- 3 weeks ago
- #considerthis
Three weeks after the tabling of Budget 2026, the dust is settling and it’s time to assess how well Malaysia’s fiscal priorities align with the 13th Malaysia Plan, as this is the first under the 5-year plan. Budgets are not just about numbers; they reveal what a country values, and who it chooses to protect. What does Budget 2026 reveal about Malaysia's priorities? On this episode of #ConsiderThis Melisa Idris speaks with Dr Amjad Rabi, Social Security Economist with Universiti Malaya’s Social Wellbeing Research Centre; and Dr Muhammed Abdul Khalid, Research Fellow at UKM’s Institute of Malaysian and International Studies (IKMAS) and World Inequality Lab Fellow at the Paris School of Economics.
Category
🗞
NewsTranscript
00:00Hello and good evening. I'm Melissa Idris. Welcome to Consider This. This is the show where we want
00:23you to consider and then reconsider what you know of the news of the day. Almost three weeks later
00:28the tabling of Budget 2026, the dust is settling and it's time to assess now how well Malaysia's
00:35fiscal priorities align with the 13th Malaysia Plan, given that this is the first budget under
00:41the five-year plan. Budgets are not just about numbers. They reveal what a country values and
00:48who it chooses to protect. So what does Budget 2026 reveal to us about those priorities? Joining
00:55me on the show to discuss this further, I have Dr. Mohamed Abdul Khalid, who is a research fellow
01:00at UKM's Institute of Malaysian and International Studies, better known as ICMAS. He's also a World
01:06Inequality Lab Fellow at the Paris School of Economics. Also in the studio with me is Dr. Amjad Rabi,
01:14who is a social security economist with the University of Malaya's Social Wellbeing Research Centre.
01:20Gentlemen, welcome to the show. Thank you so much for joining me. So I'm going to start with Dr. Amjad
01:25because we had a conversation just before Budget in the days leading up to Budget 2026, during which
01:30you said you had hoped to see more allocation being given to older persons. So talk to me about Budget
01:392026 as a whole. Did it meet your expectations, Amjad? I must say no, because I was hoping, as we
01:46discussed before the budget, that we would see an increase of allocation for senior citizens,
01:51given the situation they are faced with, a very high rate of relative poverty among senior citizens.
01:58It's 42 percent among senior citizens, compared to 16 percent national average. So I was really hoping
02:05a prioritization of this group. So in that sense, I was a little bit disappointed. Also, I must say,
02:13related to old age, also allocation to Minister of Health, I was really hoping to see significant
02:19improvement in allocation to Minister of Health, given that the country is aging and it's already
02:25the allocation to the Minister of Health is very low the year before. So just to put it in context,
02:32especially why I look at health. If you go back to prior to the COVID-19, we had an allocation above 2.3
02:40percent of GDP, GDP to health care. Now, last year, it was allocated to the Ministry of Health. It was 2.2
02:48percent of GDP. And this year, it's 2.11 percent of GDP. So we've seen a reduction. So that those two items,
02:58I hope to see a significant increase in allocation to these two groups. But also, I have some views,
03:06maybe as we speak, about the overall budget in comparison to other countries.
03:11Yes. Did you want to just give us a teaser as to those views?
03:15Right. It's with the same logic, I think, you know, if you would, we need, when we look at the budget,
03:20it's important to situate it within the developmental path of the country. Where Malaysia is at now in terms of its
03:27developmental path. So generally speaking, countries at a higher level of development, usually the
03:34the size of the budget to the GDP is higher. And that's understandable because the country is getting
03:40older and education becomes very expensive, you know, to a higher level of thinking. So if you would
03:46look at, for instance, in Europe, 50 percent actually of GDP is to the budget. But advanced economy is around
03:5342 percent of GDP. Now, if you come to developing countries and developing Asia, it's about 30 percent
04:00of GDP. Now, if you go lower to sub-Saharan Africa, it would, in 2023, for sub-Saharan African countries,
04:0921.7 percent of GDP. Now, in the budget in Malaysia, it's actually 19.05 percent of GDP of 2026. So it's actually
04:20decreased from 20 percent the year of 25 to 19 percent. We were already lower than sub-Saharan
04:28African countries. And then it's actually, instead of seeing it increasing to match the countries at
04:35the same level of development, actually we regress. So in general, I think, you know, the hope was to see
04:42higher education to key social sectors in Malaysia, including health and education.
