KUALA LUMPUR (Dec 9): The more challenging external environment has underscored the need for Malaysia to increase trade diversification and strengthen investment competitiveness moving forward, according to the World Bank Group’s economic report.
In its 21st edition of the Malaysia Economic Monitor — ‘Making Ends Meet’ report launched here today, it said in an environment of subdued global demand and increased protectionist tendencies among the major economies, a sustained commitment to deepening regional integration and addressing trade barriers is pivotal to preserve a vibrant trading environment and send confidence-building signals to investors.
“It is also important to strengthen Malaysia's competitiveness in attracting quality investments and to improve targeting and the return on tax expenditures so as to maximise the gains from investment towards economic upgrading, high-value job creation and inclusive growth,” it said.
The report said increased progressivity in the personal income framework and an expansion of current tax measures could enable the government to increase revenues and improve redistribution, of which the government has taken a step in the right direction when its proposed a new hope income tax band in the 2020 Budget.
Nonetheless, it said more could be done to this end, including raising the tax bracket for the other high-income bands, and reviewing the tax reliefs and exemptions applied.
“In addition, the scope of the real property gains tax could be widened by extending the scope of the tax, particularly for owners of multiple properties, and increasing stamp duty on purchases of higher-value properties.
“These measures could result in significant increases to revenue while having a minimal impact on lower- and middle-income households,” it said.
The report said a gradual lifting of the exemptions on selected non-essential items, particularly those not within the B40 consumption basket, could also facilitate increased revenue without jeopardising the purchasing power of lower-income households.
The World Bank Group also noted that the medium-term structural reforms should focus on addressing critical gaps in human capital, facilitating economic opportunities for women and improving private sector opportunities to ensure sustainable and inclusive growth.
“Making greater gains in human capital development will require deeper reforms to improve the quality of learning through better pre-school services and improved in-school assessments, and to reduce childhood stunting with multi-pronged solutions.
"Facilitating equal access to economics opportunities for women would also yield significant gains in the long term,” it said.
Concurrently, the report said policymakers should also sustain reform efforts to promote healthy competition, strengthen public procurement and address distortions in labour and output markets to improve private sector participation in the economy.