Malaysian Economic Democratisation – Extract 2

(Extracts from DAP Alternative Budget 2010 launched on 7th October 2009)

5. Key Policy Highlights

Based on the 3 key thrusts outlined above to achieve greater economic democratisation via fiscal decentralisation, to place rakyat first with restructuring and reallocation, and to empower Malaysians through economic capacity building, the key policy measures proposed include:

1. Tax revenue sharing agreements where 20% of individual and corporate income taxes collected in a state will become the state’s entitlement. For Selangor and Penang, this revenue sharing agreement would entitle them to approximately RM 3.2 billion and RM 500 million respectively. An equalisation and development grants formula based on a function of population, poverty, area development, cost, human development and gross revenue per capita indices will also be given to ensure that poorer states do not lose out.

2. States will be given the rights to borrow up to a maximum of 50% of their annual ownsource revenue, which is revenue raised directly by the state governments.

3. We will set up a fund of RM 400 million to provide grants to state governments to reinstate local council elections, conduct delineation studies, hold trainings and promote awareness via publicity and education campaigns after amending the Housing & Local Government Act.

4. Authority over the design and administration of public transport networks will be devolved to states. Every city will have a Transport Authority under the oversight of the local city council; for smaller towns and suburbs, they would be grouped together under the control of the State-wide Transport Authority. In the Klang Valley, which is too interconnected for public transport management to be left to a single state or local council, the DAP proposes to create the Klang Valley Transport Authority (KVTA).

5. Under this system of devolved transport expenditure, RM 13 billion is budgeted for public transport in 2010, and will be distributed to the individual states based on population and vehicle density. Limited competition and Gross-cost route contracts will also be implmented to allow the transport authority to prioritise stability and connectivity while seeking cost efficiency. Under this system, the network and design is determined by the transport authority, while the operator selected via a open and competitive tender.

6. RM750 million in 2010 to eradicate hardcore poverty in Malaysia within 5 years, RM500 million for Social Safety Net for those living below the higher and revised Poverty Line Income (PLI), RM 500 million for development of human capital of poor families and RM 3 billion for the development of basic amenities in rural areas and East Malaysia.

7. RM1.07 billion will be allocated for the Senior Malaysian Bonus. Up to RM3,000 will be channeled into EPF account of a working adult at the end of the year and will be available for immediate withdrawal if the personal income is less than RM3,000 per month under the FairWage Programme. RM 1500 will be given to a homemaker (non-working spouse of a working adult) whose spouse income is not more than RM3,000.

8. To assist the Malaysians cope with the rise in living expenses, particularly in urban areas, we propose that the first RM15,000 chargeable income will be tax exempt, with the subsequent RM15,000 taxed at 7%. Currently, only the first RM2,500 is tax exempt while the next RM2,500 is taxed at 1%. In addition, we propose that the top tier of the income tax bracket be raised from RM 150,000 chargeable income currently to RM300,000.

9. Legislate the use of surplus oil and gas revenue where at least 20% of the surplus payment will be channelled to Khazanah Nasional for new capacities and capabilities building in key areas such as Renewable Energy and Energy Efficiency (RE&EE), and Green Technology, at least 20% of the surplus payment will be deposited at a new National Stimulus Fund that boosts fiscal spending and provides financial assistance to all Rakyat during economic downtimes under the new Malaysia Reversed Bonus scheme and Special Risk-sharing Initiative (SRI) and at least 20% of the surplus payment will be invested in building human capacity, particularly in Education and Training, above and beyond their normal budget allocation.

10. An off-budget RM25 billion is allocated to buy back the PLUS Expressways as well as other highway toll concessionaires with abnormal levels of profitability which does not commensurate with the risk and capital invested. The buy-back will be in accordance to the terms and conditions specified in the concession agreements. A new “Unfair Contracts Act” will also be established to ensure transparency and legitimacy of the process, as well as to review other lobsided government concessions such as the Independent Power Producers, the privatised water concessionaires, hospital management services, privatisation of the Government Medical Store and foreign worker medical tests.

11. To build a real world class learning environment for our young Malaysians and students, a sum of RM43.3 billion is allocated for education and training, accounting for 23.8% of the overall 2010 Budget. At the same time, development expenditure will increase most significantly with RM13.69 billion over RM10.07 billion boosted by the legislated 20% of surplus payments amounting to RM4 billion from PETRONAS earnings.

12. The existing JPA undergraduate overseas scholarship scheme into two tiers RM60 million is allocated for scholarships to all top SPM students for pre-university studies without conditions for more than 4,000 students, up from the existing 1,500 students, while RM500 million is allocated for at least 1,000 pre-university students who have secured places at top universities overseas. Additionally, RM200 million will be allocated to top pre-university students from poorer background.

13. To better position our SMEs in the face of changing economic environment, the DAP proposes to mandate the state governments with autonomy and resources in developing thematic SME clusters. RM100 million is also allocated to facilitate and strengthening the collaborations of our universities, SMEs, public and private research centers and a RM250 million fund be set aside to act as seed funding for these new enterprises.

14. DAP will be proposing allocate RM50 million as a matching grant of up to RM 250 per household for the installation cost of security guards and CCTV for identified high risk neighbourhoods. RM25 million will also apply as a matching grant for the installation of CCTV for micro, small and medium private enterprises in high risk areas. The RELA regiment will also be disbanded and replaced by a Community Police team set up by the respective local council with a total budget of RM67 million.