This article first appeared in The Edge Malaysia Weekly on January 10, 2022 - January 16, 2022

The Edge: It’s been only two months since the tabling of Budget 2022 but so many things have happened that it looks like you need to redo the budget or table a supplementary budget.

Zafrul: Every year, there is a supplementary budget but, yes, only just now I told the cabinet that we have to relook and reprioritise to make sure we focus on those who need it most first. In this case, it is the floods — roads need repairs and all that, because the resources remain the same, despite additional allocation.

This time it is major. The last time [the floods] were this bad was in 2014, when close to 300,000 households were affected. This time, it is 80,000 households — less but it’s more severe in the sense that it happened in Selangor. In Terengganu and Kelantan, they were more ready. Here in Selangor, they didn’t expect it. We have to relook at a number of things.

Will there be any major flood mitigation plans?

We discussed. The ministry will have to come up with a long-term solution. But even with any solution, because of climate change, the cycle has become shorter; things that happen once every 100 years become 50 years, or every 30 years.

For example, this time, the SMART Tunnel was closed for 22 hours. Usually, it is only three to four hours. It’s not so easy to have a SMART Tunnel [to mitigate flood] outside the city [but] we have to improve on flood mitigation.

Your senatorship is three years, so about one more year to go but it can be renewed for another three years, right? GE15 doesn’t affect your senatorship, right?

Yes, it doesn’t. Yes, one more term. So, the maximum is six years.

So you can be in the position until 2026?

If they want me to.

Is there any going back to Corporate?

Yes, but not as the CEO of a bank.

In managing the country’s fiscal position, how do you balance between doing what’s right but unpopular versus what is popular, politically?

Well, one issue that I’m very firm about is the Employees Provident Fund, for example. There are people who really need it. To me, it is the role of the government to assist them, and not asking them to take out their savings, especially the B40, and even the M40, for that matter.

Of course, I’m getting slammed by some quarters for that. But I have to be firm because of the impact. We are going to be an ageing population by 2030. That’s only eight years away when 15% of our population will be above 60 years old. They won’t have enough money to retire on and this means that their children and grandchildren will have to pay for it. In a sense, the government has to then [assist them]. That’s why developed countries have such high income taxes, right, to fund the generation who is not productive any more. It would be good if we can mitigate that [ageing population issue] early.

On the floods, to me, the government should step in. That’s my argument but some people [still insist on the EPF withdrawal]. But those [EPF withdrawals] are the type of populist things we need to counter, and when we think it is not right, we have to be firm, and thankfully when I briefed the cabinet on it, it also supported my position on it. The prime minister himself also said we must do the right thing.

So, we increased the assistance to those who are affected [by the floods]. It is the first time in history that we came up with a structure where we give funding to those affected — 0% interest rates through Bank Simpanan Nasional, Tekun Nasional and various other institutions. The banks are now more helpful because they agreed to give six months’ moratorium to those affected by the floods.

For the government, we worked with the car companies — RM1,000 for repairs, and they are also doing their part, giving [up to] 50% discount on spare parts and labour cost. Tenaga [Nasional Bhd] is also giving rebates for one month and the government is also providing RM500 for electrical goods and RM2,500 to buy the things that have been destroyed and repairs of up to RM5,000.

Those are the things that we are doing, and because we are recovering from Covid-19, we have to do a bit more than usual.

The bill is rising. It’s going up by the day. At the cabinet meeting earlier, the relevant ministries reported how much is needed for repairs for highways, schools, buildings ... It’s tough but this is a natural disaster. So, we need to provide support.

Does it look like we need to table a supplementary budget already?

Every year, we table a supplementary budget, usually in the next parliamentary session. It will be either in the next parliamentary session or the one following that, depending on the timing of the parliamentary sitting and when we get a slot.

Will there be significant reallocation to the budget proposals?

It’s still too early to tell, it’s only Jan 5. We can always reallocate. I have already hinted to my colleagues that we might have to do some reallocation and reprioritise.

Has any ministry been notified that it will get a cut?

