Kuala Lumpur, 10 June 2022 – Institute for Democracy and Economic Affairs (IDEAS) welcomes the publication of the 2023 Pre Budget Statement (PBS) on 3 June 2022. IDEAS has been a key proponent of the publication of a pre-budget statement, as the research institute that has been assessing Malaysia’s budget transparency in the Open Budget Survey since 2015. 

The PBS is an important tool for fiscal transparency and governance. It sets the foundation for the government’s budget strategy and policies for the upcoming fiscal year. The PBS allows relevant stakeholders to anticipate the upcoming budget and to foster debate in an informed manner on government’s spending and on the implication of budget policies.  

The incorporation of the PBS in the budget process is a good step in promoting transparency and inclusiveness. The PBS allows stakeholders, particularly the private sector and civil society, to anticipate budget policies. “IDEAS recommends engagement with targeted stakeholder groups and particularly with vulnerable or minority groups  to provide feedback on key budget policies, more so in these times of uncertainty where quick, responsive policymaking may have unintended consequences on these groups,” said Alissa Rode, Manager of the Public Finance Unit at IDEAS. “A consultative approach on the national budget is essential in ensuring that policies are relevant and inclusive. Therefore we anticipate the PBS being followed up by a comprehensive effort in getting public participation.”

The PBS provides a comprehensive view of the government’s initiatives and programs that are in progress while providing a broad view of the upcoming policy objectives that will be implemented in the areas of economic recovery, improved social protection, and reforms in business and priority sectors. IDEAS calls for a PBS that provides a more  concrete indication of forecast expenditures, revenues, debt and borrowings, as required by the OECD best practices.    

IDEAS notes the strong indication that the government will shift to targeted subsidies and targeted assistance for vulnerable groups. “Subsidy rationalisation is important for fiscal sustainability moving forward, given the limited fiscal space that we have,” said Alissa. “The PBS indicates that petroleum and cooking oil subsidies alone are projected to balloon to RM30 billion from the budgeted RM4 billion. Therefore, we need to proceed in a manner where subsidy expenditure is more predictable and manageable. “Subsidy rationalisation combined with  more effective distribution would  ensure that the government channels public resources to groups that are most in need”.  

IDEAS also notes the Ministry of Finance’s commitment to mitigate tax base erosion and profit shifting of global taxpayers, in line with OECD standards. The shift in tax strategy should also be complemented by deeper thinking on the non-fiscal incentives that bring value to investors in Malaysia, including efforts in deepening our talent pool in global services management, E&E and digitalisation, and policies that encourage the environmental, social and governance (ESG) agenda.  “As a developing country aiming to digitise and automate its sectors it is important that the local sectors are supported by FDIs with specific know-how and expertise. This is where non-fiscal incentives need to be investor friendly, especially in a post-pandemic setting,” said Dr Juita Mohamad, Research Director at  IDEAS.  

The publication of the PBS is a step in the right direction for a well-governed, transparent budget process. IDEAS further calls the government  to publish a Mid-year Review to enable oversight of the nation’s fiscal position at the halfway point of the financial year.

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Download Media Statement PDF File Here

For enquiries, please contact:
Alissa Rode, Manager, Public Finance Unit
T: +603 2070 8881/8882 | E: alissa@ideas.org.my

Louis Denis, Manager, External Relations
T: +603 2070 8881/8882 | E: louis@ideas.org.my