Overview of Budget 2027

 

Significant Points:

 

·        Total Allocation & Spending: Budget 2027 sets a total federal expenditure of RM510 billion (with an actual federal government outlay of RM459.8 billion), splitting into RM376.8 billion in operating expenditure and RM83 billion in development expenditure.

 

·     Revenue Projections: Government revenue is projected to grow by 4.7% to RM380.8 billion, supported by dividends (such as RM32 billion from Petronas) and expanding tax bases.

Source: https://belanjawan.mof.gov.my/ms/cadangan2027

 

·       Fiscal Deficit Targets: The government aims to narrow the fiscal deficit further to 3.3% of GDP in 2027 (down from 3.6% in 2026), balancing growth support with fiscal consolidation.

 

·    Subsidies and Social Support: Allocations for subsidies, social assistance, and incentives exceed RM80 billion (including RM40 billion designated for fuel subsidies) to shield households from high living costs.

 

·        Strategic Growth Sectors: Development spending prioritizes the economic sector (45.4%), followed by social services (33.7%), security (14.7%), and general administration (6.2%), with heavy emphasis on AI, green technology, and digitalization.

 

Review of a Budget: 

A brief review evaluates whether a budget achieves its stated goals sustainably, equitably, and realistically:

 

·       Rigidity in Operating Expenditure: A high share of operating expenditure goes toward mandatory and fixed items (emoluments, retirement charges, and debt service charges), leaving less fiscal space for agile crisis response.

 

·      Subsidy Burden vs. Targeting: While massive subsidy allocations (over RM80 billion) protect the Rakyat (citizens) from immediate inflation, broad or fuel-heavy subsidies can strain public finances compared to more precisely targeted cash transfers.

 

·      Macroeconomic Vulnerabilities: Growth projections (4.2%–5.2% for 2027) and revenue estimates rely heavily on external commodity prices, global semiconductor/AI demand, and regional stability. Weaker-than-expected external trade could trigger revenue shortfalls.

 

·       Fiscal Consolidation Trade-offs: Narrowing the deficit to 3.3% requires strict expenditure efficiency and leak-reduction (such as e-invoicing and subsidy rationalization), which can face execution bottlenecks or lag in administrative impact. 

Dr Lim Teck Ghee, economic historian has suggested a cut of 10% of the operating budgets of 500 GLCs and statutory bodies. Take the savings and put it into healthcare, housing, and social welfare. Dr. Lim estimates that abuses, leakages and mismanagement in public procurement cost this country between RM40 billion and RM60 billion annually. Procurement is about 40% of government spending, upwards of RM150 billion a year. It is, in Dr. Lim’s words, the sector most heavily hit by systemic financial loss and corrupt practices.

However, above it all, nothing was based on Reformasi. PMX could have introduced measures or bills to reform the corrupt affairs of the state. Like what?  He announced the idea of a legal reform commission, but he didn’t mention a RCI for all the shenanigans over the last 15 years – Felda, LCS, Feedlot, Jana Wibawa, Sabah Water Department and many more (beyond 1MDB and Tabung Haji). Malaysia ranks 54 out of 182 countries in Transparency International’s 2025 Corruption Perception Index. This would have been a bold move to assuage the sentiment of the ordinary rakyat. But alas, you must not spook friends in the Cabinet.

Reference:

Opinion: RM60 billion money disappearing trick and calling it a GLC, Nganasegaran, newswav.com, 14 October 2026 

Tuition Centre Owners Told to Find Bumi Partners By 2027?

 

Recently, the Ministry of Education (KPM) embedded a 30% Bumiputera equity requirement into private education centre registration rules. For many Malaysian Chinese-owned tuition centres that have operated legally for decades, this is traumatic. The Ministry of Education (KPM) has now clarified that existing tuition centres that do not meet a 30% Bumiputera equity threshold will not be denied registration renewal from 2027.

