This article first appeared in The Edge Financial Daily on July 1, 2019

KUALA LUMPUR: A year after the Pakatan Harapan government took office, the coalition announced during its anniversary in May that it has achieved near 40% of its election pledges — no mean feat considering it’s just the first year of its five-year term.

This was affirmed by the Institute for Democracy and Economic Affairs (IDEAS) in an assessment report of the new government that was released last Friday.

“Overall, we conclude that the government is performing reasonably well in delivering its manifesto commitments. Just over a year into their first term in office, over 30% of the promises assessed are either achieved or on track, the think tank, better known as IDEAS, concluded in its new assessment report, titled ‘Projek Pantau, Report Card No. 2’.

“Notable successes include the rapid abolition of the goods and services tax (GST), significant new support to small and medium enterprises and an ambitious plan to talk corruption and reform public procurement. In many of these areas, the real test will be implementation, but it is encouraging that the government is on track to deliver,” IDEAS said, adding “all in all, the government can be proud of the achievements it has made in its first year”.

But there are a number of highly ambitious targets that are proving difficult to reach, IDEAS noted in the report.

“In many cases, these challenges reflect the unrealistic nature of some of Pakatan’s promises. In other areas however, lack of political will is the challenge. For example, where it comes to reform of government-linked companies (GLCs), despite repeating the maxim that “the business of government is not to be in business”, the government has not taken any serious steps towards rationalising its significant corporate footprint, or even disclosing the full extent of that presence,” it noted.

Here is a look what the think tank’s research director Laurence Todd has described as “unrealistic” targets:

Cost of living

This was made the central issue by the Pakatan coalition in the run-up to the 14th general election (GE14), with a signature pledge — the highly-anticipated abolition of the GST — geared towards addressing this problem.

“Straight after the [Pakatan] government came into power, prices did indeed drop quite significantly once the GST was zero-rated, but they have recovered in September last year when the sales and services tax (SST) was introduced,” said IDEAS research director Laurence Todd during a public forum hosted by the institute on Friday.

While the promise of abolishing the GST has been implemented, Todd noted that it was “ultimately not a policy that achieved the very ambitious target of sustainably lowering prices”, while IDEAS’ report noted the SST is seen by many as an inferior tax as it is more open to abuse and can be more complicated from a compliance perspective.

“The government’s continued focus on controls and subsidies and not addressing systemic issues in supply mean their efforts are unlikely to achieve a sustainable impact on prices. Furthermore, the cost of living debate itself often does not distinguish between rising costs, stagnant wages and changing consumer habits – each of which need to be addressed to manage the cost of living. The government has recently announced its intention to introduce price controls this year. The exact policy mechanism has not yet been specified,” the report noted.

‘PTPTN remains problematic’

Education is not cheap. And many still opt for a student loan from the National Higher Education Fund (PTPTN), the repayment for which the government has promised to restructure, and to abolish the blacklisting policy.

While the government has removed debtors from the travel blacklist after GE14, it has not permanently abolished the policy. In fact, there have been suggestions to reintroduce the travel ban.

Todd said it remains a challenge for the government to reduce the burden faced by young people when it comes to PTPTN loan repayment, saying that “honouring this promise is an unrealistic ambition”.

Over the years, the amount owed has been increasing exponentially, said Todd, noting this as an “unsustainable situation”.

Furthermore, 51% of total borrowers have not been paying their loans consistently, with 19% of borrowers not paying even a single sen, said the report.

For every RM7,000 not paid, one student is deprived from obtaining a loan to finance their future studies, the report wrote.

To build one million affordable homes in 10 years

While Prime Minister Tun Dr Mahathir Mohamad has repeatedly given the assurance that building one million affordable homes in 10 years is achievable, the think tank seems to believe otherwise.

Todd said there are only 3,528 affordable houses built in the first year of Pakatan’s administration. Thus, if the rate of building houses continues at this pace, then the one million targeted new low-cost homes will not be achieved, said Todd.

At the most optimistic, he projected that the government will only be able to achieve about half its target.

“So, in terms of achieving this target, this is one we consider quite unrealistic,” said Todd.

The report also highlighted the need to view the issue of housing through a wider perspective when assessing the government’s intention to make houses more affordable for Malaysians. “The issue of affordability is a complex one and simply looking at the ratio between median house price and median income is simplistic and misleading,” the report wrote.

Finding money for healthcare

As Malaysia prepares for an ageing population, one of the promises the Pakatan government has made is to improve access to health services, as well as better quality of care.

Under this promise, the government wants financial allocation for the ministry of health to be increased to 4% of gross domestic product (GDP).

But Todd believes it is “quite unrealistic” for this target to be achieved, if the current rate of budget increase in this area continues at its present level, which will only push the spending to 2.74% of GDP by 2023.

He added there is a significant gap between the government’s current forecast performance, and its target in the manifesto.

In Budget 2018, 2.26% of GDP was allocated for healthcare, while in Budget 2019 this was raised to 2.35% of GDP.

Other achievable promises, but do we have the will?

Todd has also highlighted certain targets that were achievable, but where the lack of political will is the challenge.

One of them is the revival of the true spirit of federalism, which had all but faded by 2008, according to the think tank in one of its policy papers published in April this year.

“The promise in their manifesto is to strengthen the role of state governments, to provide 10% of income tax revenue back to state government,” said Todd, noting that it should equal to RM3.5 billion of tax revenue.

However, the federal government has only announced that half of tourism tax will be distributed to the state governments, but has not committed to allocate income tax recepits, as per its manifesto promise.

Meanwhile, the 50% tourism tax, which is estimated to be about RM125 million, said Todd, is “way less than what was promised”.

As for the promise to make the governance of government-linked companies (GLCs) world class, at par with international standards, more actions from the government are needed, said Todd.

“We believe that change (GLC reform) is possible ... we believe that it is achievable, but it is not yet happening because it seems like the government does not want to do it,” said Todd.

In the report, it was noted that the government has restated its aspiration that GLCs be freed from political influence, yet the prime minister continues to be the chairman of Khazanah Nasional Bhd, while politically-connected figures remain in senior positions at various GLCs.

“Real change to the huge presence of GLCs in the Malaysian economy will require a step-change in the government’s current approach,” it added.

Additionally, Todd expressed his disappointment about the government backing out from its intention to abolish oppressive laws.

“We are very disappointed that having committed to rollback the use of Official Secrets Act (OSA), [it has continued to rely on its use],” said Todd.

He was referring to the government’s decision to withhold the release of the report by the Council of Eminent Persons’ 100-day report, citing OSA.