This article first appeared in The Edge Malaysia Weekly on October 2, 2023 - October 8, 2023
MINISTER of Economy Rafizi Ramli is a busy man, tasked with achieving the many plans and aspirations of the government, many of which are embedded in the 12th Malaysia Plan (12MP). How will the government — which needs to increase revenue and reduce expenditure — balance things without jeopardising its support base?
In an exclusive interview, a candid Rafizi shares his thoughts on the 12MP, and why some of the government’s initiatives are taking longer than expected to roll out. The following are excerpts of the interview.
The Edge: Can you explain the additional RM15 billion in development expenditure (DE) under the 12MP?
Rafizi Ramli: Without the additional RM15 billion, the RM90 billion a year would have been in the RM400 billion earmarked for the 12MP. I don’t know whether RM15 billion out of RM400 billion initially earmarked is actually a big jump. With that commitment for at least RM90 billion a year, it will bring the total DE for the 12MP to RM415 billion, which is RM15 billion more than what was initially earmarked and planned in 2021. But, if you think about it, first, cost impact; basically, things have changed so much. Since it was planned in 2021, some of the cost structure has gone up by 10%, 20%. The other thing is that in the last five to seven years, there has been underinvestment in basic infrastructure. So, things like dilapidated schools … were never budgeted for and factored in when the 12MP was presented in 2021. That is why, for road maintenance, for example, over the years, people have complained about our roads … because underinvestment. So, that RM15 billion is also to cater for all these things or necessary investments for the public that was not adequately provided for in 2021.
There was also a statement in the 12MP Mid-Term Review that 60% of the DE is going to go for basic infrastructure. Is this a change of focus from the previous administration?
It is a bit more complicated than that. The RM90 billion DE each year has various components. Some of it relates to public-private partnership (PPP) projects. These are mega projects of the government such as the MRT (Mass Rapid Transit) and ECRL (East Coast Rail Link). It was funded through so-called private financing, or even build, operate, lease; those are parts of the PPPs. It was not funded by DE year after year, but the leases are paid through DE. We recognised that we have to refocus and rebalance so that a big chunk — more than 50% — of the DE has to go to projects funded directly from [consolidated] development expenditure, not through all this PPP financing. Part of it is because I think it is better governance. Part of it is because if you are not careful, there will always be a significant allocation to mega projects. Because the PPP is usually funded for mega projects. We wanted to set the direction as we go forward; we should go back to the basics — development and infrastructure projects must be funded through consolidated development funds, because that creates fiscal responsibility. If you have this much, you plan for this much.
What happened in the past is that these quasi, so-called PPPs look like private project financing, but they are not. They are being paid, in stages, through DE. But the planning is very different. The approach to these PPPs is very different from the way it is done for your normal DE. I don’t think it means basic infrastructure; we mean basic DE, those DEs that are bottom up. And this goes through proper due diligence of the respective ministries, stakeholders, the running of schools, clinics, roads.
This was how DE was done in the 1970s and 1980s, as opposed to one minister saying, ‘I want this, this, this’ and ‘Okay, let’s privatise this, this, this, this’, which is eventually paid through DE. Because that is very much top-down.
Do you think there is an overdependence on Petronas for government revenue?
It is not just about overdependence on Petronas, from a pure fiscal perspective. It is also the need to make sure that Malaysia continues to defend our position as a net exporter of crude oil and gas. We need that to buffer the uncertainty of the global economy, because if you remain as a net oil exporter, it will help in the currency, it will help in terms of moderating global economic growth and so on. The thing with oil and gas is that it is a long gestation industry. And it is a huge investment [that is required]. You have to go through prospecting, exploration, development, production and, sometimes, it takes 10 years, sometimes eight years. We will pay the price and feel the pinch many years down the line. So, unless we move away from short-termism, by just looking at how much cash balance Petronas has — Petronas’ cash balance is one thing — my biggest concern is eventually we just don’t produce enough, and we are already feeling it now. Our daily crude output has fallen below 400,000 barrels per day, and that is historically low. A few years back, we used to produce 500,000-plus bpd. We want to produce as much now when the oil price is inching towards US$100 per barrel; but as I said just now, oil and gas is a long-gestation industry. You have to add your blocks and prospect much earlier; you have to spend in building your oil reserves.
