Dear Saudara Lim Guan Eng,
As a Malaysia citizen and veteran economist of regional economies, may I suggest that:
1. The Malaysian government's 2019 Budget resolve smartly the critical problem of liabilities of rm36 bil (GST refunds and corporate tax).
This huge unfunded liability, after negotiating tactfully with the creditors, should be amortised or repaid on a staggered basis so that the Federal budget is not burdened.
Thus, there is no need to raise more taxes in 2019 which invariably has a multiplier contractionary effect on the economy in various degrees.
2. Overall, the PH government must communicate clearly to the rakyat that the extraordinary inefficiency, fraud and corruption of the previous government must be dealt with in a similarly extraordinary policy that does not make the current tax payers and citizens pay the cost of BN's mistakes at one go.
3. 2019 is a very crucial year for global financial markets given the unresolved trade war and a rising US dollar. We cant afford to take an accountant's approach to solving the fiscal mess.
4. At the same time, there must be counter cyclical expansionary policies that enhance consumer and business confidence.
5. We have to review the tax system and come up with a new way of taxing property development profits so that the oversupply of office space can be reduced and discouraged. Much of the nation's resources are wasted on property development and overpriced infrastructure projects.
6. The public transport system can be improved further with the succesful MRT serving as a good model for other lines. Education resources must be invested (without being politicised) to make schools more competitive for the global market. Malaysia will be competing not only with Vietnam in manufacturing but also India in services.
7. Finally, just as the Finance Ministry has disclosed its revised government debt/GDP of 80% for 2017, it ought to show the actual budget deficit adjusted on the assumption that the GST and corporate taxes were duly refunded in prior years. Is it 3.5% or 4% versus official budget of 3%?
That way we can assess the "true and fair" condition of our fiscal finances.
8. One final thought, the rationale of the GST was to reduce corporate and personal income tax rates. Since GST is zero rated, how will tax rates be brought down to encourage investment in capital and enhance household disposable income levels?
Allow me to end with a quote from Financial Times journalist John Authers:
"The right to free speech does not give us the right to shout 'fire' in a crowded cinema; there was the risk of a fire, and we might have lit the spark by shouting about it."
The Emerging Market crisis we are facing today, burdened by higher debt levels than the 1997/98 crisis is like a crowded theatre of people (investors) waiting for a good show (vibrant economy).
You have shown the bad news of the past government's deeds. Now you must end the narrative with a creative twister. Dont let the people lose the plot much less alarm them unwisely.
Thank you for your faithful service to the rakyat and being a major part in the rebuilding of a corruption-free New Malaysia.
May God bless our two leaders Prime Minister Tun Mahathir and the PM-in-waiting Datuk Seri Anwar Ibrahim.
Jeremiah Liang
