Wednesday, March 19, 2008

DAP Economic Policies

Many have been asking us, now that DAP is leading the government in Penang and part of the government in Perak and Selangor, what are the economic policies which we plan to implement in these states.

Some may be aware of the "Malaysian Economic Agenda" promoted by Parti Keadilan Rakyat. Similarly, details of economic policies promoted by the DAP is encapsulated in the 2008 Malaysia's Alternative Budget launched in September last year.

It's a 54-page document, so if you are just interested in the key highlights (3 pages), read on. ;-)

The proposed DAP 2008 Malaysian Budget focuses on the twin challenges of globalisation and our high dependence on oil and gas resources. With increasing competition from other developing countries and the rapidly evolving technology markets, it is critical that Malaysia puts in place a system which will be able to exploit the opportunities provided by, and at the same time mitigate the negative impact resulting from globalisation. At the same time, a 40% dependence on government revenue from the oil and gas sector is of serious concern, especially in the light of oil reserves which will last for only another 2 decades and Malaysia becoming a net oil importer by 2011.

This Budget will also serve as a distinct departure from the current administration's New Economic Policy (NEP) which is driven by race. The underlying rationale and approach to our Budget is the “Malaysia Economic & National Unity Strategy” (MENUS) which will be based on performance, competence and needs of all Malaysians.

Therefore it is imperative for the Government to build new capacities for the future to ensure that our productivity increase is more than sufficient to replace declining contribution from the oil and gas sector. At the same time, we will strengthen our social security system to ensure that the poor, less fortunate and under-privileged are not left behind in our pursuit for excellence. The wealth of natural resources on our shores must be shared equitably to make sure that everyone gets to benefit and taste the fruits of our land. We must also shake off our habit of designing world-class blueprints, only to fail miserably in their implementation. The DAP will put in place a robust system to improve productivity and competitiveness of the government's delivery system.

Finally, we will utilise responsibly all fiscal measures and tax instruments to ensure that the country does not bury itself in debt and to avoid expenditure on mega-projects which are unlikely to bring significant benefits to the population. Our policies are designed to make ourselves competitive relative to our neighbours as well as to nurture dynamic innovative and entrepreneurial Malaysians.

The key policy measures proposed in the Budget include:
  • Legislating the use of oil and gas revenue to ensure that a substantial portion of the revenue is spent on education as well as research and development to build the necessary economic capacity for Malaysia, to ensure that the increases in productivity and innovation will more than compensate for the expected decline in oil revenues. It is proposed that 50% of oil and gas revenues be invested in human capital and research and development, while another 25% be used to strengthen the social security for Malaysians who are in need. Legislating the utilisation of funds will also prevent the mis-allocation of resources to bailout failed projects or other non-productive sectors.

  • Hence, RM43.3 billion is allocated for education and training, accounting for 26.3% of the overall 2008 Budget. The focus of the expenditure will be to enhance the qualitative elements of education instead of the quantitative elements. RM3.2 billion has also been allocated for Research & Development.

  • RM13.6 billion is allocated to improve the quality of the nations transportation infrastructure, particularly the public transport system. The bulk of the increase goes to development expenditure for transportation, which will increase from RM7.3 billion to RM9.5 billion. Key attention is given to the 3 highly congested urban centres – the Klang Valley, Penang Island and Johor Bahru. A blueprint for the “Valley Circle” rail network will also be developed to improve inter-suburban connectivity, by-passing the congested Kuala Lumpur city centre.

  • Barisan Nasional's policies of guaranteeing highway toll concessionaires as well as independent power producers (IPPs) extraordinary profits with grossly unequal contracts with little or no risks to the latter are the clearest cases of the Government failing to protect public interest. The impact of these policies are increasingly felt today with rapidly rising toll rates and energy prices. It is hence imperative that the Government renegotiate these contracts to protect the interest of the public within a 6 month period. In the event whereby no significant headway is made in the negotiations, it is proposed that the Government move to acquire the assets of these entities. The resultant savings will then be passed on to consumers or be diverted to other public interest projects, such as the public transport system.

  • When the Government launched the Multimedia Super Corridor (MSC) project 10 years ago, it promised to make every effort to grow and support local MSC status companies. However, despite the rhetoric, the Government being the largest consumer of information technology services in Malaysia has not given preference to these companies. It is therefore important that in this proposed budget, Malaysian MSC status companies be given specific preference in tendering for the Government IT-related contracts to help nurture these companies into successful regional players.