This is why time is of the essence, and why oil and gas companies require a certain kind of cash buffer, because you need to develop at the time when oil price is good. If you don’t have enough of a buffer, you will miss the opportunities. For example, this is the time when we need to really push up our crude production … Petronas has to manage the phasing of their production based on the cash they have, because they have to maintain a certain level of cash. So, it is not so much dependency on Petronas, but it is also the need to use our oil and gas resources intelligently, to buffer the uncertainty of the global economy.
How do we widen the tax base?
I am agnostic about how. Every time we talk to the analysts, the media, investors, it is as if there is a one-way street, which is consumption tax or GST (Goods and Services Tax). To me, it is a lot more complicated than that, there are many other considerations. I remember being asked this question and people didn’t understand when I said this. My view is that we shouldn’t be looking at revenue targets and therefore increasing tax, and diversifying tax streams, just for the sake of having higher revenue. Because it is also a function of what is your expenditure.
It is true that tax revenue as a percentage of GDP is low, about 11%. And there is a pressure on revenue now because the costs, expenditure, are high, especially on all these blanket subsidies and so on. But before governments haphazardly jump onto any bandwagons to increase tax, we owe a duty to really make sure that we optimise spending.
If people feel that I may be evasive when asked about tax and so on, it is not me being evasive. We have to go through the subsidy retargeting first, optimise expenses first. Then, if we can manage with a more reasonable, value-adding government expenditure, then one year or a few years down the line, we may be able to know that this is the level of revenue that is optimal for the country. If that means we have to expand our tax revenue base to meet that optimal income to pay for optimal expenditure, then so be it … This administration has to put a standard as well. That is why when I was asked [about new taxes], even internationally, ‘How long are you going to take?’, I said, ‘One year is adequate time, if we have to go through certain processes first. Let’s do it first.’
Of course, we have to cross the bridge at some point. Consumption tax is the most efficient tax collection mechanism, but as best as possible, we should avoid consumption tax from being regressive to society. I have always argued that income improvement is very important. Get more people into high or reasonable income, so that they start paying income tax. So, if we roll out any form of consumption tax, then it is a substitute for income tax, for being a better tax-collecting mechanism. It is not an additional tax burden. [Ever since] GST was considered — from 2005, 2006 all the way to its implementation in 2015 — I don’t think we have resolved this issue about low income. Only 10% of our workforce is in this tax-paying bracket. So, there is also that big consideration about how we can navigate morally so that we don’t pass the tax burden to the lower-income group.
The other candidate is indirect tax. GST paid in 2017 was about RM44 billion, and when PH took over, and then in 2019, there was a RM19 billion refund. Basically, the GST collection, give and take, is about RM30 billion-plus a year. Indirect tax, SST (Sales and Service Tax) now is already RM33 billion a year, and SST doesn’t have this input tax mechanism. In terms of apples-to-apples comparison, it is not too far off in terms of collection.
That is what I meant by being agnostic. I don’t want to go haphazardly on this GST, thinking everyone is paying and therefore it is good. We have to see things in detail, because if there are ways that we can improve the existing tax structure without … risking our tax system becoming regressive, these are all options that are open to the government. In terms of sequencing, subsidy retargeting is more important to fiscal consolidation than GST or any new forms of tax.
What about Capital Gains Tax (CGT)?
We are waiting for details from the Ministry of Finance (MoF). I have not run the numbers myself. The details will come up, but there are some principles that have been discussed. It is certainly for unquoted shares because we are working very hard to make our capital market more attractive.
