2023 Budget Speech: Act One of Anwar Ibrahim’s Reform of Malaysia?
Anwar Ibrahim’s 24 February speech unveiled a budget largely replicating the October version presented by his predecessor. Given that Malaysia’s reforms extend beyond public funding priorities and allocations to institutional reforms and new narratives of nationhood, the budget speech may be just the opening act.
On 24 February 2023, the reform-professing, politics-breathing Anwar Ibrahim tabled the first budget of the country’s Fifteenth Parliament. Expectations were high, since the finance minister, who is also prime minister, is taking charge of the country’s pocketbook again after 25 years. But the reality is that pragmatism trumped predilections for major change.
Malaysia’s budget speech is the pinnacle of parliamentary stagecraft and the finance minister’s address commands more attention than any other hour in the Lower House. But Anwar’s passage to the podium is an epic tale. He had delivered budget speeches in 1991-98 as Finance Minister until his unceremonious ouster by then Prime Minister Mahathir Mohamad in September 1998. This sparked the reformasi movement. Banished to the political wilderness, he spent the next twenty-five years preaching the need for reform. He endured two incarcerations, served twice as opposition leader, and was overturned as PM-in-waiting in 2020 when Mahathir, spectacularly returning as premier in 2018, reneged on a promise to hand over power.
The November 2022 general election consolidated a new normal of fluid and complex coalitions in Malaysia. Three coalitions of parties, of which two are based on the Peninsula and one in Sarawak, plus a handful of other parties and independents, aligned through inducements and compromises in support of Anwar. This elevated him to the Prime Ministership.
Adding another layer of intrigue, the election was called before the 2023 budget of the Ismail Sabri administration was passed. That budget was tabled by former Finance Minister Tengku Zafrul on 7 October 2022, following the usual year-end cycle; parliament was dissolved on 10 October. The circumstances gave Anwar the task, and opportunity, of re-tabling an out-of-cycle budget three months after taking office.
Anwar was clearly seizing the moment while facing the constraints. The country was waiting to hear what his administration is about — including his Malaysia Madani (Civil Malaysia) concept of sustainability, prosperity, innovation, respect, trust and compassion. However, with so little time to consult and negotiate, how much would he shake things up?
The answer is that Anwar shook things up a little, but there is probably more to come.
Pragmatism takes precedence. It would be unwise, not to say difficult, to overhaul the extensive efforts that went into preparing October’s “Zafrul budget”. The Anwar budget remains expansionary, totalling RM289 billion for operating expenditures and RM97 billion for development, which is up from RM272 billion and RM95 billion, respectively, presented in October.
A closer look at the line items shows that the Anwar budget largely replicates the Zafrul budget with some modifications. The additions or alterations derive from electoral mandate or political leverage. A notable contributor to the increase in operating expenses is a RM3 billion allocation for hiring new medical, dental and pharmaceutical officers on permanent and contract bases – which delivers on an election promise. However, it remains unclear what proportion are permanent and hence addressing the specific concern of health workers’ job insecurity. Growth in development allocation for Sabah and Sarawak, from RM11.7 billion in the Zafrul budget to RM12.1 billion in the Anwar budget, reflects the importance of East Malaysian support to the current administration.
Anwar reiterates the government’s commitment to eradicating hardcore poverty — perhaps infused with more vigour and resolve, considering that he has for decades championed the plight of the poor. He repeats his predecessors’ practice of relabelling Malaysia’s decade-old cash assistance programme, now Sumbangan Tunai Rahmah (Rahmah Cash Contribution). This will reach out to a projected 8.7 million recipients, but the maximum that the lowest-income households can receive is increased from RM2,500 to RM3,100 per year.
Anwar reiterates the government’s commitment to eradicating hardcore poverty — perhaps infused with more vigour and resolve, considering that he has for decades championed the plight of the poor.
Clearer differences can be discerned on the issues of poverty and inequality, as well as governance. The Anwar budget introduces two notable programmes for low-income households. The Inisiatif Pendapatan Rakyat (People’s Income Initiative) supports microenterprise towards earning a targeted RM2,000 per month. The Madani healthcare scheme helps households obtain medical treatment at private clinics. Changes to the personal income tax code will take more from the top brackets (with taxable annual income above RM400,000). It will relieve the burden on the lower brackets, specifically the middle rungs and higher income recipients. This will generate net revenue for state coffers. Everyone with taxable annual income below RM230,000 will not pay more tax, and many will pay less.
The Ministry of Finance has also committed itself to studying the feasibility of a capital gains tax on income for the disposal of unlisted shares, which at least initiates action on a long-advocated reform. The exclusion of taxation on profits from share trading, however, raises questions.
Anwar’s budget stresses open tenders, and efficiency and integrity in public procurement more broadly, as imperatives, and commits to tabling the Procurement Act shelved by his predecessors. In the same vein, the Fiscal Responsibility Act initiated by previous administrations will be tabled later this year.
Anwar decidedly broke from the past in one area: near-total silence on ethnically-targeted programmes. Budget speeches have for years reproduced a template that detailed the funding for vernacular Tamil and Chinese schools and Islamic religious schools, and for programmes targeted at ethnic groups — predominantly benefiting the majority Bumiputeras — in higher education scholarships and institutions, enterprise loans, and business support. These are not in Anwar’s speech, although they are in the budget. An allocation of RM6.6 billion for Bumiputera higher education programmes, spotlighted in the Zafrul budget speech, only gets a passing mention in the Anwar budget’s supplementary documents.
Reticence on such issues makes people ponder the meaning of Malaysia Madani, on which Anwar does not attempt much beyond attaching this label to select programmes. The budget speech could have said a bit more.
But a budget speech can only say so much. The rarefied promises of Madani, and Malaysia’s unrealised reforms, extend beyond public finances — to institutional and educational reforms, democratisation, and new narratives of nationhood. Anwar will have the opportunity to articulate and actualise his reformist agenda, through passing laws, and launching the Mid-term Review of the Twelfth Malaysia Plan (2021-25) due out this September. In short, 24 February was Anwar’s opening act. Believers in Anwar’s reform agenda will have a wait a while longer for him to articulate his vision.
Lee Hwok-Aun is Senior Fellow of the Regional Economic Studies Programme, and Co-coordinator of the Malaysia Studies Programme, ISEAS – Yusof Ishak Institute.