Malaysia budget 2021: Five ‘refinements’ from the initial proposal and possible implications

KUALA LUMPUR: Malaysia’s 2021 budget was passed at the policy stage in parliament on Thursday (Nov 26) following a voice vote.

Only 13 out of 220 Members of Parliament (MPs) stood up to protest the vote, short of the 15 required to enforce bloc voting.

The parliament has 222 seats but there are currently 220 MPs following the deaths of opposition MP Liew Vui Keong and Barisan Nasional (BN) MP Hasbullah Osman. 

After the parliamentary session, Prime Minister Muhyiddin Yassin released a statement, lauding the Ministry of Finance for finalising the budget by making “a few refinements” to the original proposal.

The RM322.5 billion (US$79 billion) budget, the largest ever tabled in Malaysia, was presented in the parliament on Nov 6 as the country was reeling from the economic impact of COVID-19. 

Given Mr Muhyiddin’s slim parliamentary majority, it was the first time the opposition bloc was consulted in the run-up to the budget presentation. 

In his Thursday statement, the prime minister said: “These refinements have taken into account viewpoints from various parties, including MPs who participated in the Supply Bill 2021 debate.

“I wish to stress that the Perikatan Nasional (PN) government is a government that has an open attitude in receiving any viewpoints, reprimands and criticism.”

Speaking to journalists after the budget vote, Mr Anwar Ibrahim said while the opposition did not support the budget in principle, he acknowledged that Finance Minister Tengku Zafrul Tengku Abdul Aziz did announce additional grants to frontline workers and those whose livelihoods have been impacted by COVID-19, and that these measures were “acceptable” to the people.

“I don’t want to be seen to be ignoring the fact that the minister has introduced some measures although he has detracted from the fundamental issues,” said Mr Anwar.

He claimed that there would be no guarantee that the opposition would approve the budget ultimately and said that opposition MPs will continue to speak when the budget is debated at the committee stage.

Debate at the committee stage will take place from next week onwards until Dec 15. During the committee stage, the budget for each ministry would be scrutinised in detail.

“We will certainly choose to reject and call for a division (bloc vote) if its deemed necessary,” added Mr Anwar.

READ: Malaysia’s budget for 2021 is its biggest ever. Will it cushion the impact of COVID-19?

Are all parties happy with things as they currently stand?

Assoc Prof Ahmad Martadha Mohamed from Universiti Utara Malaysia said it was a win for Mr Muhyiddin’s government, which has now managed to pass the budget at the policy level while at the same time holding off challenges from the opposition to its razor-thin parliamentary majority.

“One reason the opposition MPs did not want to vote against the government is because they did not want to act against the Agong’s decree,” he said.

The Malaysian king has urged politicians from both sides of the political divide to support the budget for the sake of the people’s well-being and the country’s economic recovery.

Assoc Prof Ahmad Martadha added that the refinements also showed the PN government’s willingness to be “flexible” and “listen to the criticisms” made by MPs during the budget debate.

Here are five refinements that the government made following the budget debate, and their potential implications: 

1. MORE MALAYSIANS CAN TAP ON RETIREMENT FUNDS 

Speaking in Parliament before the voting was conducted on Thursday, the finance minister announced that more than 8 million members of the Employees Provident Fund (EPF) can now make withdrawals from their account 1 if their source of income has been affected by COVID-19. 

He has also raised the withdrawal limit to RM10,000 (US$2,457), from the previous limit of RM9,000 for those with an account balance below RM90,000.

He explained that the scope of those allowed to withdraw through the i-Sinar programme has been widened to all members who have lost their jobs, given no-pay leave or have no other source of income, expanding the pool from 2 million to 8 million members.

READ: Malaysians now allowed to tap on retirement funds, withdrawal ceiling raised to RM10,000

During the budget debate, both BN and Pakatan Harapan (PH) urged the Ministry of Finance to allow people  to access their account 1, which used to be off limits to account holders until the retirement age of 60.

While Mr Anwar urged only for the people to have access to their savings, BN’s Najib Razak suggested that the allowed withdrawal amount should be upwards of RM10,000. 

Commenting on this shift, Professor James Chin, who teaches Asian Studies at the University of Tasmania, said that this could be construed as a “populist move” as it would cater to the requests of the millions of Malaysians whose income have been impacted by the pandemic.

He warned that individuals who are likely to make these withdrawals are from the B40 (bottom 40 per cent) group, and these withdrawals will deplete their retirement funds in the EPF.

“This means after the COVID-19 crisis is over, many of them might regret withdrawing the money as they no longer have the cushion needed,” said Prof Chin. “So this change has both strengths and weaknesses.” 