Given that Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) are the biggest players in our equity market, putting a CGT on our capital market is almost like money from the left pocket going into the right pocket. So, when you put CGT on quoted shares on Bursa, the ones who will be hit the most would be public funds anyway. The discussion so far is on unquoted shares, and some of the most opaque transactions and some of the biggest transactions are on unquoted shares. I agree in principle when it was discussed that we should focus on unquoted shares first. But I don’t know how much it will have an impact on the fiscal position. If anything, the discussions on CGT were more from the governance and moral perspective.
You don’t want to stifle entrepreneurship as well …
Yes, due care must be given to special classes of ventures, for example, start-ups, venture capitalists. If we apply the same rules across the board, it has a big impact in stifling some much-needed investments, especially in start-ups and the digital economy because venture capital and start-ups work precisely on an increase in valuation. That’s just how the world goes around in the start-up world.
How about targeted subsidies? Has anything been firmed up? What are the low-hanging fruits?
We are already at the final stage; we’ve been working on it since February. The discussion has reached the final level and all the prerequisites, especially for the system to be implemented, are in progress. For example, PADU (a central database hub) is working as planned. We hope to see it going live for public validation by January. [I cannot talk about the details] because we have to go through the process of the cabinet, and it is highly sensitive. Also, we have only one shot in a generation to do it right. The political cost is high; therefore, I would want to give the government as much flexibility as possible to sequence it as we planned it. What I can say is that the final version is going for approval.
Any indication of how much savings can be gained from targeted subsidies?
It very much depends on how steep and frequent it is in terms of unwinding the existing subsidy. The model has been developed to allow the government, first, to balance between the inflationary impact, the net savings, to make sure that whatever blanket subsidy that we saved, the bulk will go back to households in the form of assistance and so on. But we want to make sure that the mechanism allows for that flexibility for the government to manage the quantum, speed and sequencing and so on.
How much savings is actually a function of so many parameters. At the very least, we should be looking at RM6 billion net savings to the government. That is already after taking into account all the social assistance and protections that we will put in place, as part of subsidy retargeting. The government has to pay close attention to how the public reacts in terms of inflation and so on.
The cost of living is quite high, but the government has to prioritise subsidy rationalisation, while also trying to increase income. How do you balance the need to retarget subsidies while ensuring that its impact will not burden the people before they have meaningful improvements in their incomes?
The obvious impact on subsidy retargeting would be prices, the fuel price cap will be lifted in phases, but those savings will be returned as income to families … Of course, the delicate balance is to ensure that the net impact to the spending power of households is better. That whatever the cumulative cash transfer, social protections, assistance that go to targeted households out of this exercise, as well as the other policies that the government puts in place — for example, the progressive wage — the total income increase to households will help them manage inflationary pressures that are a consequence of subsidy retargeting. It is not a precise science.
If people ask me how much [income increase] and they need it in detail, my answer is it is operational — listening to the ground, looking at the data as we roll it. Of course, we have the model, but it should be fed back with the data as it happens. For example, we project inflation to be of a certain level. We project the number of households with a certain increase of monthly income to be a certain number. But until you do it and get the data back, it is just a model and we designed it to allow the government to see it on a month-to-month basis, based on this data. We really need to control the pedal, whether you accelerate or decelerate, because it is a fine balance between the increase in household income and managing the inflationary impact.
What are the mechanics of a progressive wage increase?
Conceptually, it is a voluntary opt-in. There are already too many debates, where probably everyone will disagree [with one another], but then again, I don’t think there is one wage correction policy that everyone will agree on, because someone has to pay, and someone feels the pinch. We have a few options as a society, and the government can legislate and make it mandatory, like the minimum wage. Good luck. It is not just the employers who will not agree, but to be fair to our economy, only 2.5% of the one million-plus entities that are incorporated companies are large companies. And about 2%-plus is considered medium — those below RM20 million revenue per year, and with staff of below 500. About 15% to 16% is considered small, while 79% is micro, which are businesses with less than five people, and the majority are in F&B.
