture a mentality according to which results can be achieved without an adequate effort.
While several sections are devoted to important and crucial social aspects, such as freedom of speech, the care for youth and elderly, family and environmental issues, it seems to us that too little is devoted to more purely economic strategies. In chapter 25, a commitment to cut red tape to facilitate industries is presented, but the initiatives to be deployed at this purpose are not mentioned. At this regard, the accent on upgrading infrastructure is welcome, but too little is mentioned on how to nurture a more pro-investment ecosystem.
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About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia.
As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces.
In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities.
Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions. Visit https://marketedu.me/.