This article first appeared in The Edge Financial Daily on October 19, 2018

Economic

Fiscal and governance reforms will affect economic growth but manageable

The new government’s fiscal and governance reforms starting mid-2018 will have an impact on economic growth but is anticipated to be short-lived and manageable.

The short-term growth trade-off is necessary to further strengthen the economy in ensuring more meaningful economic growth for the rakyat.

Govt cuts development expenditure by 15% to RM220 billion under 11MP

The development expenditure ceiling will be cut by RM40 billion or 15% to RM220 billion from the original allocation of RM260 billion under the 11th Malaysia Plan (11MP) (2016-2020), as part of plans to consolidate the country’s fiscal position.

Govt mulls digital tax on e-commerce biz

Thanks to the continued growth of e-commerce and sharing economy activities, the government will explore imposing tax on these online transactions.

Govt tightens belt to invest and spend less

The country will see a mild contraction of 0.6% in real public investment between 2016 and 2020, compared with the initial target of 2.7% growth.

Public consumption, meanwhile, is expected to grow moderately by 0.3% a year for the remaining 11MP period, with emphasis on optimising public expenditure without affecting the quality of public service delivery.

Slowdown in private investment

The government expects a target annual growth of 5.7% in private investment for the remaining period of 11MP. With the growth target, contribution of private investment to gross domestic product (GDP) will increase from 12.3% in 2010 to 17.8% in 2020.

Private consumption the main growth engine, to contribute 56.9% of GDP by 2020

Private consumption will continue to be a major source of growth and is expected to expand at an annual average rate of 7%, with its share to GDP reaching 56.9% in 2020.

Opex accounts for 98.9% of govt revenue in 2016-2017

A total of RM427.9 billion was expended for operating expenditure (opex) during the review period. This was lower than the initial budget of RM430 billion due to the decline in oil-related revenue.

Fiscal deficit target may “temporarily be beyond target” to shore up growth

In the remaining 11MP period, the federal government will undertake measures to strengthen its medium-term fiscal position, among others by strengthening the management of public debt and accelerating institutional reforms.

Govt to raise indirect taxes and non-tax revenue

Revenue will continue to be diversified by increasing the contribution of indirect taxes and non-tax revenue such as licences, permits, fees and rentals.

Governance

Two-term limit for prime minister and state chiefs in the works

Malaysia is set to limit the tenure of the prime minister, chief ministers and menteris besar to two terms in a bid to curb possible power abuse and corruption.

The excessive concentration of power in the prime minister before this has had a negative repercussion on the nation and has contributed to trust deficit among the rakyat.

Govt to streamline state-owned enterprises, monopoly entities

The government will focus on reviewing and streamlining the role of state-owned enterprises and monopoly entities, to help promote market efficiency and protect consumer interest.

This is part of its steps to address market distortion and unfair practices, in an effort to promote market efficiency and healthy competition in the economy.

Institutions to assist bumiputera 30% corporate ownership target

The government will continue to emphasise bumiputera participation in strategic investments towards achieving the target of at least 30% corporate equity ownership.

In this regard, bumiputera institutions will continue to invest in high-growth companies and companies listed on Bursa Malaysia as well as venture into potential companies as minority shareholders.

Voting age to be lowered to 18

The government has agreed to lower the voting age to 18 from the current 21.

Business

Higher levy looms for firms with more foreign workers

The government seeks to implement a “progressive multi-tiered levy system” that is based on the proportion of foreign workers employed to strictly reduce and regulate the number of foreign workers in the country.

Govt will not consider proposals for new container ports

The government will not be considering any proposals for new container ports. This decision was made “given the underutilised capacity of existing ports”.

Healthcare

Govt mulls national health financing scheme

The government will explore a healthcare scheme that aims to create a national health financing scheme.

The scheme will provide assistance for primary care treatment for B40 (bottom 40%) households to ensure comprehensive health coverage.

Affordable homes

Govt to build 200,000 affordable homes

A total of 200,000 affordable homes targeted to be built in the remaining 11MP period. This is in line with the objective to improve the rakyat’s well-being, under which efforts will be intensified to provide quality and affordable housing and increase homeownership.