Even when my critics are saying ‘this is a half-hearted way of doing it, it is not going to be successful’, I wish it was as simple as legislating, and everyone will follow. There has been no intervention in the wage-setting mechanism so far because I don’t think our economy has the resilience to absorb this kind of payroll cost. Because it will wipe out the 79% micro businesses. And if you legislate, it will repeat the experience with minimum wage. You make it mandatory, and then all the industries and groups will come and say, ‘Well, if we do it, we will all be out of business.’ And then governments start giving exemptions, and it will dilute everything.
[I would like to go that route,] but not now; we need to intervene now, rather than wait for the economy to pick up. So, the only other way is voluntary opt-in. What we need to make sure is that whatever contributions the government makes, it yields the required outcomes: first, in terms of wage levels; second, in terms of upskilling by the employees who benefit from the scheme; and, third, in terms of creating a more vibrant talent market so that it incentivises companies to pay more. Otherwise, if they don’t adhere to progressive wages, it would be a challenge to get the right people, to retain [talents]. Because if you talk to industries now, whether they are the biggest or the smallest companies, talents are the big challenge. Retention is the big challenge. As such, it has to be a voluntary opt-in.
There will be parameters set. Of course, the wage-setting committee will go through the process and set the band independently from the government. The band goes by industries and will look at at least two major parameters. First is starting salaries, and we are looking at semi-skilled and skilled workers, because the lower-skilled workers have been dealt with minimum wage. Second is annual increment, because for us to push the compensation to employees from the current 32% to the target of 40% by 2025 is a big challenge. And for 45% within 10 years of Ekonomi Madani, there must be a certain level of annual increment to push up the salaries. So, at least these two parameters by sector, and then the government will allocate a certain amount of allocations every year, and companies will come on a first come, first served basis.
If you have X amount and pay within this band in terms of entry-level salaries and minimum annual increment, then there are financial top-up incentives from the government. That is for the employers. And this is only for a certain size of companies; otherwise, you’d benefit the big ones. They have already been paying good salaries anyway. So, we want to focus on this 90% of enterprises that can’t afford to pay good salaries, because they are the biggest employers in the world, and they are the ones that are partly responsible for this low level of wages. So, companies of certain criteria can apply to be part of progressive wage; they have to go through all the validations and so on. If they pay within this progressive wage structure, within the parameters, then they’ll get financial incentives.
How long will the government support a company in implementing the progressive wage?
There must be an exit policy; otherwise, we will transfer the burden of blanket subsidy to progressive wage subsidy. That is not the idea …
The idea is if we have enough employers and employees being employed at the progressive wage, and our simulation shows that companies that adopt progressive wages will benefit from higher productivity. If you have reached a certain level of productivity and a certain level of value creation, with a certain type of talents, if you want to — just because you want to — fall back to the previous wage level, you can face the risk of losing talents and therefore see a drop in productivity. But, of course, it depends on how many employers and employees are in this.
So, there will be an exit policy, and for employees to remain in a productive wage system, they have to go through mandatory upskilling. The accountability is on both employer and employees.
Please explain Ekonomi Madani.
Simplistically, raising the ceiling, raising the floor is the best way to explain it. For decades, Malaysia has focused on growth. We focus a lot more on the average, rather than median, approach in everything … We want to make sure that we continue to grow much faster than we have over the last 20 years — it was 4% to 5% from 2000 to 2022. We feel that the country can grow at 5% to 6% — maybe not as fast as between 1970 and 1999; that was about 9% cumulative — but we certainly can do better than the comparable economy at our size. But the danger is this. I don’t think it is that difficult to grow at 5% to 6%.
The bigger difficulty is to make sure we raise the overall livelihood of the common people, common household, hence the focus on income, salary and the shift from blanket subsidy to redistributing that as additional income to households and to ensure that we start building the foundation for a universal social protection for families. So, I don’t think raising the ceiling is something that new.
Any administration before would have wanted to grow the economy, and therefore we would have to find the growth engine. We do it rather differently on energy transition and REE (rare earth elements); those are the new ones. In fact, I don’t know if the public is convinced, but modern farming is a high-growth, high-value sector that we want to focus on. Any administration would have wanted to do the same. But the clear differentiation is about raising the floor.
