Ahead of the 2021 Budget tabling on Friday, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz shares with the New Straits Times what to expect in the national budget amid the unprecedented pandemic and economic crises.
Question: How is the 2021 Budget different from the previous ones?
Answer: I think this is the most important budget in our history. It will be different from the previous ones because we are going through the worst crisis we have ever seen, not just in Malaysia but also globally. It's a combination of economic crisis and health crisis. We are not alone, the whole world is facing the same problem.
This budget is very crucial because 2021 is the year we hope we can show some good recovery. But it all depends on how we manage the crisis. So far, we have introduced four stimulus packages prior to the budget. The four packages (Prihatin, Prihatin SME+, Penjana and Kita Prihatin — Bantuan Prihatin Nasional 2.0) boast a fiscal injection of RM55 billion. This is equivalent to the development expenditure in the 2020 Budget. We have done four mini budgets so far this year, but the fifth (the 2021 Budget) is the biggest.
Next year's budget will be different because its focus is going to really save the rakyat and our economy. The focus is on people's lives and livelihoods because of the crisis that we are going through. Typically, budget is defined as an allocation but this time, it is a combination of how we find solutions and grow the economy during the Covid-19 crisis.
Expectations are very high as there are many people being affected. We need to make sure that our economy remains intact and the people stay safe. We have to find ways to balance these two factors.
We have seen some good recovery, but it is important that we sustain this. The only way to sustain this is to ensure that Covid-19 is properly controlled.
Q: What is the difference between drafting the budget during your corporate career and now in the government?
A: Now I know how difficult, tedious it is to do (a national budget). You have to balance too many different focus groups, states, ministries and so on. It is more difficult as our income has been affected because of the economic downturn. At the same time, you have to spend more.
This is the year where I think we should spend more. In theory, if you have less money, you should spend less. Since we are in a crisis, namely economic crisis and health crisis, we need to spend although our income is less.
The only way to do that is to borrow. If we do not spend more, especially under this budget, the crisis will become more severe and the rakyat will suffer more.
We have seen it before. Two years after the 2008/2009 global financial crisis, we could see the countries that spent more during the crisis recovered faster than those that had been a bit more careful with their spending,
They thought that when the economy was recovering, only then you spend. Actually, we should spend more when the economy is bad to help it grow. It does mean we have to borrow more. It does mean our debt will increase, but in the short term. Over the long term, InsyaAllah when the global economy is back on the growth path and we benefit from that, we go back to our fiscal consolidation and reduce our debt in a timely manner.
Q: Are we borrowing for the people?
A: Yes, we are borrowing for the rakyat. Basically, the government has its own operating expenditure (OE), but this is used to help the rakyat. Our development expenditure (DE) will increase as well so that we can develop more projects, more infrastructure to provide a greater long-term impact.
We use the OE to help the rakyat in terms of Bantuan Prihatin Nasional (BPN), among others. To date, we have dished out RM18.2 billion under BPN to 10.6 million Malaysians. We have extended the wage subsidy programme worth RM12 billion to 320,000 employers that benefited about 2.8 million employees. This, more or less, has helped the rakyat.
(Tengku Zafrul explains that Malaysia's OE is normally bigger than DE and that under our Constitution, the government cannot finance OE using borrowings. The government can borrow only for DE.)
Q: Would helping the rakyat be in the form of extending automatic loan repayment moratorium?
A: We were the first country to impose automatic blanket moratorium. In other countries, people had to apply for a three-month or six-month moratorium. We did an automatic six months. At that time, not everybody who needed the moratorium had also enjoyed it. We saw close to 7.7 million Malaysians, or 97 to 98 per cent of qualified Malaysians, who actually took it.
(Of) these 97 to 98 per cent, not all of them were unable to service their loans. That is why the change from automatic to targeted (loan moratorium until the year-end). Based on Bank Negara Malaysia's numbers up to Oct 9, there were 640,000 applications for the targeted repayment assistance received by banks. The approval rate stood at 98 per cent. Our study with Merdeka Centre, which concluded on Oct 30, shows that 70 per cent of respondents said they did not need the moratorium.
Therefore, I believe targeted assistance is better. Firstly, if you have the money, you should pay your loan because that money can be used (by banks) to help people who are unable to pay. Secondly, it's about cash flow. Cash flow means we need to build the country back. One way to do it is for companies to grow and one way for companies to grow is to borrow. So banks must lend money. But if banks do not get back what they were owed from, there will be a cash flow problem for them.
The big borrowers, especially personal borrowers, are the ones with money. So you can always apply this 80:20 rule. Twenty per cent of borrowers are probably making up 80 per cent of the total loan amount. The others are small borrowers. They are those who Bank Negara Malaysia are engaging with more now to ensure that, especially the B40 group, get proper assistance.
So now, the targeted assistance is for those who lost their jobs or saw income reduced, regardless of (whether they are from) B40, M40 or T20. Now we are also looking at helping the B40 group who still have a job, but are in dire need of help. We are still studying this although I think we can do more. To do automatic moratorium for all is not right. It must be more targeted.
