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"Malaysia’s 2017 Budget: A Budget for the 14th General Elections?", a Commentary by Cassey Lee

Commentary 2016/68, 26 October 2016

On the surface, the recently unveiled 2017 Budget is unremarkable. The total allocation has increased by 3.4% - smaller if adjusted for inflation (2.3% in 2016).  The deficit as a percentage of GDP is projected to decline by a mere 0.1%. As for economic growth, the expected rate is 4%-5% in 2017 – not much different from the 4%-4.5% expected for this year. These figures suggest business as usual, status quo and stability.  However, a detailed reading of the 2017 Budget reveals something else.  

Both the rhetoric employed as well as the various project allocations and incentives deployed suggest that this is an election Budget. This is not surprising given that this could be technically the last important budget cycle before the 14th General Election which must take place by August 2018.  The reason for this is that the impact of the budget (fiscal multipliers) requires time. In addition, project allocations are important and indirect sources of funding for politicians in elections.

First, the rhetoric. Compared to the previous budget speech, there are more frequent attempts to dispel misconception, misperception, hearsays, untruths and allegation (“accusations by irresponsible internal and external parties must be stopped!”).  And towards the end of the budget speech, an election battle cry (“ … ultimate victory in the 14th General Election to the Barisan Nasional … A warrior never retreats”).

Second, the list of goodies - allocations, payments, incentives and exemptions - are numerous and are spread across many sectors and communities.  Significant targets include the traditional support base for the Barisan Nasional – public servants, rural community and FELDA settlements.  The 1.6 million public servants (18% of eligible voters) will stand to benefit from additional scholarships, additional loans (smartphones, motorcycles, housing) and one-off cash payments. For rural folks, there are allocations for 97,000 street lights, 616 km of rural roads (RM1.2 billion), electricity supply (RM460 million), Orang Asli housing (RM350 million), FELDA water supply (part of RM732 million), FELDA/FELCRA/RISDA housing (RM400 million), agriculture subsidies (RM1.3 billion), price support for rubber smallholders (RM250 million) and continuing of monthly allowance for 57,000 fishermen. Finally, there is the sizeable allocation of RM800 million for numerous “People-Friendly Projects” (suraus, small bridges, community halls, markets and kiosks).

No doubt, the Malaysian government continues to be constrained fiscally but is finding ways to deliver a budget that is likely to strengthen its political support base.  The multiplier effects from the government expenditures and incentives will be quickly felt and timely harnessed before the forthcoming election.  

Dr Cassey Lee is Senior Fellow at ISEAS – Yusof Ishak Institute.

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.