We are taking huge political and social risks beginning with subsidy rationalisation. It has been attempted before, but the difference is that, every time subsidy rationalisation was attempted, it was viewed from a fiscal consolidation perspective. Through Ekonomi Madani, what we want to do is use this opportunity to create social protection. I can’t give you all the details, but the model that is being considered by the government at the final stage is a combination of universal social protection as well as social assistance. And this is all about providing the social safety nets for households. It is more inclusive, it covers a lot more households than before, and we also want to reduce and manage these exclusion and omission errors. So, over the past six months, I have been really focusing on PADU, the database.
Now, everyone is panicking, wondering whether we can pull it off. I hope we will pull it off, but at least my conscience is clear. Before we do subsidy rationalisation, we really focus on getting the data right first, just to make sure that whoever should get the best level of our effort will get it. So, even the whole idea about PADU is not just so much about subsidy rationalisation; it is about social safety nets. And that, to me, is very different from all of the previous administrations, because a lot more focus had been put on the social safety nets.
Even if we go beyond that, as we talked just now about repairing roads and all this basic infrastructure, that’s a very big difference with our approach from what was done previously — because, to us, it matters. Infrastructure for laymen, for your regular Joe, for someone in rural Perak — they deserve a school as good as the ones in Damansara. In the past, that was not important, because growth was very important. The focus was on big projects; so, any small infrastructure, public amenities that benefited a lot more people was not considered good value for public money because it didn’t have the so-called economic multiplier effect … Increasingly, we are shifting more and more money towards those kinds of infrastructure buildings, and that’s going back to the basics, that was the foundation of this country. In the 1950s, 1960s and 1970s, the government didn’t go on mega projects. The economy responded well to the government’s focus to lift up everyone because value creation was very much the private sector and private individuals’ initiatives.
If the environment is good and the government facilitates, there’s motivation and incentive for people to create value; they are better off creating value on their own. So, that encapsulates the ‘raising the ceiling’ and ‘raising the floor’. We want to ensure that everyone has a good chance of scoring in life. If you work hard and you sprint, there’s no obstacles and impediments that can slow you down; you can go as far as you like. Of course, it is easier said than done. Translating this into policy will be a challenge, especially in a country where people expect announcements of big projects.
So, I have to and the PM has to put up with people saying, ‘This government doesn’t do anything, because where is the big mega project?’ … You want to make sure the public money goes to as many people as possible, liberate them, create the ecosystem, let them compete and let them have ambitions to create value. That is a much better way to grow the economy than what was done in the past.
Removing rent-seeking, anti-competitive ecosystems is one way to raise the ceiling. What’s the plan?
Going back to competition, to me, value creation in any organisation and society is very much tied to competition. We have more competition, and if the right people are given [the chance], there is always this discussion about equality and fair competition. Of course, there are ways to see that, we want to create fair competition.
In issues about bumiputera and non-bumiputera, both sides of society can be quite negative. With the right-wing Malays, everything is about ‘let’s take more from the non-Malays’. If [you talk about] the non-Malays, the right-wing ones say the ills of this country are because of bumiputera policy. It is not true as well. Both bumiputera and non-bumiputera pay the price of corruption. Leakages, largesse of the ruling elites, everyone pays the price. For people who are able and want to compete, even some kind of intervention from the state will give them a leg up because of where they come from; they are so disadvantaged.
I always say it is not fair to expect someone from the rural areas — whether they are Malay, Chinese or Indian — to get 10 A+ before they can be considered for a scholarship. Because they had to go through a lot more to even get 8 As, compared with my son, who, let’s say, has a private tutor. Even if he scores well, you have to take things in their entirety.
So, when I say ‘competition’, I’m talking from that perspective. But we also understand that there are so many impediments and layer after layer, where free enterprise doesn’t necessarily have the best chance to lift off in this country. First, it is because of regulations and so on. So, as much as possible, whatever we need to, we simplify in terms of ease of doing business. When I talk about moving towards govtech, it is not just about digital; it is about simplifying the process, because when you simplify the process, you remove layers. And when you remove layers through ease of doing business, it also means fewer impediments for people with free enterprise spirits and all.
