At a pre-Halloween party, I was appointed the shadow Minister of Finance
for a “virtual” nation. My job entails how to address the following:
·
Exchange rate depreciation;
· Rising
inflation for daily goods/services;
· High fiscal
debt;
· High
household debt;
· Greater
transparency and accountability;
· Income
inequality @ 0.40% Gini coefficient;
· Enforcement
of policies/laws;
· Reducing
corruption and enhancing integrity;
· Providing
unemployed graduates with jobs;
· Reduce cost
of doing business;
· Getting
value for investments in education;
· Mounting
health cost and surplus of medical professionals; and
·
Increasing productivity of civil service and private
sector
These are some of the main concerns, amongst others.
As a technocrat, my new appointment makes life difficult because of
competing forces in the political maelstrom! Be that as it may, I am determined
to lay down my best for the “virtual” nation.
Many are troubled by exchange rate fluctuations. As an immediate step,
the Overnight Policy Rate is raised by 1.0% to improve the exchange rate. We need to reward savers as much as
investors. There will be an outcry by those in business who see this as a cost
increase which may impact GDP growth. We will take that challenge. Imported
inflation is reduced, currency is better reflective of our standing, and people
have confidence going forward. Creeping deprecation is like being in a haunted
house with “creepy” ghosts.
For 2018 and 2019, we are reducing GST to 3%. Thereafter, we will
re-examine consumption, inflation and tax buoyancy. This will stimulate growth,
increase consumption and reduce inflationary pressures.
Our fiscal debt which is high, will first rise to 60% of GDP before reducing
to a manageable 40% by 2020 and beyond. Legislative exemption will be sought
for the increase. An additional 5% or $50 billion will be injected into the
economy as a stimulus to build new district hospitals, TVETs (in education) and
social services. Graduates in medical, education, social sciences are to be engaged
for better services to the rakyat.
Our students in public universities will have their tuition fees waived
for their respective courses. This is an investment in the country’s long-term
future.
Household debts and the broad property sector have been a “drag” on the
economy. I propose that both these areas are centralised under a new agency with
the Central Bank as the custodian. Commercial banks have to “sell” to this
agency their portfolios in the broad property sector to generate liquidity and
lend fresh money for affordable housing. Each state will establish new housing
development agencies for the middle and lower income strata. Affordable house
cost will not exceed six times the average earnings of a household.
Private sector remuneration at the top end will not exceed 20 times that
of the lowest employee in an organisation. The “excess” wage will be taxed at a
higher rate of 30%. Inequalities have to be addressed if societies are not
destabilised. With many large corporations having pre-tax profits in excess of $1
billion, it may be timely for wages of the lower level employees be raised. Tax
rate will be reduced to 20% for those companies improving salary scales in
excess of 10% but below 15% for 2018.
A new Corruption and Reconciliation Commission is proposed to provide an
avenue for those involved in such practices. This Commission is to function for
a period of three years, after which it will focus on integrity in private and
public sectors.
Graduate unemployment has to be tackled at source. In the short term, a
period of internship with companies is proposed. These companies will receive
double tax relief for every graduate employed from the registered pool of
unemployed graduates. Job centres/placement centres are to be established in
every major city. In the longer term, graduate intake at university level must
reflect demand conditions in the economy. A major review of courses will be
implemented at university and college levels. Schools will be permitted to use
English as a medium of instruction from Form 3. This is an option and will
improve marketability of graduates.
To enhance productivity and provide innovation, an R&D Fund of $10
billion for application research is to be established.
To drive down health costs, generic drugs and production of the same will
be encouraged. In the short-term, import of these drugs will be tax free
(including GST). This will hopefully bring down costs. For the ageing
population (above 65), all medical costs are borne by the Government. Purchase
of medical devices such as walkers, wheelchairs, beds for assisted living are
reimbursed on a one-time basis for each senior citizen.
To help reduce global greenhouse effect, we will refocus our energy
sources to renewables. A special renewable fund scheme will be announced
shortly to increase usage of solar and other sources of renewable energy. All
gasoline driven cars will be banned in 2035 to reduce pollution in cities.
Subsidies will be introduced for electric and hybrid vehicles.
Growth is driven by the private sector, and to enhance their ability to
move forward, a structure similar to that at Central level is to be instituted
at each state. The Government’s job is to facilitate. And this has to be in an
efficient manner.
Our focus for 2018 and beyond is GDP growth of 6% and above. This
together with an enhanced quality of life for the ordinary person. It is a
right for everyone to own a home, a car and a business or have a stable income
stream. We want this “virtual” nation to live up to its name, and truly reflect
unity in diversity.
Finally, this is not a trick or treat event!
(The above is a figment of unbridled imagination (or the lack of it) of
the writer. It does not represent any nation in the past, present or future).
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