On the contrary, Assoc Prof Ahmad Martadha said the announcement showed that the government was adaptable so that it could ensure the people are able to draw on funds as they struggle to cope with COVID-19.

“Because the funds are used for retirement purposes, the government was initially reluctant to cave in the demands of the people. But it has now taken into account how the pandemic has impacted their livelihoods,” he said.

2. LOAN MORATORIUM EXTENDED, BUT ONLY FOR B40 AND SMALL BUSINESSES

Another hotly debated issue during the budget debate was whether to automatically extend the moratorium on loan repayments for all Malaysians. 

Subsequently, the government said it will implement an auto-approval mechanism for those in the B40 group as well as small and medium enterprises (SMEs).

In his speech on Thursday, Mr Tengku Zafrul clarified that this means individuals in the B40 income group and micro SME companies do not need to submit any supporting documents to be entitled to the three-month moratorium which will be implemented until end of December.

READ: Malaysia’s budget for 2021 is its biggest ever. Will it cushion the impact of COVID-19?

Prof Chin said that the refinements were positive as they made it easier for more Malaysians to spend and this will  “restart the economy”.

“If people are denied money to extend their loans, they will spend less, and this could cause Malaysia to head further into recession,” said Prof Chin.

However, he cautioned that interest rates during the moratorium are not deferred, and this could snowball into more debt for the individuals.

3. GOVERNMENT PROPAGANDA UNIT TO BE REPURPOSED

On Wednesday, Minister of Communications and Multimedia Saifuddin Abdullah announced that the government’s Special Affairs Department (JASA) otherwise known as JASA, will be rebranded to become the Community Communications Department (J-KOM). He stressed that J-KOM will not operate as a political propaganda machine for the government.

JASA was one of the issues which sparked controversy after the budget was tabled on Nov 6. The proposed budget not only indicated that the department would be resurrected after being disbanded by the PH administration. It was also allocated a whopping RM85.5 million. 

READ: Why there is robust debate in Malaysia’s parliament over a move to revive the government’s ‘propaganda unit’

However, the proposal was criticised by many MPs during the budget debate.

The opposition has said that JASA is a propaganda tool by the PN government to promote partisan messages.

Even MPs from United Malays National Organisation (UMNO), a component party of PN, have voiced concerns on the government allocation for JASA in budget 2021. On Thursday, the finance minister said the allocation for JASA would be reduced. 

Assoc Prof Ahmad Martadha said the move to rebrand the department was positive, as it would rid the department’s reputation of a propaganda unit, as it was regarded when BN was in power before 2018.

“J-KOM has a different purpose, The government has explained that it is used to disseminate information, educate the people and at the same time allow people to provide responses and feedback to the government,” he said.

He also noted that the department would be part of the government’s pivot to become a digital society, and will use some of the budget allocation to strengthen IT infrastructure in rural areas.

“This fits the government’s goal of having a digital society in the future,” added Assoc Prof Ahmad Martadha.

4. ONE-OFF PAYMENT EXTENDED TO MORE FRONTLINERS

Following the budget debate, the government has also agreed to extend a one-off payment to more frontliners battling COVID-19. Earlier, it proposed a special one-off payment of RM500 to frontliners with the Ministry of Health.

The finance minister said on Thursday that after considering proposals from MPs, the government has decided to extend the payments to other frontliners on duty during the COVID-19 pandemic such as police officers, army as well as personnel representing the National Disaster Management Agency (NADMA).

These frontliners will now receive a one-off payment of RM300.

Assoc Prof Ahmad Martadha said this shows the government’s commitment to reward frontliners from outside the health ministry, who have also been working tirelessly throughout the pandemic.

“The government may have realised that these frontliners are a forgotten group of people whose roles are as important as health workers in helping the country overcome COVID-19,” he said.

5. MORE FINANCIAL AID FOR SABAH TO COMBAT COVID-19

Mr Tengku Zafrul also announced on Thursday when wrapping up the budget debate that the government would allocate another RM50 million to Sabah to help the state overcome COVID-19.

He noted that Sabah still has 63 active clusters and expressed hope that the funds will be channeled to ensure the situation would be managed better.

Malaysia is currently battling the third wave of the pandemic, and Sabah is one of the most badly hit states.

READ: In Malaysia’s Sabah, COVID-19 pandemic rages as migrants flee testing

Prof Chin said that more healthcare funds could provide medical access to the thousands of residents in the states, including migrants living in rural areas.  

However, he noted that the additional funds alone might not be sufficient for Sabah to eradicate the coronavirus.

“It’s not going to make much of a difference because the amount of money cannot stop the spread of COVID-19. It is factors like human behaviour: Being consistent in social distancing and avoiding mass gatherings,” he said.

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