But there is also the issue of rent-seeking, rules here and there. Rent-seeking has created social problems in our society, not just among the business class, but even to the lowest level. When we talk about the Myanmar or Indonesian in Pasar Borong Selayang or anywhere, the public doesn’t know that it is very difficult for enforcement officers to do anything about it, because there are no laws against it. You apprehend them, and then they say, ‘I’m not the owner, I work for so and so’. The licence for the plot to trade was given to a Malaysian, and then you call the Malaysian and he says, ‘Yeah, yeah, that is my worker.’ You know that is not the case, you know what happens is that this foreigner basically pays a monthly rent to these people, and these people just collect, get RM4,000 or RM5,000.
In fact, Malays totally understand when it comes to bazaar Ramadhan, for example. Someone has 20 plots, and then he or she sells each plot for RM5,000. So, there is no law to deal with this, because it is usually on a willing buyer, willing seller basis. This guy is saying, ‘I don’t mind paying, because I want to get this spot. I got this [licence or permit] and I rented it out. What is wrong with that?’ There is no law. So, we are going through that process. We hope we will be able to table the legislation in the third quarter of 2024. Wish us luck.
If we manage to remove or restructure rent-seeking, approved permits (APs), do you think it can help lower the cost of living?
I hope so, although I’ve learned enough to be cautious nowadays. There are a lot of unintended consequences. Economists build so many models, but you need to see how the public and the economy react to it [before you can tell whether the models work]. But, yes, conceptually, if we allow better competition and better supply, it should help. We should make it easy for everyone and that is what we are focusing on.
There will also be challenges that can’t be quantified economically. Take, for example, some of the requirements, such as for food — part of [what causes costs to rise] is the halal requirement. It is not AP or import permits (IPs). It is just that the market demands halal certification, and that is what takes a long time. It is a regulation, to get halal certification. We make sure that it can be done much faster, but there are things that you cannot [take a] shortcut when it comes to halal; it is very sensitive.
So, whether all these APs and IPs will have the total accumulating impact on lowering prices, the answer is yes, but I don’t [really] know until we do it. It’s true that we should allow for more supply and competition. We are moving in the right direction, [but] it is not as simple as ‘if we do this, we are going to get this’.
Even as I go through the list of regulations, some of them are [do not pertain to] permits. It is not about APs or IPs; it is just regulations. For the market to do this, you have to do this and that. If you import, say, beef, you have to comply with the quarantine regulations. It is applicable to other countries as well, not just Malaysia.
Some critics say that instead of funding progressive wages, the government might as well take the market approach. Remove all these hindrances and create more competition; then you can create more value in the economy.
That was the argument or, rather, I don’t know whether it was a conscious decision, but that was the existing approach, where we don’t interfere in the market, in wage setting. Look where we are now? Wages have actually come down over the years.
My pet peeve is talking about problems over and over again, complaining about them but not doing anything about them. Everyone complains about wages. We have tried non-intervention; we have tried a market mechanism; we have tried cash assistance; we have tried many things. The only thing that we have not done is direct intervention for wages. I don’t know how it will work. Our modelling shows that it will be okay, it will contribute [towards improving wages], but there’s no certainty. There will be unintended consequences, and that’s fine, but the alternative to me is a no-brainer, because the alternative is to do nothing, and certainly it will not improve. Because it is leaving it to the market, so to speak, especially after the minimum wage has proven otherwise.
In other countries, when the minimum wage is set, it pushes up the semi-skilled and skilled levels, so that you differentiate between the low-skilled and semi-skilled and so on. In this country, it is the other way around. When the minimum wage was set at RM1,500, it pulled down the fresh graduate entry levels and semi-skilled salary, closer to RM1,500 — on the basis that this was a qualitative assessment, that you are already being paid higher than the minimum wage. Those were the unintended consequences. So, only time will tell.