No. It’s only the fifth day of the year. We can always adjust based on priority and reallocation. The difficult part [is] only when it is the second half of the year or towards the fourth quarter, then you will know.

Regarding EPF, do you regret opening the floodgates?

No, I don’t regret it. If you look at it RM101 billion that was taken out from the three schemes, and at that time we had to be accountable as well for the economy, because it was a decision by the government to close down the economy [to keep the pandemic under control] for three months, then another three months and then for certain sectors. Whatever you want to say [about our earlier decision on enabling EPF withdrawal], this pandemic is something that has never happened before, an unprecedented crisis and a global one. Other countries have done it as well, like Australia. But it has to be a one-off and we were clear at that time.

Even for the third scheme, i-Citra, I was very reluctant at that time. It’s not about the institution itself but about the contributors and their future. But still, no regrets on that part.

But we also have to understand that the flooding cannot be termed as unprecedented as it can be a recurring event. How do you then say that we would allow a withdrawal for this year’s flood but not for the next flood? Where do you draw the line? Is it just floods? What about fire or a landslide? Then the contributor’s savings will never be built up again.

Even without the different Covid-related withdrawal schemes, many will not have enough for retirement anyway.  

Yes, that’s my concern. You can see from the statistics, it is worrying. Close to 50% have less than RM10,000, among those who are below 55 years old.

We are studying that, it is a long-term issue about the social safety net because we are talking about EPF. And how about those that don’t [contribute] — those in the informal sector? That’s why in my last two budgets, I tried to include the informal and gig workers in the EPF system. They don’t want to be in the system because they want to have a higher [disposable] income to bring home. But in the long term, they need to start thinking about what will happen when they can’t work. How about insurance? At least, if they are covered by Socso, they are protected if something happens.

Other nations have been raising their tax rates during the pandemic. Singapore is talking about raising its Goods and Services Tax to 9% from 7% while here in Malaysia, we’re talking about more withdrawals from EPF. Where did we go wrong?

We are one of the most heavily subsidised nations in the world. It is estimated that more than 80% of each household’s expenditures are subsidised, from electricity to water.

Petrol, do you know we are the cheapest in the world now, apart from Brunei? We are cheaper than even the Organization of the Petroleum Exporting Countries (Opec). Where can you get RM2.05 per litre? RON97 is already at RM3.00 plus per litre, that is the true cost.

Even with GST, we are one of the few countries in the world that have not done it or have done it and retracted it. We would have got RM20 billion from that at least for a year and RM40 billion in two years. It is a lot of money which can be utilised for development.

[But] you can’t introduce any new thing when people are recovering [from the pandemic]. If you noticed, prices didn’t come down even when the Sales and Service Tax (SST) was implemented.

You mentioned earlier that more than 80% of our goods are subsidised. Is it because we have been used to so much subsidy that it is hard to let it go, regardless of affordability?

Yes. And when fuel prices are high and commodity prices are high, the subsidy bill becomes higher because we have a ceiling, for example, RON95. Remember, we also extended three months’ subsidy [price control mechanism] for cooking oil? We have never done that before, that’s another RM400 million. And what about electricity? Don’t you wonder why it hasn’t gone up?

I am supportive of subsidies but they have to be targeted. People like me shouldn’t be paying the same price for petrol and electricity.

At one point, we were paying quite a lot for fuel.

Yes, petrol prices were floated [according to market prices].

So why not revert back to the float and implement targeted subsidies?

Well, [the petrol price ceiling], along with the abolition of tolls and so on, was part of the previous government’s manifesto. Whatever it is, I think subsidy has to be targeted, and those who drive bigger cars, have bigger houses, should be paying more. We even subsidise industries. They make profits. Of course, they say when they make more profit, they also pay more taxes but that’s not the point. We are talking about long-term fiscal sustainability. So, what we also want to achieve on sustainability is to reflect the true cost of fuel so that people would not use more carbon than necessary. Now, it is so cheap that they tend to waste it — like leaving the air conditioning on for 24 hours, or water taps running. Our water rates are also the cheapest in the world.

Is the pushback also partly due to low wages?