Q: That means widening the scope of people eligible for targeted assistance?
A: We have not decided on anything yet because, again, we have to talk to the banks. We cannot force them. We have to engage with them through Bank Negara Malaysia.
If we open to all, big firms, company executives and entrepreneurs may use the money for other purposes. Many rich people take up the moratorium, invest in the stock market or make another investment. One rich borrower is probably equivalent to 1,000 of B40 in terms of total loan amount.
We want to widen the scope. That is the plan. We will discuss with the banks. Wait for the budget (tabling on Friday).
Q: In a nutshell, is the 2021 Budget a "Covid-19 Budget"or "People's Budget"?
A: Next year's budget is basically our message that the government will not compromise when it comes to saving the rakyat and the economy. This is the time for everyone to work together.
When I said work together, I have said previously about GLCs (government-linked companies) and GLICs (government-linked investment companies) helping to rebuild the economy. I believe the private sector should join in, too, for the country's sake since we already have the commitment from the GLCs and GLICs.
I call on the private sector to help as well. To be fair, some of them have already helped. In Prihatin and Penjana stimulus packages, telcos have provided free Internet valued at RM600 million. Tenaga Nasional Bhd, together with the government, offers discount for electricity bill valued at RM1.8 billion. We also work with Shopee and Lazada under an e-commerce initiative.
But the main storyline here is for the government to do everything to save what we have today. When the economy is back on its growth path, we need to make sure that the base is still there, the capacity is still there for strategic industries to restart.
For the rakyat, we need to make sure we save jobs, we create jobs. The unemployment rate stands at 4.7 per cent now, which is high, although it peaked at 5.3 per cent during the Movement Control Order. Our unemployment rate was between 3.3 and 3.5 per cent over the last 15 years. We need to bring it down, (hence) we need to create jobs. So this budget is also about investing in creating jobs.
Q: This budget is a bit different as it involves support for the prime minister amid the political upheaval.
A: That is true. I think that is the speculation out there, what will happen during the voting process of the budget after it is tabled to the cabinet. For me, it is crucial for us to show to the members of parliament (MPs) the importance of this budget to help the rakyat. I hope MPs from both sides will support this budget as it is important for the rakyat and the country. In the end, it will be up to the MPs' decision. In my opinion, if this budget is a good budget, it is time to show to the rakyat that we are not politicking with urgent issues such as these.
Q: After your meetings with several MPs, there were rumours of their concerns about the proposals for the budget by the government, hinting that it would be postponed. Is this the case?
A: This budget will not be postponed. It is going to be tabled this Friday. I have met and have been engaging with various focus groups, MPs and others for the past two to three months. My deputy and I had, in fact, visited all the states across Malaysia to hear these people's suggestions.
Recently, the government decided to hear the proposals from MPs from both sides. Since Sunday, I have met political leaders, especially MPs from Umno, Gabungan Parti Sarawak, Pas and Pakatan Harapan. I met MPs from MCA and MIC today (Monday) as well.
They have given their suggestions and proposals, and I have listened. We will consider some of them. But they need to understand our limitation now with this crisis in hand, and our focus. I also shared with them what has been done so far. I cannot delve into much details now, but we listen to each and every one of them, and we are going to study these proposals.
Umno gave us 130 proposals, we cannot include them all in this budget, while PH has six. Some of them are obvious and, as I said, the economy must be expansionary. We must spend more. And they agreed with my proposal and I came out with a statement on this last week that this budget must be expansionary. And most of the MPs from both sides agreed with me.
Everybody has their own interest groups and we listen. But we cannot include them all in the budget proposals.
Q: In general, will all these suggestions be included in the budget?
A: We will look at the important ones that can help us in helping the rakyat. The government has drafted the budget to support the economy. They give us their suggestions, so we are collecting them all. In fact, we have received thousands of them. We have a special team dedicated to weighing on all of these proposals coming from different groups, MPs and politicians.
Q: Will there be new taxes or increase in existing taxes?
A: I think to increase tax when economy is suffering is not the right move. That is my view. I cannot say yes or no, but my principle is, if you want to drive the economy, this is not the right time to increase or introduce new taxes. I cannot say if we are going to reduce it, too, as it is going to affect the government's coffers. Our revenue coming from tax and excise duty has already been reduced by more than 20 per cent.
Q: Is there any special allocation for Covid-19 vaccines?
A: Allocation for the Health Ministry is part of our main area in the 2021 Budget. We need to make the allocation for the vaccines. We cannot tell the rakyat that we do not have any allocation for it. Whether it is going to be announced in this budget or not, it is still uncertain as we are not clear about the timing.
We have made a RM500 million commitment to join the Covax vaccine initiative, which is at stage-three clinical trial. Like other countries, we are in talks with other countries, including China. Russia, too, is discussing on bilateral terms with China. We need to see how we can do this.