 

For tuition centres specifically, the rules go further: foreign equity is prohibited entirely. Education regulation should primarily focus on teaching standards, teacher qualifications, student safety, premises and compliance with the law. Under the KPM table, a tuition centre may be registered as a sole proprietorship or enterprise with minimum equity of RM10,000. Bumiputera equity must constitute at least 30%, and foreign equity is not permitted.

 

 

Source: https://en.wikipedia.org

 

Language, skills and training centres structured as Sdn Bhd carry a higher minimum equity of RM50,000. The 30% Bumiputera requirement applies here too, though foreign equity is permitted — but only within limits set by Malaysia’s Free Trade Agreements (FTA), the bilateral and multilateral trade deals that determine how much foreign ownership is allowed in specific sectors.

 

Company directors and owners are separately barred from becoming employees of the same centre. Branches must mirror the parent centre’s ownership structure.

 

In its initial form at 30%, it is burdensome, what if it were higher, say 50% as some now advocate. This is in fact “backdoor nationalisation” which will impact locals and foreigners considering new investments into Malaysia. It is not viable if 30%, 60% or higher is given “free” to Bumiputera equity holders. Why? Simply because if one has to give “free” shares to another group, the initial return of say 10% is now 5% for the original promoter and “infinity” for the other party. It doesn’t make sense to invest.

 

Equity threshold (30%) should only be applicable to public listed companies not on Sdn Bhds, sole-proprietorships, family-owned “mom and pop” stores. Madani is pandering to the ultras, which love a ‘rent-seeking’ opportunity! It is then a vote for no growth.

 

Reference:

Tuition Centre Owners Told to Find Bumi Partners By 2027, Or Lose Their Licence, Fernando Fong, The Rakyat Post, 17 September 2026

 

 

Is Malaysia’s Economy a Porsche on paper and a Proton on the Ground?

 

According to the Department of Statistics Malaysia, Malaysia’s economy grew 6% in the second quarter of 2026, the country’s strongest Q2 growth outside the pandemic period since 2014. Unemployment stood at 3.0% for the quarter, edging up only slightly from 2.9% in Q1. Headline inflation rose to a modest 1.9%. By almost every conventional measure, the Malaysian economy is performing well. Yet the picture looks very different for the rakyat.

There is a persistent sense that wages are not stretching as far as they used to, that costs keep climbing even as official inflation stays low, and that the prosperity in the national accounts simply is not showing up in household budgets.

A regional survey released in September found cost of living to be Southeast Asia’s single biggest social concern, cited by 42% of respondents, with Malaysia’s own optimism levels notably tempered by it.

Source: https://en.wikipedia.org/wiki/Formula_One

The economy is growing but the people are not feeling it. So, the million-dollar question is, why? What follows is one attempt at an answer, not the final word on it. It starts with a simple observation: everyone is technically competing in the same race, but nobody is driving the same car.

Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour has been explicit about what is driving the headline figure: manufacturing strength on continued global demand for electrical and electronic components tied to artificial intelligence and data centre construction. This is real, but narrow, dependent on capital-intensive investment, global supply chains, and a relatively small number of large export-oriented firms.

These are Porsches in Malaysia’s economic race, purpose-built for this exact moment in the global economy. They cross the line first, and that part is real.

A new data centre or expanded chip fabrication line creates high-value jobs for engineers and technicians, but it does not, in the short run, raise the income of a retail assistant in Kuching, a hawker stall operator in Chemor, or an administrative clerk in Johor Bahru.

The same Q2 data also show what the rest of the field is driving. Agriculture contracted 3.7%, reversing from 2.6% growth in Q1, on weak oil palm and fishing output. Services eased slightly too, to 5.4%, though it remains the largest single contributor to overall growth. Mining is the exception worth an explanation. It rebounded to 10.2% growth after contracting in Q1, but this tracks global energy prices amid the Middle East conflict, not any shift in the sector’s role for ordinary workers, mining employs a small fraction of the workforce compared with agriculture, retail, or services. None of these domestic-facing sectors are accelerating the way the AI-linked engine is, nor should they be expected to. They are also where most of the workforce is employed.