  • As part of our philosophy, no person or community in need, irrespective of race or religion will be denied the necessary government assistance. In line with this, the DAP will implement “FairWage”, a policy which serves to improve the livelihood of low wage earners above the age of 35, which will at the same time incentivise employers to provide increased employment opportunities. A “Malaysia Bonus” of up to RM1,200 will be granted to Malaysians with income not more than RM3,000 per month. In order to assist the elderly above the age of 60, many who are having problems making ends meet, those qualified will enjoy an the “Senior Malaysian Bonus” of up to RM1,000. These bonuses are channelled into their respective EPF accounts.

    The FairWage policy and Malaysian bonus will cost approximately RM9.3 billion to administer.

    It is part of the proposed programme to share the fruits of the nation's wealth, particular from the oil and gas sector with all Malaysians in need. In the longer term, more assistance programmes will be carried out in this grant-based mechanisms which are means tested instead of via subsidies which are distortionary in their impact, and often disproportionately benefiting the wealthy.

  • One of the core pillars of MENUS is that all Government contracts should be tendered in an open, competitive and transparent manner. All qualified companies shall be provided with equal opportunities to secure Government supply contracts and projects. To prevent overwhelming disruptions to the current system, this policy, free from race-based requirements, shall be implemented on a gradual basis, commencing with projects or supply contracts sized above RM10 million for 2008. In view of the challenges brought by globalisation, all tenders shall be made competitive, open and transparent by 2015. Assuming a conservative 10% savings is achieved via the new tendering system, this will result in absolute savings in excess of RM5 billion per annum in conjunction with quality improvements.

  • The transformation of the Malaysian economy into one that is knowledge-based will not succeed without the critical ingredient of innovation and entrepreneurship. Therefore it is proposed that the Government set up a new RM250 million seed fund, STARTUP where we will act as a matching co-investment fund with reputable private investors who will assist in the mentorship of the start up companies. To encourage private investor participation, losses incurred by such investments shall be tax deductible from the investors' individual or corporate income tax. To further boost entrepreneurship, start-ups shall enjoy full tax exemption on their first RM200,000 chargeable income for each of their first 3 years of assessment.

  • Government revenue from small medium enterprises which constitutes more than 99% of all enterprises in the country has clearly declined with the dependence on oil and gas revenue. To revitalise the SME sector, and to assist many SMEs whose counterparts in many countries in the region enjoy significant tax advantages, it is proposed that the tax rate for SMEs on their first RM5o0,000 chargeable income be reduced to 18% from the current 20%. In additional a new partial tax exemption threshold will be set at RM200,000 and taxed at 12%. This means that a SME with a chargeable income of RM900,000 will be taxed at an effective rate of 18%, in line, particularly with its competitors across the causeway in Singapore. This measure will help make Malaysian SMEs to be more competitive and at the same time attract more SMEs to set up business in Malaysia, creating more employment opportunities.

  • DAP is proposing a 1% reduction of the top tax bracket to 27%. More importantly however, there will be a revision and a simplification of the progressive tax brackets which will result in significant reduction in taxes by all. Most importantly, to assist Malaysians to cope with the rise in living expenses, particularly in urban areas, the first RM15,000 chargeable income will become tax exempt, with the subsequent RM15,000 taxed at 7%. Currently, only the first RM2,500 is tax exempt while the next RM2,500 is taxed at 1%. Based on the new tax structure, a married worker with RM3,000 pay per month, a full-time housewife who looks after 2 young children will pay no taxes, whereas under the previous tax structure, he will be expected to pay between RM55 to RM445 depending on his insurance premiums and medical expenses for his family, including parents.

  • The rate of global climate changes is accelerating and it has become absolutely necessary for Malaysia to play its part in protecting the environment. Hence, a “Green Tax” is to be implemented in 2010 whereby a “carbon tax” is charged at RM25 per tonne of CO2 equivalent, with the exception of methane emissions from the agricultural sector as well as special exemptions for carbon intensive businesses which adopts global best practices on emissions. In addition, a 5% severance tax shall be imposed on the extraction of metals and forestry products in the country. However, companies which secure certification from The Forest Stewardship Council (FSC) accredited certification bodies will be granted the severance tax exemption for promoting responsible management of the forest.

