[ad_1]
The rumored plan by the Perikatan Nasional (PN) government to announce a state of emergency before the 2021 Budget appears to be a strategic move to prevent the budget from being defeated and end political disputes for the time being.
“With the state of emergency, Parliament will cease to be in force. The budget would be presented to the Cabinet and could be approved without the vote of the 222 members of Parliament (MP) ”, says a political observer.
At the time of writing, it is unclear how the emergency would unfold, pending an official announcement. High-ranking sources say Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah would have the final say on when the state of emergency will take effect.
However, Putrajaya officials informed The Star that only political activities will be affected by the emergency.
“Everything will continue as usual. Economic activities will continue and there will be no curfews.
“Simply put, life goes on as we know it. This is for the good of the country in the fight against Covid-19, ”says a source.
The PN administration will present its first budget in two weeks, but no one knows if the ruling government has enough “yes” to approve the budget.
In the event that Budget 2021 does not garner simple majority support in Parliament, this would be the first time that an annual budget submitted by a ruling government would be defeated in Malaysia.
This possibility has raised multiple concerns about a government shutdown and disruption to public service, especially those related to publicly funded health care, safety and education.
The larger economy is likely to take a hit as well, creating further vulnerabilities for investor sentiment at a time when foreign funds have continued to ditch local stocks.
According to Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, a rejection of the budget would lead to further uncertainty, especially amid a deadly pandemic.
“Businesses can also be affected, as they cannot operate in a predictable way, while greater uncertainty is always negative for financial markets,” he tells StarBizWeek.
A special Malaysian Cabinet meeting took place yesterday, surprisingly attended by Attorney General Tan Sri Idrus Harun, Chief of Armed Forces Tan Sri Affendi Buang and Inspector General of Police Tan Sri Abdul Hamid Bador.
Citing sources, The Star reported that the government discussed at the meeting the option of imposing an “economic or health emergency.”
Unlike previous emergencies that involved curfews, the proposed emergency aims to intensify the fight against the Covid-19 pandemic, which has skyrocketed over the past week, unhindered by political uncertainties.
If the proposed emergency passes, this could be a government move to eliminate the risk that the 2021 budget will be rejected in Parliament. It would also mean that the PN is looking for a way to avoid any attempt to overthrow the government.
For now, since the details about the so-called “economic emergency” are not clear, the focus remains on the presentation of the Budget 2021 on November 6.
While there is a heightened fear that a rejection of the budget will result in the fall of the PN government, constitutional expert emeritus Prof Datuk Dr. Shad Saleem Faruqi believes this is an “exaggeration”. By convention, Shad says that a rejection of a bill presented by the government in Parliament is akin to a vote of no confidence.
“However, as I said, it is a convention. This means that it is an internal will to obey tradition. There is no strict law that says a prime minister must resign if a bill is rejected.
“Even if the budget is rejected, it can be resubmitted a few days later, perhaps with some adjustments. The Cabinet does not need to resign, ”he tells StarBizWeek.
Referring to article 43 of the Federal Constitution, Shad clarifies that he has not specifically mentioned the need for a prime minister to resign if a government bill is rejected.
“Take the UK, for example, the Brexit bill introduced by former Prime Minister Theresa May was rejected by Parliament on several occasions. She didn’t quit because of that, ”he says.
Meanwhile, the executive director of the Institute for Democracy and Economic Affairs, Tricia Yeoh, does not believe that the deputies will reject the 2021 budget, as this has important implications for the implementation of government projects and the distribution of aid.
“The political situation remains fluid and dynamic, and it is unclear exactly how many MPs support the different political coalitions and their leaders.
“As things stand, if Umno continues to reaffirm its support for the PN government, it seems likely that the PN will have the necessary majority, however small, to approve the 2021 budget,” he says.
While the rejection of the government budget is unprecedented in Malaysia, Yeoh says this has happened in other Commonwealth countries.
These include Canada under Prime Minister Pierre Trudeau in 1974 and Australia under Alfred Deakin in 1904 and Arthur Fadden in 1941.
