The Malaysian Reserve
27 February 2023
Budget 2023 expanded to accommodate people-centric programmes
Anwar leaving the Parliament last Friday after the budget announcement. The MoE continues to receive the highest allocation of RM55.2b under the revised Budget 2023 compared to RM52.6b in 2022 – pic Bernama
AGAINST the backdrop of a moderating national and global economy, Prime Minister (PM) Datuk Seri Anwar Ibrahim has presented a yet bigger budget for 2023 with a total allocation of RM388.1 billion, focusing on people-centric programmes in poverty eradication and public infrastructure.
The bulk of the increase came in the form of a RM25.4 billion or 35.5% boost in development expenditure to RM97 billion, versus RM71.6 billion previously.
The government allocated RM388.1 billion (versus original RM372.3 billion originally announced in October 2022), with RM289.1 billion for operating expenditure and RM99 billion (October 2022: RM71.6b) for development expenditure, including RM2 billion in contingency savings.
Anwar said in line with the expanding fiscal policy, development allocations were increased to enable govt and machineries to “focus on programmes to eradicate poverty, rehabilitate public infrastructure and rural facilities”.
“With the reform of the government’s procurement procedure, it will be ensured that this additional expenditure is fully utilised for the benefit of the people,” he said while re-tabling the Budget 2023 at the Dewan Rakyat last Friday.
The theme for Budget 2023 was “Developing Malaysia Madani”, reflecting the principle of accountability and a noble value system that could strengthen the country in facing current challenges, including a global economy fraught with uncertainty.
The PM outlined five challenges in explaining the performance and resilience of the economy, including the excessively high debt burden inherited by the government which now reaches RM1.2 trillion or 60% of the GDP in 2023.
The other four involved the decline in national administration due to corruption and malpractices; the country’s position that has to go through the uncertainty of the world economy; investments that have not reached their pre-pandemic performance; and economic threats that affect the people.
MoE Gets Most at RM55.2b
The Education Ministry (MoE) continues to receive the highest allocation of RM55.2 billion under the revised Budget 2023 compared to RM52.6 billion in 2022.
Anwar said a total of RM2.3 billion from the allocation is provided to ensure the best infrastructure and learning facilities in all schools.
He added that it covers the allocation of RM920 million to upgrade buildings and infrastructure in 380 poor schools, especially in Sabah and Sarawak, through a special procurement method for urgency.
In addition, RM900 million is allocated for the work of maintaining the facilities of all types of schools including national schools, religious schools, national-type schools, Chinese and Tamil schools.
“It includes work such as repairing toilets, school wiring, drainage, replacing dilapidated dormitory and classroom furniture and equipment,” he said.
RM36.3b for MoH
Meanwhile, Anwar said the Health Ministry (MoH) is given the second-largest allocation of RM36.3 billion compared to RM32.4 billion last year.
According to him, the main component of the allocation involves the procurement of medical supplies, vaccine reagents and consumables.
He highlighted that it includes an allocation of RM3 billion for the long-overdue permanent appointments and contracts for more than 1,500 medical, dental and pharmacy officers.
“The government will also try to improve congestion in public health facilities, including by outsourcing patients from overcrowded hospitals to other hospitals.
“The government will also hold a number of schemes including university and military hospitals, and equipment will be provided to help overcrowding locations such as Selayang Hospital,” he said.
RM64b for Subsidies, Aid and Incentives
Anwar also said a total of RM64 billion has been allocated in the form of subsidies, aid and incentives throughout this year.
The PM said the large amount of funds is to minimise the cost of living through control of the price of goods and financial aid, while also aiming to provide services to the people.
“In considering efforts to deal with the increase in the cost of living, the unity government has introduced the ‘Payung Rahmah Concept’ to help the poor and vulnerable.
“One is the Rahmah Menu Initiative which organises the sale of meal sets at a price of RM5. This Rahmah Menu Initiative is expected to continue receiving good response,” he said.
Anwar also said the government will implement “Rahmah Sale”, which offers basic goods at prices up to 30% cheaper than the market, with a provision of RM100 million to make this programme a success in all 222 parliamentary constituencies.
“The government will also increase the allocation from RM200 million to RM225 million to expand the distribution programme of basic necessities to 25 new areas.
“Among them in Paloh and Passin, Sarawak; Pasir Raja, Terengganu; and Kuala Krai, Kelantan,” he noted.
A Combined RM36.2b for Home Affairs, Defence Ministries
Additionally, Anwar said the government has allocated RM18.5 billion and RM17.7 billion to the Home Affairs Ministry and the Defence Ministry respectively.
He said the priority of the allocation is to maintain and purchase the assets of the Malaysian Armed Forces (ATM) to increase defence preparations with an allocation of almost RM4.1 billion.
He also noted that to strengthen the country’s defence and maritime control capabilities, the government will implement the procurement of coastal mission ships (LMS) this year.
“Meanwhile, the agencies under the Home Affairs Ministry will be provided with almost RM1 billion to strengthen domestic security, including to acquire more than 2,100 units of Royal Malaysian Police body cameras.
“A new Perak contingent headquarters and police quarters will be built at a cost of RM450 million,” he said.
Review of MRT3 Project
On the Mass Rapid Transit 3 (MRT3) project, Anwar said the government will review the details of the project to ensure the best value and achieve additional savings of at least under RM45 billion.
“This effort is in line with the reformed management to reduce procurement costs and achieve savings that can then be redistributed for the benefit of the people.”