DOSM figures show MSMEs accounted for almost half of total employment in 2025, 48.7%, or 8.09 mil people, spread across retail, hospitality, agriculture, and small-scale manufacturing. This is the sedan most working Malaysians are actually driving: reliable enough for daily use but never built to keep pace with an F1 car. Above all, the gap is not a matter of effort. Same fuel, different costs.

Roughly a year into BUDI95, Malaysia’s flagship fuel subsidy rationalisation, its lagging effects are starting to show. Full rollout came in September 2025, followed by a further quota cut this past April, and it’s this ongoing tightening that distinguishes this lap of the race from Malaysia’s past two-speed moments. The issue is not whether the policy makes sense, but how unevenly its impact lands. Every car runs on fuel, but a rise in fuel cost does not register the same way for every car.

Transport and logistics costs seep into nearly every other price, and when they rise for households no longer covered by blanket subsidies, the effect does not show up cleanly in the 1.9% headline inflation figure.

It shows up instead in what many Malaysians experience as everyday inflation, food away from home, transport-dependent services, the small recurring costs of running a household or small business.

A household on the domestic-facing track, where income growth has been modest, experiences the same subsidy adjustment as a proportionally larger bite out of a budget that was not expanding to begin with. The policy may be sound and necessary. Its distributional timing, arriving while one part of the economy surges and the other merely holds steady, is what turns a fiscally responsible reform into felt financial strain for a large share of the population.

To return to the analogy: the Proton sedan feels this pinch immediately as its budget was never built with much margin. The Porsche, by contrast, barely notices the same rise in fuel cost against a defined revenue stream from various businesses of its owner. Different cars need different strategies.

To be clear, I am not arguing against subsidy rationalisation. Fiscal discipline, targeted subsidy reform, and Malaysia’s push to attract high-value AI and data centre investment are each sound policy directions on their own merits, and the second quarter’s figures reflect real, creditable achievement. This is not a case of Malaysia’s economic management having failed. The issue is sequencing and absorption, not direction, and no amount of steady driving closes a gap between two fundamentally different machines. Something else may need to change the terms of the race. 

Malaysia is not the first country to face this problem, a narrow, foreign-investment-driven engine generating headline growth the rest of the economy does not proportionately feel. Ireland offers one parallel worth considering: a small number of multinational tech and pharmaceutical firms account for a strikingly large share of its corporate tax revenue, disconnected from activity in the rest of the Irish economy. Dublin’s response, modelled explicitly on Norway’s sovereign wealth fund, has been to divert a portion of that windfall into long-term investment vehicles rather than spend it through the ordinary budget. Notwithstanding, Ireland’s own fiscal watchdog has warned the government is saving too little of it and spending too much now, a reminder that the temptation to let the fast car keep everything it earns is not unique to any one country.

Malaysia’s version of this question, whether AI-linked investment and export revenue should be treated, in part, as a windfall to be channelled deliberately toward the rest of the field, deserves its own careful examination.

A sedan does not become a Porsche by driving more carefully. Understanding where the growth is coming from, and where it has not yet reached, seems a reasonable place to start before anyone proposes how to bring the rest of the field closer to the front.

Reference:

Malaysia’s economy is an F1 car on paper, a sedan on the ground, Dr Mohd Zaidi Md Zabri, Focus Malaysia, 28 Sept 2026

Average Monthly Salary of Malaysians in 2025

 

The total number of monthly salary and wage earners rose to 12.01 million, up from 11.96 million in 2024. Malaysians accounted for 10.38 million, or 86.4% of all full-time paid employees. The average monthly salary and wage of Malaysians increased by 4.1% to RM3,803 in 2025, compared with RM3,652 the previous year, according to the Salaries and Wages Survey Report 2025 published by the Department of Statistics (“DOSM”). The median monthly salary and wage increased by 5.3% to RM2,940 from RM2,793 in 2024. 