  • As a part of our new source of revenue as well as to negate the rent-seeking culture, the approved permits (APs) current issued for free by the Ministry of International Trade & Industry to a select pool of “businessman” shall be auctioned to the highest bidders instead.

    Based on an estimated 70,000 APs issued per annum and a conservative RM25,000 market price, the auction will provide an additional RM1.75 billion to the government coffers.

  • Women will also benefit significantly with the proposed extension of paid maternity leave from 60 to 90 days if they have worked for at least 180 days prior to delivery with the employer.

    Their pay will be shared equally by both the employer as well as the government. This together with other measures proposed in the Budget will play their role in strengthening the bond between the mother and child, promoting strong family values, while at the same time, encourage more women to join the workforce. As at 2004, Malaysian women participation in the work force stands at 47.3%, significantly below that of our neighbours, Singapore and Thailand at 53.9% and 64.2% respectively.

  • Finally, this budget represents a budget which seeks active involvement from the civil society. Instead of attempting to tackle all issues on its own, which the government will not be able to competently and effectively, sizeable grants will be made available to specialist non-governmental organisations (NGOs) to promote, educate and run various social causes and programmes. RM240 million has been set aside as partial or full grants for NGOs to pursue environmental causes, eliminating poverty, promote healthy living, managing women issues or assisting the disabled, to be disbursed over the next 5 years.


Anonymous said...

why peguam negara said sultan no power on the menteri besar.
See what happen to PERAK?
People claim lim kit siang no respect, how about Peguam negara?????

shky said...

What about state government budget? I think this one is of priority and will pose significant challenges especially when the current federal government is not likely to be sympathetic to DAP State Government's cause.

Anonymous said...

Wow, this sounds great!

I love to see them materialise in the near 5 years.

Thanks for sharing.

Anonymous said...

Dear YB

Needless to say: don't over-promise, but over-deliver. This was the main cause of the fall of BN, apart from not evolving it's political philosophy & maintaining race-base policies. Talk less to the MSM. Reach out in other ways, esp. on important issues. The MSM will always misconstrue issues that don't favour the ruling gov of the day. Like it or not. All the BR-MPs are famous/popular enough already: otherwise, how else they got voted? Another one of the problems of the BN is that they think they are superstars.

May or may not be related, I believe Selangor state is probably top 3 income tax-contributors (private & corporate) along with Penang & Perak to the Fed-Gov. Can't we channel these taxes to the respective states instead? The states then decide how much to give the beggars in Fed-Gov. That's only fair. Or is it run this way already? Pardon my ignorance.

If not wrong, in the US, each state decide the tax level. So, if all BR-states decide to lower corporate tax (for example only ah) - this will be one way to lure more FDI into these states. After all we have to compete with BN-states now. I am no economic guru but don't see how such healthy competition can cause dire consequences.

EPF can't be help. That can be Fed-Gov control since it will involve major investments & returns. I would also hope that the EPF look to contributors as their investors / shareholders. This attitude got to change. The EPF should also have a watchdog from the BR. Somewhat like a internal shadow.

WY said...


I think it ll go well with the general public and Malaysians at large, if DAP via yourself, have some thorough discussino with your PKR and PAS counterparts, to form and draft the future government economics policies. Be it MEP or MEA etc.


Anonymous said...

Dear YB Tony,

I was one of the crowd that chanting ur name during the ceramah at SS2...I would like to apply for the DAP life membership under your team...Can u pls advise me on the membership application?

Hope to hear from you soon...



NEO said...

Dear Tony,

Crude Oil Forward Contract already hit USD200 per barrel. Please do informed the opposition coalition not to over promise on low petrol price.

Most citizen actually not "angry" on high petrol price but they are "very angry" why cannot keep their standard of living maintain as before.

In summary, its all related to economic performance.

Please started to formulate a medium to long term economic policy for Malaysia for next 15 years and prepare to implement this policy once opposition captured the federal government by 2012.

Maybe the CM of Penang and MB of Selangor and Perak should organise a joint business trip to overseas to secure the foreign investors confident in the three opposition led state government.

Good Luck.

Anonymous said...

On police force:

1)Have police beat on foot.
2)Have public assessment on them.
3)Reward based on public ranking.
4)Have their faces put on billboard so they can be recognized.
5)This helps to enhance motivation.


Anonymous said...

