MARCH 4 ― The "100 days” scorecard is pretty meaningless in the context of economy policy and reform but now is as good a time as any to ask whether there have been tangible signs that Prime Minister and Finance Minister Anwar Ibrahim has begun to stabilise the economy since assuming the premiership.

The background is not strong. We had two recessions and an inflationary boom under the previous Finance Minister that caused high interest rates, closed tens of thousands of businesses, lost hundreds of thousands of jobs and wiped out the pensions of millions of people.

So we are in a much better situation under Anwar Ibrahim as Finance Minister. The economy and the financial markets are calmer now and Anwar is well known and well-respected internationally with a reputation for sound economic policy.

We expect lower but more stable growth, lower inflation and hopefully more stable interest rates, although there is still a chance of another small increase. Debt management is high on the agenda and the deficit is forecast to fall as a percentage of GDP. Fiscal policy has been refocused in terms of revenue and spending and overall the foundations look more stable.

It has been a very short time and it is rather too early to expect much impact, nonetheless some policies will be beneficial. The problem is that government communications on economic policy have been terrible so we need to identify the successes for ourselves.

For example, freezing utility tariffs will benefit millions of households and 98 per cent of firms and will hold down price increases, helping to slow inflation during the year.

Bringing forward social assistance payments to January helped with the cost of living for millions of people.

Rescheduling and retendering development projects has identified billions of ringgit in savings and overall development spending has increased.

Addressing corruption has identified a RM10 billion loss in diesel fraud which can now be stopped.

Addressing supply-side issues and easing import restrictions in food to open up the market helps improve supplies and will help keep prices low.

Working to identify and remove anti-competition activities and cartels frees up the market, especially in food and animal foodstuffs in the supply-chain.

Getting an agreement from the rice monopoly Bernas to provide help to rice producers and small-holders helps their incomes.

A set of initiatives for rubber tappers, including raising the ceiling price of rubber and encouraging social assistance and income reforms through Lembaga Getah Malaysia (LGM) will help that community too.

A refocus on agriculture and food security offers the promise of significant reform of the agricultural sector and the communities that rely on it.

The amnesty on foreign workers that have overstayed their visas releases 380,000 workers to take up employment immediately and avoids expensive rehiring and agency fees linked to forced labour.

The settlement with the Abu Dhabi government on 1MDB will help reduce and stabilise that debt and shows a more decisive approach to long outstanding legal issues.

Budget 2023 was more pragmatic than populist with few "wow” factors but many initiatives that show Anwar’s administration is moving away from the subsidy and cash hand-out culture.

The government has made some useful changes especially to the B10 group with incomes below RM2,500. This is the start of a Universal Basic Income scheme and the government should be more assertive about this. The RM600 food vouchers to this group should be scrapped and converted to cash transfers.

The cut of RM2.5 million for 222 MPs is worth RM555 million which is enough to give a monthly cash allowance of RM364 to all the 127,000 hard-core poor households. So direct assistance is very much better than the waste and patronage of the MPs allowance scheme.

The reforms of taxes in Budget 2023 are small but hopefully signal the start of a full review of tax and revenue including the Capital Gains Tax (CGT) and even the efficacy of the Goods and Services Tax (GST) and it is good that the immediate reintroduction of GST has been resisted.

The T20 tax and the luxury goods tax will have no effect on investment and very little effect on incomes. The luxury goods tax would have to be 35 per cent to raise just 1 per cent of government revenue. The T20 income tax will affect fewer than 150,000 people and raise only between RM1.7-3.4 billion or 0.6-1.2 per cent of government revenue. Nonetheless they do signal a more equitable approach to taxation overall.

Government assistance for MSMEs may not be enough given most of the aid takes the form of loan assistance and only a small tax reduction.

The Treasury Secretary General Johan Merican said at the Malaysian Economics Association (MEA) post budget briefing that only 150,000 MSMEs will benefit from the 2 per cent tax cut. So 90 per cent of MSMEs will not benefit from this. Around 78 per cent of MSMEs have fewer than five employees and most do not pay tax anyway.

This will have very little impact and is worth only RM250 per month which is not enough to pay for the minimum wage increment for one worker.

It would be better to exempt SMEs from tax below RM500,000 revenue or impose a flat-tax of RM500 per month on all SMES below that revenue level.

The RM40 billion in loans will depend on the applications and most SMEs will not be keen because cash-flow has not stabilised, they do not have good credit history and they do not want to go through the administration. It is not a solution.

Against this mostly positive background we have seen some disappointments on reform and no clear reform agenda. The minimum wage increase has been postponed making poor people poorer.

The reform of PTPTN has been ripped-up and it is now in a very precarious state.

The targeted subsidies are no closer and we are relying on policy projects which are subsidies in disguise. The Menu Rahmah scheme is well-meaning but unsustainable and will fail, so it should be quietly scrapped. The new People’s Income Initiative (Inisiatif Pendapatan Rakyat or IPR) looks expensive and cumbersome. It is not a full reform and will not remove the need for cash hand-outs.

The Parliamentary Budget Office has not been announced yet even though it was promised in the Pakatan Harapan manifesto.

Some argue that institutional reforms have been put on the back burner in place of political stability and that Anwar’s comparatively low support from the Malay community might influence his economic policy moving forward.

In reality Anwar does not have comparatively low support among the Malays he has wide support across the whole of electorate including the Malays. The government is not at risk of imminent collapse despite what opposition leaders might dream of and the upcoming state elections will have little or no impact on the overall political balance.

Against this backdrop Anwar can and should be more confident about pushing forward on the reform agenda but it must be much more structured and communicated much more clearly for the benefits to be maximised.

* Professor Geoffrey Williams is an economist at the Malaysia University of Science and Technology and Mohamad Shafiq Sahruddin is a student at the Arsyad Ayub Graduate School of Business, UiTM.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.