Initially, the MRT3 project was estimated to cost RM68 billion in 2018. However, last year, the project cost was trimmed to RM50 billion when the project procurement process started.
On the transport and infrastructure sector, Anwar said the government will continue the My50 monthly pass initiative for the benefit of 180,000 users.
He added that the government will also introduce a MyBAS50 unlimited travel pass on a pilot basis, for the benefit of the people of Johor Baru under the Stage Bus Service Transformation (SBST) programme.
He also said a total of RM150 million will be allocated to the SBST programme, including the expansion of the implementation in the cities of Melaka, Kuching and Kota Kinabalu.
SMEs to See Great Benefits
Anwar also assured that the government will continue to support the recovery of the small and medium enterprise (SME) sector, in addition to re-boosting the business to survive the post-pandemic period.
Anwar said for that purpose, the Business Financing Guarantee Company (SJPP) is ready to guarantee up to RM20 billion in SME loans with focus sectors such as high technology, agriculture and manufacturing guaranteed by the government up to 90%.
“The guarantee is also extended to financing by non-banking financial institutions such as credit leasing companies and cooperatives, so that it can provide specific benefits to small hawkers.”
Anwar pointed out that the government has provided almost RM10 billion in loan funds provided by Bank Negara Malaysia (BNM) to ease the financial burden of SMEs and support business expansion.
Furthermore, he said loan facilities under Bank Simpanan
Nasional (BSN) will also be provided involving a sum of RM1 billion to support micro SMEs and hawkers.
“BNM provides loan funds of up to RM2 billion to support sustainable technology start-ups and help SMEs implement low-carbon practices.”
“Electricity tariffs have been maintained for all domestic consumers and SME businesses,” he added.
On income tax, Anwar says the govt will reduce the M40’s individual income tax rate by 2% to help ease their burden – pic TMR File
Introduction of Luxury Goods Tax
On taxes, Anwar said the government has no plans to implement the Goods and Services Tax (GST) this year. He said in a situation where most people are still struggling, food inflation is over 5% and wage rates are still low, now is not the right time to implement GST.
“The government is taking a more progressive approach by broadening the tax base to those who can afford it.
“The government plans to introduce a tax on luxury goods starting this year with a certain value limit according to the type of luxury goods such as luxury watches and luxury fashion items,” he said.
In line with international best practice, he said, the government will also study to introduce the Capital Gains Tax on the disposal of unlisted shares by companies from 2024 at a low rate.
He noted that the government will hold engagement sessions with the relevant parties to examine the details of this proposal.
Lower Tax for M40
On income tax, Anwar said the government will reduce the middle 40%’s (M40) individual income tax rate by 2% to help ease their burden. He added that the reduction will start this year involving a range of more than RM35,000 to RM100,000 a year.
According to him, the move is expected to provide approximately 2.4 million taxpayers with an excess disposable income of up to RM1,300.
“So far, the bottom 40% (B40) group has often been given various forms of assistance, while the M40 has shown their patience, despite being squeezed by the gripping increase in the cost of living.
“As such, I am happy to announce that the government has agreed to increase the M40’s disposable income through a reduction in individual income tax rates that will benefit them more,” he said.
On that note, Anwar also said the government will also increase the tax rate for those with high incomes, by 0.5% to 2%, involving a range of more than RM100,000 to RM1 million. He noted that less than 150,000 taxpayers will be subjected to higher taxes.
“This step involves reducing the government’s net tax revenue by RM900 million for the benefit of the people, especially the M40,” he said.
According to the PM, the govt will contribute RM500 to Account 1 of the EPF’s contributors aged 40 to 54, who have less than RM10,000 in savings in their account – pic TMR File
Govt Adds RM500 to EPF Account 1
Anwar announced that the government has agreed to contribute RM500 to Account 1 of the Employees’ Provident Fund’s (EPF) contributors aged 40 to 54, who have less than RM10,000 in savings in their account.
He noted that the initiative in the Budget 2023 is part of the government’s efforts to help the rakyat rebuild their retirement savings that were reduced following withdrawals during the Covid-19 pandemic.
For that purpose, the PM said the government has allocated almost RM1 billion to increase the retirement savings of nearly two million EPF contributors who are approaching retirement age.
“After the country was beset by the disaster of the Covid-19 pandemic, the people had to sacrifice their old age savings several times to meet the needs of life during the pandemic.
“Now, as the people gradually rebuild their lives, most people use the income they receive to support themselves, while their retirement savings are still low.
“The government is committed to helping the people rebuild their retirement savings to ensure that the available savings will be sufficient to finance their retirement,” he said.
RM12.1b for Sabah, Sarawak
Under Budget 2023, Anwar announced that Sabah will receive an allocation of RM6.5 billion and Sarawak will get RM5.6 billion.
“This allocation includes plans to develop cities bordering Kalimantan, Indonesia, such as Kalabakan, Sabah, and Ba’kelalan, Sarawak, at a cost of RM1 billion as a step to closely follow the Indonesia government’s initiative in moving its capital to Kalimantan.”
Anwar added that more than RM2.5 billion is provided to implement projects involving public infrastructure, mostly for the benefit of Sabah and Sarawak, involving road and street lighting as well as water and electricity supply projects.
He said that the implementation of the Sabah Pan Borneo Highway and the Sarawak-Sabah Link Road, which is estimated to involve a total cost of RM20 billion with a length of more than 1,000km, will be continued and expedited.