KUALA LUMPUR (Aug 9): Malaysia needs a leader who is willing to risk his political career to reform the economy and put it back on strong fiscal footing, said Khairy Jamaluddin, the former health minister, who was previously on his way up to the top.

Khairy concurs with the view that the series of structural reforms that the country needs is painful and these are unpopular measures that will cause the government of the day to lose its support.

“This is why I said you have to have a policymaker that doesn't really care what happens to them,” the former minister told The Edge in an interview.

Subsidy rationalisation, Goods & Services Tax (GST), and government pension reforms, according to Khairy, are the top three tasks that the government has to carry out sooner than later.

“I spoke about subsidy rationalisation and public sector pension reforms in the past. It's painful, of course, because some people will not get [targeted] subsidies and they'll be pissed off.

“That is why you have to educate the people, and this is the only way that we're going to be sustainable and we'll use the revenue (money saved) for public goods, education, health, things that help everyone, public transport and infrastructure,” explained Khairy, who was knocked off his pedestal in Umno’s post-general election infighting.

On the GST, which the Pakatan Harapan government zero-rated when it took over Putrajaya in 2018, Khairy views that the current government is reluctant to bring back the consumption tax. However, he believes the window of opportunity to reintroduce the tax is closing.

“Anwar may have until the next budget (Budget 2024/25) to announce it and it will take only one year for the market to be ready as the system is already there.

“If you announce it next year, then it's going to come into effect in 2025. The next general election is going to be in 2027, and you don't want to fool around with taxes when it is so close to the elections,” he analysed.

On the ballooning pension burden, Khairy highlighted the crucial need to reform the civil servants’ pension scheme in order to cut operating expenditure.

Civil service emoluments as well as the pension and gratuities bill already account for nearly half of the federal government’s annual revenue. Indeed, the government’s operating expenditure currently takes up 99% of the public revenue.

Khairy pointed out that new hires in the public sector, including politicians, should not be offered pension coverage and should be covered under the Employee Provident Fund (EPF) instead.

“I told (Datuk Seri) Anwar (Ibrahim) this when I met him at MOF. I said that every day that you delay pension reform, you are adding to the pension bill.

“You cannot touch people who are already government officers because you can't change the (existing) contract. But for new hires into the government for permanent staff, no more pension, including politicians,” he adds.

When asked about his view of some critics that the current government is slow in fixing economic problems, Khairy noted that issues that need to be addressed have been rooted for years.

“It's an accumulation of years of not wanting to come to terms with the truth,” said Khairy when describing the country’s fiscal position.

Khairy, a 47-year-old who had been minister three times, acknowledged that the current structural issues in the country were inherited from the previous governments. He added that the government then should have started the reforms in the wake of the 2008 global financial crisis. Nevertheless, he said there was no “real attempt to change it”.

“To what was quite necessarily correct at the time, after 2008, there has been increased inequality because of the hard edges of globalisation, and Datuk Seri Najib Razak came with cash transfers, that is when we moved to centre left in economic management,” said Khairy.

The nation’s fiscal position has been stretched since the government started giving cash aid — a move that is perceived to be a populist measure.

On the weakening ringgit and capital outflows, Khairy said the soft local currency is because of the structural issues that the country is facing.

The ringgit has depreciated 3.92% to RM4.58 against the US dollar year to date. It slid to a record low of RM4.74 Nov 4 last year.

“I don’t blame them, they (the current government) have to make tough decisions. The weakness in the ringgit is because of structural issues."

You may watch The Edge's interview with KJ by clicking the following video clips:
‘To pull off large-scale corruption is difficult’
Is KJ the politician making a comeback?
KJ gives his predictions ahead of state elections
Targeted subsidies, pension reform and GST on KJ’s fix it list