Yes. That’s the other thing. We need to be more firm on setting minimum wages for these low-skilled jobs. Otherwise, the salaries for low-skilled jobs will never go up and the salaries of the local workers will also not go up.

Let me give you an example. Our construction workers are not highly paid; I’m talking about the low-skilled jobs. For me, I believe it’s okay to get foreigners for high-skilled jobs if there are no Malaysians, but for low-skilled jobs, I’m sure Malaysians can do it. The construction example I give is because when I was in Singapore, I saw that the construction workers there are mostly Malaysians. Why don’t they want to work here? Because the pay is low, but when you increase their pay, they will definitely work. Industries will always resist and provide so many excuses, but the government is always thinking about the long-term impact on the economy.

When palm oil prices rose, some blamed it on the lack of foreign workers, because there were not enough people to harvest. So, in the end, we allow this as a short-term solution, but we are also looking at sustainable longer-term solutions.

Since politics keeps coming up, what fiscal reforms can you make before GE15?

What we are doing, as we announced in the budget last year — and we are presenting to parliament once the cabinet approves before the next parliamentary session starts at the end of February — is the Fiscal Responsibility Act (FRA), which includes the Medium-Term Revenue Strategy that talks about how we want to enhance revenue and, more importantly, the FRA will make fiscal transparency and governance a law.

If any changes are needed, go to parliament. I hope parliament will approve it because it provides clarity on policy and transparency, and it is the way forward.

Governments are usually afraid to take this step but, for me, it is good because it creates discipline. If there are certain decisions to be made, they have to be done within the Act.

What can you do now that you won’t be able to once the Act is in place?

Now, I can do anything! I can pass the deficit to whatever amount I want. It is not a law.

Isn’t there a guide? Ceilings?

No. That [65% debt-to-GDP ceiling] was put in by me. It is only there because of the Covid-19 Act. Prior to the Covid-19 Act, the ceiling guide was the Ministry of Finance’s internal guide. When something like this is part of an Act, it is much better for accountability and transparency.

So, the [65% debt-to-GDP] ceiling is applicable until end-2022, because it is under the law. Once the Covid-19 Act lapses, it becomes a guide [but] it will be taken over by the FRA, which is also about transparency.

Are we going to keep the 65% debt-to-GDP ceiling?

We have to reduce it slowly. We can’t just choke the development and operating expenditure. My target, which the Economic Planning Unit agrees to, is for the fiscal deficit to go down to 3.5% by 2025. Now, it is around 6.5%, so we have to reduce debt-to-GDP to below 60%.

Are you bound by the 6.5% fiscal deficit?

No, I’m not.

This year, Malaysia should be fine because of the expected recovery?

We should be okay. By definition, GDP is key because it’s the denominator. If it goes down while debt remains the same, the ratio will still rise. So, this year, assuming the economy grows between 5.5% and 6.5%, in line with the International Monetary Fund and World Bank [projections], we need to make sure debt does not grow as much as GDP grows, and naturally, the debt-to-GDP ratio will go down. So, we need to make sure debt doesn’t grow as fast.

In fact, if you look at operating expenditure, we have rationalised many items in the last two years. I also want people to remember that this [Covid expenditure] is a one-off and not [part of] your normal budget. Or else, if I lump the Covid-19 fund amount into the normal budget, people will forget and might take it as a new base. We have to learn to live with Covid-19.

Regarding the Covid-19 fund, did MoF allocate money for the third jab?

Yes.

What about the fourth?

Not yet. We have to discuss that at the cabinet [level] and the Ministry of Health has to make its recommendation. Personally, this is not the view of MoF yet; I think we need to still support the B40. I don’t think people who can afford it should be funded by the government.

Back to subsidies, it doesn’t look like you can cut anything before GE15.

It is mainly because of the commodity prices.

What’s your view on inflation this year?

It is expected to plateau at about where it is for today, depending on commodity prices. There is some correlation. You can see how costs have increased. What we did do is control the prices of some goods, so inflation is still somewhat muted but imported inflation will be there, for sure.

Do you expect to support more?