04:47Okay. All right. So same question to you, Dr. Muhammad, in terms of your, what budget 2026 revealed to you
04:55about where the priorities are for Malaysia's economic future?
04:59I would look at the budget in context with what you said earlier, 13 Malaysian plan. Because it's the
05:04first budget of 13 Malaysian plans. What does 13 Malaysian plan say? We're going to spend, and on
05:10development expenditure also we're going to spend. On average, we're going to spend about additional
05:143 billion per year on development expenditure. This budget, instead of spending on development
05:18expenditure, we actually cut development expenditure. I understand the reasoning why we are cutting,
05:25because we want to reduce the deficit. But we shouldn't cut development expenditure. Development expenditure
05:32is not spending, it's an investment for the future. Spending on health, spending on education,
05:37spending on infrastructure. So we cut the wrong thing. That's how I see it. We cut the wrong thing, which is very dangerous.
05:46And we spend less on things that really matter. For instance, like Dr. Amjad mentioned about health.
05:52Development expenditure on health, this budget, increase only 7 million ringgit per year.
05:58When we know at the same time, the hospital is understaffed, overcrowded, needs a lot more money,
06:06and need a lot more resources. We should double down on health care, not cutting or reducing.
06:13Could you repeat that? Did you say the budget increase for health this time was only 7 million ringgit?
06:21The increase in development expenditure on health under this budget is only 7 million ringgit.
06:28You're shocked, I'm shocked, everybody's shocked. Because the amount is too small.
06:31Yes. And you want to put things in context. If we say we have no money, why do we spend 42 million per
06:38month on sugar subsidy? Why we spend 2.2 billion to give 100 ringgit to everyone, including
06:44billionaires, billionaires, ministers, Vincent Tan, and all those people. You don't deserve 100 ringgit,
06:51I don't deserve 100 ringgit. Dr. Amjad, he is not Malaysian, he shouldn't get it. But why
06:58people who don't deserve it get 100 ringgit? That's 2.2 billion. Last year, another 2 billion,
07:02that's already 4 billion. So we're cutting things that we're not supposed to cut and we give money to those
07:09people or spending money on those people who don't deserve it. This is a small component.
07:15on cutting, giving cash to everybody, 100 ringgit. Money that we don't have. We are borrowing
07:22nation. Our debt is 1.7 trillion. Why do you want to give 100 ringgit to everybody? Okay, I'm gonna ask you,
07:28are you not for universal assistance? I am Okay. But not for the rich. But universal is universal, right?
07:38And conditional, regardless. You can target only those who deserve it. Same. Why should I get 100
07:43ringgit? A clerk does not get the same amount of me. But if you look at the bigger picture, how much we
07:49spend on social assistance and social subsidies, why does a clerk get less than me? Why a clerk get less than
07:55you? Why does a clerk get less than a minister? In what way? One of the biggest chunk of subsidies,
08:01fuel subsidy. We're gonna spend 11 billion next year. For every 100 ringgit that we spend, B20 gonna get
08:104 ringgit on fuel side. 4 ringgit. 20% of B20 have no transport, which means they don't benefit anything.
08:17If you take the average of B20, they got 4 ringgit in fuel subsidy. T20 got 42 ringgit. Why should I give you?
08:25more? Why should you give him more? So that's why we cut, which is a good thing. We want to cut the deficit.
08:32But we cut the wrong things. And the money that we have, small money, we give to the wrong people.
