Budget 2025: Falling short on economic dignity
- Capex products: What the government will choose to spend money on and what the state will get.
- Unless SMEs become more successful, pay will stay low for most staff
The 2025 resources is full of opinions and observations. What else can I contribute to what has already been said, then?
Maybe a reminder of what a resources, beyond the great bright numbers, really ought to reflect.
The latest administration, which had already established its principles in the Malaysia Madani perspective, emphasize six fundamental principles: sustainability, prosperity, development, respect, trust, and compassion, is currently in transition. However, Malaysia Madani was an “effort to travel and reestablish Malaysia’s dignity and splendor,” according to Prime Minister Anwar Ibrahim right away. “.
Anwar’s next year in business, with this being his second expenditure as prime minister and finance minister, was just one month away from releasing the 2025 Budget. The budget’s central point should then be financial dignity,  .
The typical prevent most commentaries pick on is the minimal fiscal room, with never-ending treatments of what the government ought to do to lessen the imbalance.
Despite our best efforts, we should remember that opex, which is the government’s obligation to pay for its businesses, including salaries and pensions, may be decreased in the near future. No matter how much, these obligations may be paid for. Therefore, the only series items that are of genuine effect moving forward would be the budget items – what the state is choosing to spend on, and what the nation will experience in return.
Choice issues, and the decisions made by this administration should be measured against the key factor, which is respect.
restoring what really counts
Lasting income:
Only the best 30 % of homeowners spend on ambitious goods and services, according to a recent statement from Khazanah Research Institute. If 70 % of us are merely trying to survive day by day, we may have a successful business.
Typically, we hear of the imbalance in earnings expectations of new job seekers and starting salaries. The sad truth is that 59.6 % of new graduates ‘ starting salaries were still RM2, 000 or less in 2010 and that 60.8 % of them earned less than that in 2021, which is still reasonably optimistic. Employers ( Okay, boomers ): are quick to point out that Gen Z are merely being impossible.
However, when inflation and living expenses are taken into account, we are basically telling our younger generation that they are for about half what they were in the previous century. Another depressing statistic is that between 2010 and 2019, the average salary for the lower 50 % of wage earners only increased by RM56 yearly. Financially speaking, this is community plainly signaling a loss for human funds.
The government attempts to control this by establishing a minimum wage, which is proposed in Budget 2025 to be increased to RM1, 700 per month starting on February 1st, 2025. Although RM1 700 is still far below what is considered to be a respectable wage, employers are now retaliating, as is expected.
]RM1 = US$ 0.227]
Most commentators fail to take into account the fact that pushing for higher wages is eventually hurt labor by encouraging companies to automate tasks that were previously performed by low-skilled workers ( For more information, see Alesina et al. Chu et al. ( 2018 ) ( 2020 ), Eckardt and Steffen ( 2021 ).
The state will need to reinvest yet more money in replacing the employees who have been replaced, which is a complex cycle. Although this should not serve as a cause for people to remain in low-skilled jobs, it does reduce the options for government legislation.
On the flip side, one should also consider if companies are only penny-pinching. According to data from the Department of Statistics Malaysia’s 2023 database, a fairer view may suggest that 96.9 % of our business organizations are unable to get much-needed capital.
Consider the fact that, according to Bank Negara Malaysia’s Monthly Highlights &, Statistics release, there were RM5.98 billion in mortgage programs for the manufacturing industry overall in September 2024. That is a RM2 billion gap in needed cash in just one month. It follows a similar style across various industries and through time.
This is in line with the rise in alternative fundraising ( i .e., peer-to-peer lending, equity crowdfunding, and venture capital ), which was valued at RM3.8 billion in 2023. The Securities Commission views this as a good, and rightfully so, but let’s also make sure we understand that these are RM3.8 billion worth of required funds that our businesses were never willing to fund.
The danger that lenders were unwilling to bear for P2P borrowing has now been transferred to the individual investors, who typically fall into the upper middle class and are above that level. Since P2P’s inception in Malaysia in 2017, regular people have provided SMEs with RM5.96 billion in total, with 98 % of the loans being working capital, compared to 2 % for business expansion. This may be no comfort if you are struggling with your pay test, but odds are your company is struggling also.
In summary, most of our workers wo n’t make much money unless our SMEs gain access to more capital and become more productive. Other than the request to restore small and medium banks, the budget specifically addresses these issues. The online banks may possibly fill these gaps, as several of them have announced the oncoming release of their company bank solutions specifically for SMEs.
Unsustainable family debts
The finance ministry is n’t all that worried, though, as our household debts totaled RM1.57 trillion as of June 2024, which is about 83.8 % of GDP. Countries like Australia, South Korea and Canada have household bills that exceed 100 % of GDP. However, no all debts are created equal.