It depends; we are already subsidising more now because the prices of vegetables have gone up, but that is partly because of transportation cost, fertiliser cost — fertiliser is petrochemical-based, also linked to fuel. We have to subsidise RM60 million on top of what we already subsidise. Or else, the price you pay will be higher.

The farmers/manufacturers say that they have to pass it through and if it is the true cost for farmers, you can’t put a ceiling on it or they will go bankrupt, so MoF has to come in to make sure that they don’t take advantage. And the Ministry of Domestic Trade and Consumer Affairs has to make sure that subsidies are only for essentials. We can’t subsidise what is non-essential.

You spoke about targeted subsidies. We have floated petrol prices before. Is the mechanism already in place to do targeted subsidies and it is only a matter of making that announcement?

We have a mechanism. The mechanism is already there. It is just about how much subsidy you want to give.

Because of Covid-19, everyone is registered either on MySejahtera or some register somewhere [either for aid or vaccine]. Does the government have additional data so that you know who to target for subsidies?

We know who are the B40 because when we give Bantuan Khas Covid-19, Bantuan Prihatin and all that, all those are directly debited to their [bank] account, so we have the link.

100% direct-debited to bank account?

99% [debited to account] and it [the data] is linked to LHDN (Lembaga Hasil Dalam Negeri), more than 44 agencies already now, at least.

So you can do targeted subsidies already now …

Yes, we are ready. That’s why previously we could say that you could just go to the petrol station, swipe your IC and the right price will come out for you. The technology is there.

Isn’t it easier to just give extra money to the targeted lower-income group rather than having everyone swipe their IC?

It [Implementation] can be in any form, as long as the data is there. You have to put a ceiling [to subsidies so that they are not abused] but there are mechanisms to do the check and balance.

It sounds like you have a lot of spending needs but measures to raise government revenue seem to be lacking …

That’s why we had the one-off Cukai Makmur. In parliament, they were pushing me for a windfall tax and a capital gains tax when I engaged with them, so I had to make sure I heard them out but, at the same time, be more focused and precise in policy. Even [with the] capital gains tax, I increased the stamp duty and I took out the commission in the brokerage sales. So, I took that out of the service tax and, even then, there is a cap of RM1,000.

What happened with the foreign-sourced income (FSI)?

We got a task force from the top accounting firms and our guys, LHDN and Customs, and they engaged the global tax authorities as well. And we came up with that, where we allow because we said Singapore can. Then they showed why. Singapore has FSI [foreign-sourced income] but based on criteria …

Why exempt taxes on FSI until 2026?

The details are coming out because we have until 2026 to fix everything. We need the time. That should be good news, right?

It is good news for individuals who were affected but …

When I spoke to the people on the ground, they showed me the problem and the tax experts showed me the practical issues and we have to be fair …

So, are we off the FSI grey list?

We should be because now we have examples.

Is there a date for the next review?

I don’t know when but it takes time. We are sending our team to Paris for a review to negotiate.

There is this perception because you announce something, then there is backtracking and even a U-turn …

But when I announced, there were no details … that’s when we negotiate.

Every time there is a budget, you know how it is … if you don’t set a deadline [things can drag on]. So, we set a deadline so that everyone comes to the negotiation table to solve the issue.

What about the vape liquid excise duties?

We are waiting for the Ministry of Health’s (MoH) bill because under the Poisons Act 1952, it is illegal and I can’t tax something that is illegal. MOH, of course, wants to ensure a solid bill for when parliament reconvenes. It should be regulated. Now, we don’t know what is inside and it could be dangerous. If it is regulated, it is easier to enforce, making it safer for consumers.

It will be at the same rate?

[Under Budget 2022] the government imposed RM1.20 per ml for liquid/gel with or without nicotine.  So, there should potentially be some revenue there as well. We also have [additional collection] from the sugar tax.

So, this time, we expanded [to others] — the 3-in-1 premix. That one is harder to work around but if suddenly the sugar content of the premix becomes less, it’s okay because, at the end of the day, it’s healthier for consumers.

Going back to vape, MoH will table the bill in March, and then it will be enforced?

