This article first appeared in The Edge Financial Daily on October 26, 2017

KUALA LUMPUR: Pakatan Harapan (Pakatan) yesterday proposed its alternative budget seeking to drive the economy by prioritising wage-earners’ purchasing power, and save about RM20 billion by cutting wastage and corruption.

The opposition pact concedes that under its spending plan, businesses are expected to face “short-term hardship”, but pledges to neutralise the effect by lowering taxes if it comes into power.

“We cannot continue to suppress wages and hope to retain talented, hardworking workers now and in future. If we are to industrialise and advance together, we need to retain talent via fair wages,” said Pakatan.

“In our pursuit of fair wages, we recognise that corporate Malaysia will face short-term hardship. To ease the financial burden and manage the transition to fair wages, Pakatan will lower the corporate income tax for this adjustment period.”

At a press conference at the Parliament lobby, PKR lawmaker Wong Chen said the shadow budget is meant for the transition period for Malaysia to transform into a first-world nation, and not as a populist federal budget.

“We don’t want to scare away businesses. We are committed to pro-business policies to a certain extent, but we are also committed to a fair distribution of income among the people. We want to start a cycle where people have higher wages, they consume, and businesses get back their profits,” said Wong.

On foreign businesses in Malaysia, Pakatan said it welcomes all investments provided they are transparent and beneficial to Malaysia. It also expresses concern about China’s investments in sensitive national security areas such as energy supply and ports.

“We nevertheless will honour those agreements that the government has signed on behalf of Malaysia. As a responsible government, our first act is to release all documents and contracts related to these deals, and if need be, seek China’s cooperation to renegotiate unconscionable terms, if any.”

On the East Coast Rail Link (ECRL), Pakatan said it will shelve the project and re-examine and assess the cost-benefit and potential economic multiplier from the project.

As for the Kuala Lumpur-Singapore high-speed rail (KL-Singapore HSR), Pakatan said its position is to prioritise a connection to the Kunming-Bangkok-Kuala Lumpur line instead of the KL-Singapore connection.

“This is simple because this rail project’s ultimate aim is to [further] open the Chinese market to Malaysia instead of [just] serving commuters between KL and Singapore — a route already adequately served by road infrastructure and air connectivity.

“The current ECRL and HSR projects are packaged as loans to Malaysia. This model where China is the financier and contractor cannot be in Malaysia’s best interest. Instead, our partnership with China must be based on equity partnership and [as] joint contractors to share and exchange knowledge and technology.”

The opposition pact promises to stop the goods and services tax (GST) and resume the sales and service tax, which would result in RM25.5 billion reduction in tax revenue.

Wong said based on Pakatan’s calculation, the shortfall can be filled with higher corporate income tax, real property gains tax, licences for motor vehicles, import, excise as well as stamp duties, and investment income.

“When this RM25.5 billion is returned to the market, there will be more economic activities, and it will increase the government’s other income streams,” he said.

Wong added that Pakatan will slash the budget for the Prime Minister’s Department substantially, from an estimated RM20.8 billion to RM8.4 billion next year.

Pakatan is also committed to abolishing highway toll concessionaires nationwide. DAP lawmaker Ong Kian Ming said it is more cost-effective to buy out the companies instead of paying compensation to them in the long term.

“Highway concessionaires are still [classified] under the OSA (Official Secrets Act), but we understand some of the terms concerning the LDP (Puchong-Damansara Expressway), for example. We think it is better to buy them out than to pay compensation,” Ong said.

The opposition pact has proposed to increase the minimum wage to RM1,500 a month as well. “Our government will fund 50% of the increase for three years and we will ask companies to do the same. According to income tax data, companies in Malaysia are collectively two-and-a-half times richer than the entire workforce of 14 million,” it said.

This severe imbalance is due to workers being underpaid. The data also highlights only 15% of the workforce pay individual income tax — a major problem because it means the remaining 85% are struggling to make ends meet.”

Pakatan also wants to reduce household debt to 75% of gross domestic product within five years as the government. “We understand the biggest components of household debt are property and car loans. We will seek Bank Negara Malaysia’s guidance on how best to lower property prices and reduce property speculation activities. Reducing excise duties for cars, meanwhile, may go some way to free up more capital and savings for the rakyat.”

On the People’s Aid Scheme (BR1M), the shadow budget proposes conditions such as ensuring the money is used for positive purposes and not spent on frivolous items.

Pakatan intends to streamline various affordable home schemes too, by consolidating them under a single government agency, just like how Singapore operates under its Housing and Development Board.

Aiming for a deficit of 2.04%, the alternative budget involves an expenditure of RM258.52 billion, of which 77% will be operating expenditure, and the remaining 23% development expenditure.