08:38Yes. I was trying to convince. So a friend of mine said that he didn't feel the impact of the fuel
08:44subsidies. And I was saying, well, I felt it. And we had this argument until he said, well, this is how
08:50how much I spent and how much I saved versus how much you spent and how much you saved. Then I think he is
08:55made the point for me, the point that you're making now. I want to ask both of you then, how do we think
09:01about the allocation of subsidies? Since you brought up subsidies, Dr. Muhammad, when we think
09:08about this narrative of, you know, let's only focus on giving subsidies to Malaysians, let's exclude
09:14the foreigners. Does it bode well or does it, what does it reveal to us about how this administration
09:23is thinking about rationalizing subsidies, which is a key pillar of reform for them, the rationalization
09:30of blanket subsidies? Can you give me what you think? What's the best, what's the optimal way
09:36on restructuring subsidy? First of all, we got a mixed signal. Because last year's budget, we said we're
09:42going to remove subsidy, at least for the rich. We're going to restructure the subsidy. We're going to reduce
09:48it. What we get instead, government doubles down on giving subsidies. Instead of round 95 increase,
09:55we lower by six cents. That costs a lot of money. Again, 11 billion. You should float it gradually.
10:02And the savings of 11 billion, what do I do? So when Amjad goes to the petrol station, he pays the same
10:07price as me. And a clerk who goes to the petrol station, pays the same price as both of us. But the
10:13difference is the saving goes to him. Not to him and not to me, not to you. That is better use of money.
10:21You give cash. We know who they are. We give cash to them on things and let them decide what they want
10:30want to spend things on. And again, the way we structure is wrong. And even when we give cash,
10:36we limit so many things. They can only go to selected stores to buy selected things. How do we know
10:41what Makcikia wants? Have you been to Makcikia? Have they been to Makcikia? They haven't been.
10:47How do they know? Can I? Oh, sorry. Because this is very important. Because we don't trust
10:53these people. We don't trust our fellow Malaysians to spend things that are right. We think they are
11:01going to spend joli, what's the name, what's the name? It's not a lot. We did a study with UNICEF. We
11:11follow the low income house. So during COVID, one year, we went to the house many times. What do
11:16we find when they get cash? They spend on two things. They spend on rapong items, food. And the second thing,
11:24they spend on children's education. The low income idea doesn't know how to make money in Malay
11:30way is kurakhat It is a myth that we think they don't know how to spend money. We do not find evidence
11:41widespread abuse. There are one or two abuses. Normal. You cannot expect 100% to spend well. But overalls, on
11:48average, they spend on the right thing. Because they know what is right for the family, what is needed
11:53on the family. We don't. Putrajaya. Putrajaya don't. So the savings from few subsidies, you flow it
12:00gradually. You save, you give more. Even the 100 ringgit that we get, if you exclude the rich,
12:07the upper class, the low income can get triple the amount of money they get at the moment.
12:13So that's where I wanted to kind of push back on. When you said we know who they are, we know who they are
12:19the quote-unquote deserving are, those who need assistance. And then you speak of excluding the
12:27rich, which is easier. Much easier. Amjad, you mentioned in our conversation before budget,
12:34you said, well, actually, it's easier to identify the rich and exclude them,
12:38as opposed to just finding out who the poor are, the needy are. It's simple mathematics. If you have
12:46from zero to 100, either you can count zero, one, two, three, four, up to 80, right? Or you can count
12:54down from 100 to 80, so it's easier. Because it's only 20% and they also have fingerprints everywhere,
13:02they're rich, right? Because they have, they pay taxes, they have cars, they have other things. Boots
13:07I want to come back also to relate it to the subsidy field, because this is also a study we put forward
13:15two years ago at this social well-being research center. And we presented to the government.
13:20At that time, the game in town was Padua. And it's not that I kind of, you know, smart or,
13:29but I lived in many countries and this premise that somehow AI will solve the issues you bring.