Yes, only then I can enforce.

You plan to implement it once it is tabled?

Once it is approved, yes. We are already quite clear on that.

What can you tell us about the medium-term revenue measures?

You’ve said it, it is not easy during this climate, politically and economically.

To me, forget about the politics and look at the economy. Timing-wise as well, sending a signal that you are trying to introduce new taxes when the economy is just picking up may not be the right signal for the immediate term.

So, your question is more on the medium term. In the medium term, we need to prepare. That’s why we’ve created this task force. That’s why I want to institutionalise this policy in parliament where the medium-term revenue strategy is approved by the parliamentarians as well, to show that we are focused on building up our revenue. Because revenue measures can be two — one is new taxes, the other one is tax administration itself, how we enforce, how we regulate. When I talk about tax administration, it is an improvement in tax collection. That’s also important.

Which is easier?

The easier one to get revenue is via a tax that is more broad-based and with fewer opportunities to manipulate. Consumption tax you cannot run away from and is more transparent. SST (Sales and Service Tax) is about different input taxes within the value chain. On paper, it should be the same but, in reality, it is a different story. We can see a big drop [in collection] but prices didn’t drop for consumers, right?

From my engagements, everyone understands this. I hope that when the time is right, the broad-based tax is about ensuring that the rate is the right rate. To me, the right rate would be one where we can start because if we look at Singapore, they’re increasing it because of the crisis. Indonesia also had their medium-term revenue strategy during Covid-19 and they announced that they are increasing [the rate] in year two, year three. Saudi (Arabia) also. The UK also increased tax. We didn’t. Of course, there are people on the ground suffering and they would have a different view.

In terms of getting revenue, you’ve introduced Perkukuh. Does it make sense to put all our sovereign wealth funds (SWFs) together to make a bigger one and get it to generate more money for the country?

The SWFs, we only have two if we look at it properly: Khazanah and KWAP (Kumpulan Wang Persaraan [Diperbadankan]) because that’s government money.

KWAN (National Trust Fund) is also government money but small lah …

Small but, okay, three, technically speaking. For Malaysia, the two big major funds are not SWFs. EPF’s RM1 trillion is people’s money. PNB (Permodalan Nasional Bhd) is also people’s money. The two big major ones are not government money. So, our SWFs are not that big. Even KWAP is still [only] RM140 billion plus, bigger than Khazanah.

And Khazanah’s [assets were largely bought with] borrowed money …

Yeah. People like us know but not everyone understands that EPF and PNB are people’s money, it is not government money. That’s why [even if] you want to do certain things to them, you can’t. PNB is a unit trust fund, not government money. We have to keep reminding people.

Even LTAT (Lembaga Tabung Angkatan Tentera)?

Even LTAT, which is only RM10 billion. Tabung Haji is the pilgrims’ money, not government money. So, yes, these are GLICs (government-linked investment companies) but it is not government money. Some people think just because they are called GLICs, they must support the government. That’s [among the reasons] why we have Perkukuh to put things into context and to have proper governance. That’s why in Perkukuh, we redefined GLICs to SWFs and institutional investors. Readers of The Edge understand these kinds of things well.

Are there plans to merge the ones where it is actually government money?

Granted, there are definitely economies of scale in the sharing of resources, but we must examine the proposal from various perspectives first. Ultimately, any merger must contribute to the government and the nation’s fiscal sustainability, and must reflect the whole-of-nation approach in helping Malaysia recover. Take KWAN, for example. It is supposed to be contributed to by states that derive any form of royalty from the exploitation of petroleum or other depleting resources. However, at the moment, only one company, Petronas, is contributing.

Planters, the CPO-related, can be argued as a type of resource?

We can have a carbon tax, maybe, once the policy on sustainability is issued. We need a policy, which is being finalised. At least now, we’ve got a target — net zero by 2050. How do we get there? Once we have a policy on this, on the financing, making sure we have the financing for this and also the carbon tax, which we haven’t really touched on.

Any estimates on how sizeable carbon tax collection could be?

