A tax holiday could boost the economy
MALAYSIA has been trying to become a developed nation for several decades. Maybe after all this time we need a strategic change in the way we run our economy.
The government’s public debt reaches 70% of our GDP, which will certainly affect our economy and the confidence of foreign investors. Malaysia needs to be more competitive in international trade to increase its exports. And the government has a big role to play in this regard.
In South Korea in the 1960s, authoritarian leader Park Chung-hee was convinced by Samsung group pioneer Lee Byung-chul to give lenient tax breaks to Korean companies. As a result, more and more companies started to invest in new business.
Perhaps Malaysia could emulate that: instead of imposing a one-off tax on the currently ultra-profitable glove makers, as some have suggested, the government should instead consider conditional tax exemptions for a period of time and oblige them. to use the profits to acquire additional glove production facilities. and rubber plantations in foreign countries to help Malaysia capture the global rubber glove market.
It could generate a lot more taxes and significantly improve Malaysia’s trade balances.
Ultimately, as exports increase, our GDP will be higher, leaving more room for statutory debt limits.
South Korea’s success is attributed to clear financial goals and cooperation within the country’s industries as well as the political will to improve the country’s competitiveness.
Malaysia faces a huge challenge in terms of political will and looking out. We must put aside the differences and be a unifying force that looks outward rather than inward. We have to make money abroad, not at home. This example of sector orientation can be applied not only to glove manufacturing, but also to other major export industries such as palm oil, manufacturing and the electrical sector.
At the same time, the Malaysian government must place the highest importance on education. To attract and retain talent, Malaysia should better fund public universities, especially research universities, and prioritize research and development while improving the curriculum in secondary and primary schools. English should be given priority – while retaining Malay as the national language, of course – due to the language’s global acceptance in business and research.
The late Lee Kuan Yew attributed Singapore’s success to its investment in education. In fact, the island nation spends 20% of the national budget on education only; Malaysia spends only 4.5%. We’ve seen local public universities offering research assistants a shameful starting salary of just RM650, while in Singapore a similar position offers S $ 3,000 (RM 9,000), a marked difference of 1,300%. How do we plan to retain talent or train new ones when our country’s education system is not adequately funded?
The government’s injection of stimulus packages as well as the long-term strategy should also focus on this point. Economists have long believed that investing in education, or “human capital”, is an important source of economic growth. In fact, the most common studies show that education contributes at least 15-30% of a country’s GDP growth (Brookings Institution, 2006).
We hope the new Malaysian government will readjust its strategy and help local industries compete with their overseas counterparts, thereby increasing exports and encouraging local demand. We also hope that the government will invest more in the education sector to develop our country’s human capital and, in turn, our GDP, which will be crucial in the long run for better government budgeting and better trade balances. with a stronger currency.
CRITICAL MALAYSIA, Critical Malaysia is a non-profit think tank that advocates for critical issues surrounding Malaysia’s economy.