 

Source: https://en.wikipedia.org

The services sector, which represents 71.5%, was the main contributor to the increase in the number of wage earners, rising by 1.8% to 7.42 million people. Meanwhile, mining and quarrying had the highest average monthly salary and wage at RM6,175, followed by services (RM3,993), manufacturing (RM3,357), construction (RM3,188) and agriculture (RM2,575), according to DOSM. 

In terms of skills, skilled workers, accounted for 36.6% of all salary earners, recorded the highest average monthly salary and wage at RM5,799, compared with RM5,582 in 2024. The semi-skilled category, which accounted for 55.6% of salary earners, recorded a 4.2% increase in average salary to RM2,714 from RM2,604, while the low-skilled category rose by 2.6% to RM2,184 from RM2,128. 

Selangor recorded the highest share of salary earners, at 25.6% of the total number of paid Malaysian workers, followed by Johor (13.6%) and Sarawak (7.6%). Five states recorded average monthly salaries and wages above the national level: Putrajaya (RM5,417), Kuala Lumpur (RM4,955), Selangor (RM4,258), Penang (RM3,912) and Labuan (RM3,887). 

It looks pathetic. With rising cost of living the average wage may not be sufficient to survive in large urban areas. Employers who are generous are few and far between. Large banks, for example, make RM4 billion a year but employees at mid-level or low-level are paid below satisfactory level. The next stage will be AI. The use of AI soon will result in many jobs including counter clerks, transaction officers and credit officers becoming irrelevant. The digital wave is going to affect many industries, and some will have to re-skill for the future. 

Reference:

Average monthly salary of Malaysians up 4.1% to RM3,803 in 2025, FMT, 21 Sept 2026

Littoral Combat Ships or Littoral Cruise Ships?

 

The littoral combat ship (LCS) project is running behind schedule again with weaknesses found in its implementation. According to the Auditor-General's Report Series 2/2026 tabled in Parliament on Monday (Oct 5), the project was 7.55% behind schedule as of 25 June 2026. All five LCS vessels experienced completion delays ranging from 30 to 108 days. 

If the physical handover (PHO) takes place by 26 December 2026, it will be handed over without achieving full operational capability, as training and the weapons systems have yet to be completed. Full operational readiness of the vessels depends on the complementary contract, which can only be completed in December 2035, beyond the expiry of the main contract on April 25, 2030. 

The report said the PHO delay of LCS 1 would affect the handover of the remaining vessels. The procurement was carried out through direct negotiation. The construction of six LCS vessels, with an original contract value of RM9.128bil and a contract period of 10 years, was from Oct 3, 2013, to Oct 2, 2023. 

During the implementation, eight supplementary contracts to the main contract were signed to amend and align the contractual terms with the requirements of the project’s implementation. Following these supplementary contracts, the construction scope now involves five LCS vessels, with a contract value of RM11.227bil and the contract period extended until April 25, 2030,". The payment mechanism has also been restructured from being milestone-based to progress-based. 

Cumulative payments under the main contract amounted to RM8.557bil, or 76.22% of the RM11.227bil contract value, leaving a balance of RM2.670bil. For the procurement of the complementary contract, the government had made payments of RM100mil for the procurement of integrated logistics support and trial aids (ILS-TA) and 124.35mil euros for the surface-to-surface missile (SSM) system. No payments had been made for the procurement of the surface-to-air missile (SAM), ammunition (for the) 3P medium calibre gun (3P MCG) and integrated decoy launching system (IDLS), as the procurements had yet to be finalised.

In response to the audit findings, the Defence Ministry said the technical committee had instructed the contractor to take appropriate action to ensure that work progress remains in line with the stipulated targets. 