The study is still being done. There are a few countries that did not sign [the net zero target] because it is non-binding, but we signed it. We did a study and we can meet the net zero [target]; we can consider achieving the positive [net carbon] later. It is easy enough for us to get to net-zero because we have more natural resources that we can even export one day.

What happened with DNB (Digital Nasional Bhd) actually? Why the U-turn there?

It is not a U-turn.

The fact that an alternative is being considered after a tender has been done and the rollout underway?

If you look at it, the telcos have always been infrastructure players. Service, yes, but more infrastructure players. Because with infrastructure, they can control service, in a way. All that will no longer be an advantage once the infra is done by another party. But that party (DNB) is not allowed to do retail. It’s just like Tenaga, the transmission line, you don’t have many transmission lines. Even broadband, it is Telekom’s. Maxis Broadband, for example, rides on that. So, 5G is based on the same rationale because we can roll out faster — 4G took like eight years, this one (5G) will only be three years. And the reason why it can be faster is that it is cheaper — instead of building three highways, we only build one big highway. Because it is one highway, the cost to telcos will be less than 20 sen per GB, making the cost to consumers also cheaper. That’s the reason.

So, when will the cabinet make its final, final decision?

The cabinet will have another meeting on this. The study is still being done.

Is the cabinet still going to decide in January?

We are still waiting for the study by the ministry and the independent parties. But the new model is you compete on service. That is basically what is key moving forward because 5G is no longer about voice and data. It’s about applications. It’s no longer usage on phones; it’s usage in hospitals, roads, industries. So, the 5G players are no longer just the telcos; the 5G players are actually application providers, technology companies. People keep saying 5G phone but it’s not about phones anymore. 5G is more than that. That’s why we need to make sure the price is right and the rollout is fast. The telcos also should sweat out their (4G) assets, instead of investing in 5G infra. The other rationale is, 5G for areas that are not commercially viable, in the end we [government] will have to do that also. So why don’t we just do all [the infrastructure] so that those not in the cities will also get it around the same time?

Isn’t your argument already clear? You will own the asset without paying for it …

And there is no government guarantee, you know …

For the government, it is also a potential additional revenue source.

It is based on a replacement cost model, so we don’t try to make money out of it but you’re right, when we sell it, we would then put it at market value. The reason banks are willing to lend is because the off-takers are telcos. If you want to be a 5G provider, they have no choice in the end, right? So the banks came in and lent to us and the banks are foreign banks because they’ve seen it in other countries.

It would be sad if other countries see the hoo-ha here and they [implement the DNB model]

I know, I know. If you look at the team, you know who they are. We did a proper tender and the winner is someone everyone knows.

Singapore is using Ericsson

So, everything is done properly. Some people say Ericsson won because something dodgy happened but try and see. It just doesn’t make sense but they’re questioning that.

How firm will you stand on this issue?

I have to be firm but, ultimately, the cabinet decides.

Not government money and the government owns the asset. Never before has the government had anything like that, has it?

Well, I cannot say. That’s my point of view. I have to see the study. We have to listen to their point of view.

The other argument they have against it is the single point of failure. What if this 5G provider one day fails, maybe because of a cyber-attack, and suddenly the whole country doesn’t have 5G? But to us, that can be mitigated because you have to wipe out all the towers, not just one. Worst case, you can go down to 4G.

It’s just like submarine cables, how many can you build?

Yes, it doesn’t make sense because the cost will be too high. For broadband, in the end, only Telekom built it and Time built only for the city/commercially viable areas. Maxis and the other companies all ride on the backbone of Telekom because it is cheaper for them.

If GST/VAT cannot happen before GE15 …

I don’t know if it cannot happen because I don’t know when the GE is going to be.

There is still hope of a broad-based consumption tax being introduced before GE15?

I think the timing [depends] on the economy. When the economy improves, I think we can justify it. That’s my view but this is the technocrat speaking. If the economy has recovered, I think we should really consider it.

And this is because you already know you can give targeted help to people who need it right?