As long as we intervene and there is a clear exit policy, I hope [it will work]. That is why we push for a quarterly wage report. I want to see how it moves the wage band in the next four to five years. That is a more robust and structured way to address this issue.
With the removal of blanket subsidies and getting targeted subsidies, the middle-class is going to be affected. Is that the challenge that you expect and what do you say to them, because they have been supportive of this government?
I don’t think the impact on the middle-class is going to be as feared, for a few reasons. First is because we do take into account this approach on a net disposable income basis. It is no longer like before; it is just purely on income basis. So, it is household income, minus your location.
We also take into account, as best as possible, your distance to work and your household expenditure pattern for fuel. We take into account the size of the household, so there will be nominal expenditure assigned to all these, so that the determination is not purely on income applied throughout the country, but as many variables as possible, to give as accurate a picture of who needs the assistance as much as possible.
So, you may end up in a situation that before this, you were in M40, and then everyone thought that they would be excluded from assistance. Yet, through this approach, you actually will fall down the so-called net disposable income class, because you are living in an urban centre, where it costs more, where fuel takes up a bigger chunk of expenditure and so on. We do try to factor all these, not so much because M40 supports PH or not. It is just to make sure that we minimise the impact.
Second, the plan that will be presented to the government includes a certain element of universal coverage. So, it means the model basically includes as many households as possible, because one element of it is universal coverage. So, it is not income-dependent. So, there will be people who are M40 but also included in the government social protection safety net. That is the balance that we want to make sure, that the coverage is as wide as possible to as many households as possible.
Yet, at the same time, we have to differentiate between families who really need extra assistance, from those who don’t need assistance. It certainly will not be the way the previous cash transfer was, not the Sumbangan Tunai Rahmah, not the BR1M, not this B40, M40 invisible line, and if you are RM2 above this, then good luck to you. It doesn’t work like that. It will cover as many people as possible, and in that sense it will be a lot more inclusive.
The PM’s speech in the 12MP touches on the direction and approach for a bumiputera economic agenda that is fairer, more equitable and inclusive. Could you please shed some light on this?
We are developing it in detail in time for the Bumiputera Economic Congress in January, but there are a few major pivots, conceptually. First, we recognise that the previous bumiputera policy was successful in [lifting] bumiputeras out of poverty and, more importantly, creating a sizeable middle-class. The major pivot from this point is that we want to transform the sizeable and very important middle-class in Malaysia to become a value-creating and entrepreneurial [bumiputera] middle-class. The status quo is that the majority of the Malay middle-class are in employment in GLCs (government-linked companies). They are very competent, but you notice that the tendency is to have a good degree, graduate, start working in GLCs or companies, and move up professionally.
The number of middle-class Malays with that kind of background and expertise who take the risk to create value and strike out on their own, to create independent SMEs and large companies that can contribute to the economy, is still quite low. So that is one major pivot. Then, the second pivot is to create the right funnels, because building this Malay middle-class with a higher risk appetite requires broadening the pool and funnel of people who can strike out on their own, and that requires the streamlining of agencies and programmes.
The third pivot is that we want to throw this question back, and I have a view on how to deal with this question. The question, the so-called holy grail of the bumiputera agenda for the last 50 years, has been this 30% equity. We want to have a fresher perspective about how exactly we measure bumiputeras’ participation in, control of and contribution to the economy. My view is a lot wider than just one dot — 30%. If we don’t understand the bigger perspective to measuring bumiputeras’ participation in, contribution to and control of the economy, then everything will revolve around that equity ownership of 30% and so on. Those are the three major pivots that we are looking at.
I hope that, by now, the media also understand what we do, that we have a high-level macro policy, such as the 12MP Mid-Term Review, and we [do it by sector]. We’ve done one on energy transition; [the Ministry of Investment, Trade and Industry] has done one on the Industrial Master Plan; the next one from the Ministry of Economy is on the bumiputera agenda, with other agencies; and then we will have one on the digital economy. It is going to be a review and fresh perspective that maps out the vision and steps for the bumiputera agenda.
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