Debts can be used as leverage to increase money for high-wage workers. With more Malaysians taking on next work, debt is good being used to finance fundamental needs. The funds grants additional cash assistance through the BUDI MADANI software despite numerous attempts to address this problem. One of a long series of overlapping social welfare programs, including those led by multiple functions, is this one. The best-case situation is these programmes provide some inhaling room but only a big programme like a Universal Basic Income can help restore the economic disparity within our society.
Given that our debt to GDP is now close to the self-imposed cap, the cost of funding for a program may be lower. I can just quote John Maynard Keynes ‘ wise statement,” Anything we can do, we may afford.”
Tax as an opportunity opposed duty as a sentence
Economics has a well-known proverb that says you get less from what you income. The idea is based on the idea that some activities can be dissuaded by income. By imposing levies on certain activities or goods, the government properly increases their charge, making them less appealing to individuals and businesses.
- Respect at work
Consider the proposal to provide a tax incentive for employers who adopt flexible working arrangements. Employees are clear that they strongly prefer flexible work arrangements. However, the findings are inconsistent. This is the a-wine-a-day research conundrum, in my opinion. For every research that says a glass of wine is good for you, you will be able to find another research that says otherwise. There are so many more benefits to providing a flexible work arrangement by default than just offering an office maintenance fee, the cost of commuter work, and the time and cost savings saved by parents with care-giving responsibilities. Instead of paying taxes on the ( few ) that choose to offer these incentives, the government should tax those who do n’t.
- Increasing productivity by maximising our human capital
Additionally, imposing a tax penalty will help with hiring women to work again. We should tax bad behavior rather than encourage good behavior. Not hiring a person because she has not worked for a certain period and has a gap in her resume is discrimination. Another issue is the specific tax incentive that applies to software costs when “implementing flexible work arrangements” is implemented. The government should n’t encourage remote employee monitoring with intrusive software.
- Carbon tax
The carbon tax’s introduction is both opportune and welcomed. With the introduction of the EU Carbon Border Adjustment Mechanism ( CBAM ), particularly for our steel industry, carbon taxes will be a burden on us in some way or another.
If we are going to have to pay, we might as well collect it ourselves. It is proposed that the proceeds from this carbon tax will support the development of decarbonization research. Without any information on the tax rate, it is impossible to predict the amount of revenue this will generate. Singapore imposes a carbon tax of SG$ 25/tCO2e currently, but started off at just SG$ 5/tCO2e. If we introduce a rate of RM5/tCO2e ( which is incredibly low ), the energy sector will receive about RM1.4 billion in tax revenue based on emissions from 2022.
The Federation of Malaysian Manufacturers ( FMM) has already expressed concern about the potential rise in electricity tariffs, but more details on the carbon tax should be forthcoming.  ,
I do n’t understand how energy producers can absorb this without passing some of it on to consumers, given that 81 % of our electricity still comes from fossil fuel sources. Given that our energy mix is so low in carbon, there may be a carbon tax that can be levied at the production, distribution, or consumption stages.
Other areas worth mentioning
- Charge Point Operators experience no love.
The Budget 2025 participants in the EV infrastructure industry probably feel a little underwhelmed. Other than the announcement of a sub-RM100k EV, there was no mention at all on further incentives for building out our EV charging infrastructure.
I’ve previously covered the industry gripes, but my colleagues have a different perspective. A transition to electric vehicles is almost unavoidable, it is safe to say. That being so, we should be able to anticipate that all these vehicles need to be charged while idle ( i. e. overnight, while parked ), and not during transit.
I doubt any of these players will realize a return on their investments due to the rush to construct EV chargers along highways and in public spaces. Most people do n’t seem to understand this, but imagine a time when all EVs will be used in cars. Everyone is going to expect that they can charge their vehicles overnight, the same way we charge our phones and laptops to have it ready to go again the next day.
The main issue will be having enough energy capacity to charge millions of cars overnight, despite the fact that we can outfit every parking bay in every condominium and apartment building in the nation. Energy production and grid capacity are both at issue, not charging-pillar issues.
Ecological fiscal transfer gets a boost
The Ecological Fiscal Transfer Fund is proposed to increase from RM200 million to RM250 million, which is a 25 % increase, in Budget 2025. This boost is intended to aid state initiatives to protect wildlife and forests. Half of the allocation ( RM125 million ) will be contingent on the performance of state government expenditures related to environmental preservation. Additionally, the Orang Asli community received RM80 million to train and hire 2,500 forest rangers. a positive move.
Overall, I feel the government is attempting to be bold but is doing it in liberal doses. Will this budget encourage everyone’s economic dignity and help them hit the reset button? Not entirely. In fact, I think many people will have further concerns on how the subsidy rationalisation will affect them, partly self-inflicted by announcements of the plan, without the actual plan itself in place.
According to Matt van Leeuwen, CEO of Sunway iLabs and general development officer of Sunway Group,” Innovation and sustainable development are in Sunway Group’s DNA. That’s how Sunway transformed an abandoned tin-mining area into Malaysia’s second incorporated bright and lasting city, Sunway City Kuala Lumpur, where collaborations have led our partnership journey.”