13:36I've seen this move in many, many countries. Yes. And all arrive at the same conclusion. That is
13:41very difficult. So, but the second best alternative is to remove, it's just you have the data,
13:47you know who is rich to remove them without doing expensive exercise like Padua and collect data from
13:53everyone. Coming back to the issue of the fuel subsidy, the best model actually we've seen that resulted in
14:00significant improvement in people's lives. It was in Iran, 2015. The fuel subsidy in Iran, what they did,
14:08they said, okay, we're going to float it right away. However, we're going to take an amount of money to
14:14every household. And this is for political reasons. I'll, you know, it's also very sensitive to remove
14:19fuel subsidy. And the amount was about 29% of median income to every household. At the same time,
14:27they said we will double allocation to the Minister of Health. It used to be like Malaysia, 2%, it went
14:32all the way to 4%. The result reduction in poverty by 50% from 12% to actually more than 50% to 5%
14:42with higher reduction in rural areas. Now, we can look at other examples that didn't work well that use,
14:48you know, the idea. We will look at Padua, we identified the 30% which resulted in inclusion,
14:54exclusion error. So my thinking, you know, like we can learn from those lessons. Coming back to you
14:59question about universality, and this is where I think we sometimes have a misunderstanding of the word
15:05universality. Universal benefit doesn't mean to give everyone. To give everyone in a category. That's it
15:11difference. Different between to give every Malaysian or to give every child, you know, because children or seniors
15:17citizen, like I promoted social pension, we know that they are more vulnerable a group. Or children
15:24is not the objective of the cash assistance, not only anti-poverty program. It's actually developmental.
15:31You want the child to receive the nutrition, the other things. So that's when you prioritize
15:36children. So the 103 that's given from 18 and above. To me, if it was done from 0 to 18, I would
15:44support it 100% because this is more vulnerable group. Or if it was given 65 and above, I would
15:52say this is great because and maybe increase the amount because senior citizen. So you need to have
15:58differentiated approach in life cycle. The ones in the working age population, usually it's not a good thing
16:05idea to give cash. You give them skilling and reskilling and job matching, you know, because cash is not the
16:11solution. But senior citizens, they're not supposed to work. They passed. And it's not only anti-poverty,
16:17but it's sure that the country cares about you, you know, or children. They're not supposed to work.
16:22But the ones in the working age population are killing, reskilling into the labor market.
16:27That makes a lot of sense to me. When you think about how much money is being spent on
16:35on social safety nets, on social assistance, does Malaysia have that wiggle room? So you talked a little
16:43bit about developmental expenditure. Dr. Muhammad said we're cutting from the wrong kitty, so to speak.
16:51Do we have that wiggle room? Is this just, at the end of the day, a misallocation or poor decision
17:00making in terms of where to spend the money? Or is Malaysia so fiscally constrained that we actually are
17:07don't have much wiggle room? We can't cut the operating budget anymore? And this is a very good question,
17:12you know, and the answer to this question is cultural, you know, because I mean, if you are
17:17in North Europe, the social contract is different. Everyone understands that we need a bigger government.
17:23If you are in the US, it's different. If you are in Malaysia, it is different. The cultural element matters.
17:28But there are kind of guiding principles that regardless of what culture you are in, they are,
17:35they form, you know, like what good governance in this issue. And one of the basic principles I
17:41shared that as a developed country, usually increase your taxation to GDP, usually. So I mentioned that
17:49the expenditure side is in Malaysia lower than sub-Saharan African countries because tax to GDP is
17:55lower than sub-Saharan African. It is so low. And it was not like this in Malaysia. It wasn't. If you go
18:00back 1980s into even 1990s, it was significantly higher. It was at one point about 20 percent of GDP.