Problem with our police force - the so called "non-executive" police - are very poorly paid. No surprise that most of these guys who join police force are school drop-outs & from very poor families. Yet, we can have a RM27Million police CID chief...which by the way, what happened to this case? Another X-File? In 30 years time, Malaysia can start making it's own X-File series.

Anyway, coming back to police force...their pay is so low how can we expect such dedication & committment from the lower rank police force. Surely, we wouldn't see an OCPD or ASP taking the "beat".

From what I hear, the London Bobbies are paid very well (UK standard mah) & they work like brother-hood style. The main thing is that they are very well covered by insurance - of course, courtesy by HR the Queen & Londoners. They are after all dedicating their life in the line for the safety of the public. The insurance payout is well enough to look after the family should anything happen...& otherwise, will go into the pension fund. Some of these guys are degree holders! They still got to study, sit for exams (for promotion = more pay), etc.

I think in our case, imagine the pay is RM 700-/mth. If anything happens, the famil get RM 350-/mth. Even Indonesian maids get more pay than that. If I am correct, then there's something truly wrong with our system.

If the system is corrected, there would be more police personnel on the road...& maybe less pirated dvd peddlers trying to cari-makan on the street.

Anonymous said...

Please note while we may not have to pay the bill for the first 20 cubic m of water supply, we still have to pay Indahwater RM8.00 per month. Poor family may enjoy free water supply, but pay RM8.00 for nothing.

Anonymous said...

Dear YB Tony,

I also one of the crowd that chanting ur name during the ceramah at SS2...I would like to apply for the DAP life membership under your team...Can u pls advise me on the membership application?

Hope to hear from you soon...



Anonymous said...

Dear YB Tony,

I believe you realise the reason of BN's fall - failure to deliver their promises. BN has the power, but they decided not to use it for the public.

Another thing is, the world is closely intertwined, and Malaysia's economy cannot run away from the symbiotic relation. Being a PPE holder, i am sure you are aware of it, so please make good use of your expertise to "truly help make our country a better place for all communities, and a country we can all be proud of" and not just for the sake of getting support from the people.

Therefore, i would prefer BR (DAP/PKR/PAS) not to over-promised things just to impress the citizens, when in fact you do not have the power and authority to do anything, at least not at the moment.

The most important thing to do is to familiarize with the administrative works as the pact has no experiences in governing a state. At the same time, beware of BN's dirty tricks and sabotage, which i believe they are going to be around until the next GE.

Keep things simple, straight and transparent, and the people of Malaysia will give you the power to form a federal government in GE13th.

Thank you.


Anonymous said...

Don't lost sight but every step taken be it small or big to improve society at a whole is important.

For example Penang govt should start looking into how best and cost effective for Penang old town building's owner to invest in conservation so that the whole city looks nicer and hence will draw more tourist in the longer term. I would assume landlord are worried about rennovation cost but if the city council can plan and group contractors and shops owner in the objective of mutual benefits than I think many shops owner will be willing to invest. This isn't easy job but is necessary if we still consider Penang identity important. It would be sad if nothing come up in this prespective in the next 4 years.

George the Town

Anonymous said...

Don't forget to post me the RM6,000 cheque you promised

cancan said...

A Letter TO The Prime Minister


Anonymous said...

Apart from national issues, the most urgent/important one which affects the people directly is the performance of local councils. Pending the reintroduction of local council elections, DAP/PKR/PAS must ensure the local councils are efficient and effective in serving the ratepayers. For a start, please replace the present political appointees and seatwarmers.

All the best and God Bless.

Anonymous said...

Dear Tony,

I am impressed with most of the key points in The DAP Propose Budget. I disagreed with the point of spending 25% of our Nation O&G revenue on social security. In fact, disagree totally in spending the O&G revenue.

Goverment should only spend the money that is being tax from O&G. Petronas should be made accountable to re-invest its revenue in exploration & acquiring Global assets.

You as an ex-CEO of a company, did you spend your company revenue away without any benefit to the company long term growth?

Will PAS & PKR buy into the DAP budget proposal? Hate to see DAP, PKR & PAS become Gov & spend next 4-5 years arguing.

It is easier to complaint but difficult when govern.

All the best

Anonymous said...

I believe that the US has a dual tier corporate taxation system, where the IRS takes a standardized cut, whilst the state takes a cut which varies according the state legislation's whims.