Yeah. So, the two things to do — on the revenue side and the cost side, that is, subsidies. Try and reduce cost, reallocating the right resources to the people who need it because right now there are a lot of leakages even on subsidies. Leakages meaning people who should not be getting [subsidies]. Simple thing. I see some of my friends taking the MRT, they still pay the same price as the B40. The My30/My50 card here, we don’t limit. The cost is RM200, we used to subsidise RM170, now it is RM150 and still, we got whacked. For every passenger, we are subsidising RM150 a month still.

Have you done a study on the people taking the MRT/LRT, roughly what income bracket are they in?

Working class we can accept but there are more and more people who take it. I see that when I go on the MRT, these are professionals who earn more than RM4,000 a month. They can afford to pay a bit more, we can still subsidise. Because of this subsidy, you can only take it away bit by bit so that people don’t feel it, even those who can afford it. That’s how we should do it. Surely, Malaysians who can afford it shouldn’t be angry at us for charging them the right price because then I can use the money for other things.

When you say people who can afford it, do you mean people who earn more than RM4,000 a month?

That is the B40 threshold. M40 we still subsidise but slowly tier it away. That’s my plan. So, I don’t think the M40 or even the T20 can accept if we suddenly go to the true cost of transportation, the true cost of doing business and all that. They can take it [in the purse] but I don’t think their mind can take it.

All these link back to GST. We can then reduce corporate tax and all that. If you look at tax collected over GDP, we are one of the lowest in the world.

Ours even decreased, right?

Yes, in 2020, total revenue was 15.9% of GDP, and in 2021, based on our revised estimate, the figures were lower, around 14.6% of GDP, despite corporate tax being much higher than in some other countries. Why is that? Because not many people pay taxes.

[The tax net is] not wide enough. Companies that come here get all these incentives …

This is FDI, right?

Yes.

Is MoF doing something about the incentives?

We are looking at these together with MITI (Ministry of International Trade and Industry). They are reviewing the incentive structure because we need to incentivise, but it must be the right sectors, that is, those that really add value in terms of our people’s skills. It cannot be unskilled labour and technology-wise, that is not there for our economy’s development. If they are ESG (environmental, social and governance)-compliant and create jobs here, then there will be good spillover effects.

This study has been going on for a bit, right? When will it be finalised?

It started last year, should be finalised this year. That’s why it links back to MITI’s NIA (National Investment Aspirations). It’s not under me.

There is talk that you are going to run in Kuala Pilah.

That’s my mother’s and my wife’s hometown. My great grandfather was buried there. Tell me the upside of running, then I’ll decide. (Laughs.)

You can continue as Minister of Finance. You can finish what you’ve started at the ministry.

Yes, of course. But I can also do other things. I can help from the outside. I can still give support, play a role to assist. You don’t have to be a minister to assist.

It’s different, being in the driver’s seat, no?

That’s true. A lot of challenges and headache, but it’s very fulfilling lah. (Laughs.)

Before we let you go, we know it is still early in the year but some experts think that the official GDP target of 5.5% to 6.5% is a tad optimistic because of the floods. What are you doing to ensure that the target is achieved?

Economy-wise, the numbers are still strong. You have to understand the difference between sentiment and the real growth of the economy. The sentiment, yes. [But in terms of economic impact] 2014 was worse. Today, it’s 80,000 households and if you look at the areas, the impact on GDP is not that great but the cost — my DE (development expenditure) and OE (operating expenditure) — might go up. Like I said, we need to reprioritise, focus on the important part first. But the 2022 GDP growth should be on track; even for 2021 GDP, we should be on track.

Singapore ended 2021 at 7.2% and they beat their estimates …

We had a lockdown last year and our challenges were different. This time, no more lockdowns. Also, if we lock down again, anti-vaxxers will say, what is the point of the jab?

Anything else you want to say to our readers, their hope for corporate and personal tax cuts?

Budget 2022 was just announced. I’m optimistic that 2022 will be a better year. Things are looking better, economically. Exports, trade numbers; unemployment as well is going down further. Things are moving. Let’s see because we are still dependent on the global economy. Right now, the global economy is moving in the right direction. We should be on track for 5.5% to 6.5% growth this year, and for 3% to 4% for 2021.

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