18:09If you go back at one point, it was similar to South Korea, 20 percent of GDP. And South Korean income
18:16increases. Malaysia's income also increases. So you would expect is to see tax to GDP ratio increases,
18:22But Malaysia kept declining. And that's why we have the Gini coefficient. It's also like very high. It's
18:28again, the inability to tax and re-inject in investment in the social sector. That's what caused
18:35inequality. And now countries can afford it at any stage of development because you have many young people
18:40people that they can work, they can. But as the country becomes older and older and aging, you cannot
18:47afford low tax regime and low investment because education becomes expensive. High thinking, productivity
18:54requires really solid investment. Relying on the private sector that we take, you know, will not
19:01will not be sufficient. So it has to be a public solution. So it's again, like I think in the long run
19:06run, it will catch up with Malaysia. Now we have a very young population, the median age is 30 years. But as a
19:11country aged, this lack of investment in education and health will catch up. Yeah, it's already catching
19:16up, right? Malaysia's aging faster than we're growing rich. So that will eventually threaten the
19:23sustainability of our social protection system. But on this one, it's still Malaysia, it's still
19:29now the new data that I was looking at, we previously, we thought that Malaysia's demographic
19:34window for Porchinti, which would end in 2022. Now the most recent data, I was just analyzing it,
19:41it will extend to 2033. So Malaysia's demography at the moment is okay. Now the example, just to
19:50understand the demographic window for Porchinti for Japan ended 1992. And the GDP per capita for Japan was
19:58increasing like a rocket. It stayed in momentum until like three years after the 22 until 2095,
20:0796. And then it started, if you look at the GDP per capita, it started to be flat. And that's common
20:13because, but for Japan, it's lucky because they already reach a very high level of income. So for Malaysia,
20:19if you have a demographic window for Porchinti to 2033, we would expect solid economic growth
20:25under status quo to continue until 2035, 36. After that, you need momentum. Yes. And that is
20:32productivity, education and health. So this is a crucial time for us. Absolutely crucial. Dr. Uncle.
20:40You asked, do we have enough money? Yes. We don't have enough money because we spend on the wrong
20:46things. We don't have enough money because we don't collect enough, like what Dr. Amjat says. I'll give
20:52a simple example on taxation. If I want to give tax holiday or tax credit or no tax, I'll give to the poor.
21:04Simple example, car. I'll give the example before. Who should get zero tax if I want to give zero tax
21:11on buying car? Do I give to Aunt Kia who bought Cancel or I give to you who bought Audi EV? Or an EV.
21:18Or an EV. Or an EV.
21:19EV is zero. No import duty, no access duty, no sales tax, no road tax. Aunt Kia bought the same car. it's a car
21:27but Cancel much cheaper, pay all four types of tax. But there's a sustainability imperative, right? One is
21:34fossil fuel and one is green. I put a cap. If I want to promote green, I put a cap. Singapore put a cap,
21:4115,000. I give you tax, Panama, exemption up to 15,000. In Malaysia, you buy a 600,000 EV, you get.
21:51Four types of taxes, you pay nothing. So far up to last year, we sold about 50,000 EVs. If one car is
21:58100,000 tax for gone, that's 5 billion bucks. So we complain we have no money because we don't collect,
22:04we give too much to the rich. At the same time, you take from the poor. You don't take from them and the money
22:10that you collect from Aunt Kia, you give to the rich again. Sarah, you give few subsidies. It's not about
22:17not enough money. We don't collect correctly, we don't spend correctly. Even the way we spend,
22:25I give an example of Sarah. I agree with Dr. Mujan If 100 ringgit is for all children, everybody will support.
22:31Right. Because we have serious issues about children, stunting rate and underweight, malnutrition issues.
22:42People will not complain about why you give to everyone. Spending, big chunk spending, DE. You look,
22:48we discussed this before. I'm from Penang. It hurts me to say this. Why we spend 20 billion,
22:55it's going to be 20 billion on LRT in Penang. At 4% interest, that's 800 million a year just for
23:03Penang. For one project. The deal earlier was that Penang, you want to have LRT, you get one
23:09contractor to do it. In return, you get an island. Three islands. Now they get one island and federal
23:14government pays the entire thing. Why should Kelantan people pay, Johor people pay, Sarawak,
23:19for one project in Penang. It's unfair. Then we say we have no money. At the beginning of our
23:25conversation, you started by saying how important this budget was because it was the first in the 13th
23:30Malaysia Plan. What about this budget reveals to you that it's not exactly aligned to the 13th
23:39Malaysia Plan? What are you missing from this budget? We expect that the subsidy rationalization
23:45is more targeted to the deserving, more spending to the vulnerable, more spending on investment of the
23:53future on healthcare and education. That's what it's supposed to be because it should be aligned
23:59with 13th Malaysia Plan. Although the 13th Malaysia Plan has some issues, the targeting is not ambitious.