“Government ministries and services would not close, but if Parliament does not approve a new budget proposal, this means that government ministries and agencies may not have the finances necessary to implement programs, projects and, most importantly, fiscal aid. in relation to Covid -19, and there is a risk that public officials will not be paid in 2021.
A doctor collects a sample for a coronavirus test outside a clinic in Kajang. The possible state of emergency is by far said to be an effort to intensify the fight against the Covid-19 pandemic, which has skyrocketed over the past week without being hampered by political uncertainties. – AP
“However, I believe that the King would intervene in such a case to prevent public officials from not receiving their salaries,” he says.
An expansive budget is expected
The 2021 budget is highly anticipated by economists and the rakyat, considering the need to further support economic activities that have been affected by the coronavirus-induced crisis.
In fact, the budget would be another form of “stimulus injection” to stimulate consumption and improve business sentiment, which has been further affected by the recent conditional motion control order in Selangor, Kuala Lumpur and Sabah.
Experts have called on the government to introduce additional fiscal and non-fiscal incentives into the 2021 budget, in addition to measures introduced in the previous five rounds of economic stimulus packages totaling RM305bil.
According to Wellian Wiranto, an economist at OCBC bank, the 2021 budget is expected to remain broadly expansionary in light of the still fragile economic recovery.
“There will be a relative decline, however, from 5.8% to 6% of the budget deficit of the gross domestic product (GDP) expected this year to around 5.5% in 2021, to give a feeling of commitment to fiscal consolidation .
“Aside from the broad gesture of fiscal consolidation, this would also preserve some room for contingency stimuli next year. We live in an uncertain world now of all time, and giving ourselves some leeway is definitely a good idea, ”he says.
Given the need to preserve jobs and livelihoods amid the uncertain environment, Wellian expects that policies that include wage subsidies, especially for the middle class, will continue in the 2021 Budget, even if more specifically for the industries most affected.
“At the same time, subsidies to help with the cost of living of the poorest segments of the population will undoubtedly be another area of budget spending,” he says.
Wellian believes that the government has some scope for a fairly accommodative fiscal policy, as its debt-to-GDP ratio has risen to 60% from 55% previously.
This allows the federal government to borrow more than was previously allowed by law to fill its funding gap.
Meanwhile, Alliance Bank chief economist Manokaran Mottain tells StarBizWeek that the country urgently needs government support.
“As the market expected the 2021 budget to remain an expansive budget in the midst of a time of crisis, I believe that the government would take these policy measures to cushion the ongoing economic recession amid the pandemic, as well as to maintain the Malaysian standard of living, “he says.
Citing his wish list for Budget 2021, Manokaran urges the government to consolidate its direct cash assistance as the Bantuan Prihatin Nasional (BPN) and the Wage Subsidy Program (WSP) in 2021.
“In addition to the consolidation of BPN and WSP, the government is also expected to extend some other financial relief such as discounts on public services and rent exemptions for the most vulnerable groups, along with new measures to improve domestic consumption in the medium term.
“As such, welfare spending is likely to remain significant in 2021,” he says.
While subsidies and social assistance are important to support consumption, Manokaran points out that such measures will not be sustainable in the long term, but will only cushion government coffers and increase public debt.
Therefore, it is necessary for the government to resume large infrastructure projects that will have a high multiplier impact on the economy, stimulate the labor market, and ensure people’s well-being.
Under the 2021 Budget, Manokaran expects the government to reinstate the unpopular goods and services tax (GST) at a relatively lower rate of 4% to increase its coffers.
This will help the government expand its tax revenue base in the future, according to him.
He predicts that the cost of re-implementing the GST will be minimal, as the tax was not completely eliminated. Instead, a zero rate has been applied from the previous 6%.
“As such, we estimate the re-implementation of a GST of 4% to generate revenues of approximately RM30bil in 2021.
“Furthermore, the government could also eventually consider expanding the scope of goods and services subject to sales and service tax (SST) in 2021.
“As of now, it only takes around 100,000 companies to collect SST compared to 472,000 that were collecting GST previously.
“By expanding the scope, the government can make up at least half of the revenue lost from SST collection,” he says.
[ad_2]