The Auditor-General recommended that the ministry establish a realistic recovery action plan to ensure that all critical activities under the main contract and complementary contract are coordinated with the scheduled PHO of the LCS vessels. It also recommended that the ministry ensure any conditional acceptance of the vessels clearly sets out the contractor’s obligations, completion timelines and responsibilities until the vessels achieve the stipulated capabilities. It also called for the project progress monitoring to be strengthened by setting milestones, designating officers responsible and establishing completion timelines for each critical issue until the project is successfully completed. 

Contract value has increased; number of vessels to deliver is now five instead of six; LCS 1 if handed over in December 2026, will not have any weapons – just the boat! Maybe we could do a cruise ship for peace instead of a defence ship for war! Why do we get into this muddle? Because of greed and corruption? Because of poor project management? Because we awarded contract to the wrong party? Or, all of the above? AG is very kind, please set a recovery plan, o a unconditional acceptance of ships and have proper progress reviews or monitoring via milestones! Wonder if by the time we receive an operational ship by 2035, will it be obsolete? 

 

Source: Auditor General’s Report 2/2026 

Reference:

Auditor-General's Report: LCS project behind schedule again, Ragananthini Vethasala, Divya Theresa Ravi and Gerard Gimino, 05 Oct 2026

 

BRICS Power!

 

BRICS is no longer just a group of countries. It is becoming a significant economic bloc.

A quick look at the numbers makes the scale interesting. The expanded BRICS group represents economies with very different sizes, structures and strengths.

China → $20.85T
India → $3.96T
Russia → $2.66T
Brazil → $2.64T
Indonesia → $1.54T
Saudi Arabia → $1.39T
UAE → $621.5B
South Africa → $480B
Egypt → $429.6B
Iran → $300.3B
Ethiopia → $121.5B

Together, the infographic puts their combined GDP at around $34.99 trillion.

But the more interesting part is not just the total.

It is the diversity.

Different markets.
Different resources.
Different industries.
Different growth stories.

And together, they represent a growing part of the global economic landscape. 

 

Reference:

Post by Pragya Bothra on LinkedIn

Global Trade Power is Concentrated!

 

The world’s largest exporters remain dominated by a small group of economic powerhouses. According to the figures presented in this WTO-sourced visualization:

🇨🇳 China — $3.8T
🇺🇸 United States — $2.2T
🇩🇪 Germany — $1.8T
🇳🇱 Netherlands — $939B
🇯🇵 Japan — $738B
🇮🇹 Italy — $726B
🇰🇷 South Korea — $709B
🇦🇪 UAE — $707B
🇫🇷 France — $683B
🇲🇽 Mexico — $665B

But export rankings tell only part of the story.

For investors, corporates and governments, the more important question is where the next generation of trade flows, infrastructure requirements and industrial capacity will emerge.

Several structural themes stand out:

-China remains the central manufacturing and export powerhouse, despite continued diversification of global supply chains.

-The United States is accelerating industrial investment, supported by technology, energy and advanced manufacturing.

-Europe remains exceptionally important to global trade, with Germany, the Netherlands, Italy, France and Belgium among the leading exporters.

-Mexico and Southeast Asia are gaining strategic importance as companies redesign supply chains and pursue nearshoring and “China+1” strategies.

-The UAE is becoming an increasingly important global trade, logistics and energy hub, connecting Asia, Africa and Europe.

-Energy, commodities, ports, logistics, manufacturing and trade finance remain essential infrastructure behind these flows.

The largest opportunities may not necessarily be in the countries exporting the most today. They may be found in the economies attracting the next wave of manufacturing, logistics infrastructure, energy investment, processing capacity and cross-border capital. Capital increasingly follows trade corridors. And understanding how those corridors are changing can provide an important indication of where future investment opportunities may emerge.

 

 

Reference:

INVEST | Connecting Capital. Opportunities. Markets, LinkedIn