24:06Even the spending on healthcare on 13th Malaysia Plan is the same as 12th Malaysia Plan, no increase.
24:11Despite we know if you don't have to do any research, you just go to Gaman Hospital, Gaman Clinic,
24:16go to Kelantan Jaya Clinic or any Gaman Hospital, the queue is too long and doctors have been complaining.
24:21So, 100 ringgit, 2.2 billion, subsidy that we give the rich to buy EV cars, you don't give the subsidy,
24:29you give to the hospital, you give to the doctors, you give to the nurses. It's better because of this
24:34would increase our productivity in the future. So, you should spend more on this. And 13th
24:40Malaysia Plan also, I diverted a bit. The ambition is too low. Two examples I give. Number one on poverty.
24:47We target by 2030, the poverty rate will reduce to 4.7. Poverty rate last year was 5.2. Basically, we achieve it.
24:57This is relative poverty? No, it's absolute poverty. Basically, it should be almost zero.
25:03Yes. Then you focus on relative poverty. Inequality. Basically, we target by 2030,
25:09inequality level, the same as America. I want inequality level, same as Nordic countries.
25:15Wages, real wages for workers by 2030, going to increase between 1% to 2%. Economy going to grow by 5%.
25:22You short-charge me. Right. Short-charging the workers. So, it's less ambitious. Even,
25:28we ignore this. The target of the 13th Malaysia Plan is not being translated or not being translated
25:34through this budget. Right. And that is something that we should revisit. Okay. In a couple of minutes
25:41left, I'm going to give Dr. Amjad the last word. What did you want to see in terms of
25:46redirection or realignment, if I may use that word? It's two minutes. I can't give a metaphor.
25:54Yes. Before I came here, I was tired. So, I immediately went to get hot chocolate just to give
25:59myself a boost. And this metaphor, we can really apply it to the economy. You can give sugar that
26:07just usually you get glucose if you are in hospital and you need to act, you know, just to give you a
26:14quick boost. But then you need a protein. If you are an athlete, you need a protein. So, the protein for
26:20the economy that I mentioned 2035, when the momentum from the youthfulness of Malaysia will lose,
26:28what's the muscles, the protein, the protein you need to inject in the economy. If I use this
26:33metaphor is you need to invest in health, education, this is the human capital. That's it
26:37what takes you long. Maybe sometimes a time of recession time, you use sugar, you use hot
26:42chocolate like what I did here just to give myself a boost. But that should not be a long term. It
26:47should not be at a time when the economy is hot, the 100 ringgit at a time. You know, it should be
26:53more now, I think the protein, the more structured kind of spending. Yes. I really like that.
27:00The human development, sorry, last thing, the human development, there is a human development
27:04index. Malaysia, where it's ranked, it's almost world average. It's lower than Vietnam. Lower
27:10income, usually higher income countries would have higher human development index, which is education,
27:15health and nutrition. But it's lower than Vietnam. Vietnam way ahead of us. So it's like this again
27:20where we need to think about. Thank you so much, gentlemen. Time is jealous of us. And this is a rich
27:26topic to explore. But thank you so much for helping us think through from a bird's eye view, the budget
27:33of this year, of next year. Thank you for your time. I appreciate it. Thank you. That's all the time we
27:37have for you on this episode of Consider This. I'm Melissa Idris, signing off for the evening.
27:41Thank you so much for watching. Thank you so much for watching and good night.
Recommended
10:50
|
Up next
30:04
25:36
15:00
13:42
4:25
23:13
42:40
Be the first to comment