With the impending arrival of the Federal Budget 2019, StarProperty.my invites the public and stakeholders of different industries to contribute their thoughts on how the government should spend or save money.
Contributed by AREA Management Sdn Bhd executive chairman Datuk Stewart Labrooy
“In the business world, the rear-view mirror is always clearer than the windshield”- Warren Buffet
International Trade and Industry deputy minister (and former Head of Penang Institute in Kuala Lumpur) Dr Ong Kian Ming produced a detailed analysis of the government expenditure in the Federal Budgets from 2004 to 2018.
“The Budget 2018, tabled by then-Prime Minister Najib Razak in his capacity as Finance Minister in Parliament on October 27, 2017, saw RM48bil allocated towards Development Expenditure (DE),” said Ong.
This figure while equivalent in an absolute amount to its 2017 allocation, and inclusive of an RM2bil provision for contingencies, represented the lowest share that the DE had taken of the Federal Budget since Independence in 1957.
Both the absolute amount and the budget share of DE had been on a downward trend since Najib became the Finance Minister in 2008 as well as in 2009 when he took office as the Prime Minister.
He goes on to say that the DE had dropped by 10% in absolute terms from 2009. The share that the DE took of the total budget had fallen from 27.8% in 2010, a year into Najib’s tenure, to 17% in Budget 2018. So, what can we expect in the Budget 2019? It’s not going to be an easy task for the Government to balance the shortfall in revenue with rising operational and debt servicing costs.
On a positive note, the rise in oil prices and the steps currently taken by the Government to stop the leakages in spending could possibly shoulder some of the deficit. However, the glaring fact is that whatever that is decided should be carefully thought out, and the allocation of our precious capital for development should maximise our returns.
Tun Dr Mahathir has hinted that this budget will be a tough one with sacrifices to be made by all. Some ministries have already started talking up strategies to improve their finances; the Ministry of Health, for example, is looking at raising funds by securitising their hospitals through a Real Estate Investment Trust (REIT).
All said and done, our budget has to send the right signals to our global and local investors to restore confidence in our economy.
The key would be in maintaining the momentum of continuing our reforms and becoming more transparent and accountable in all the things we do.
So where should we invest our precious development expenditure next year? The question is what are we good at and should we aspire to be the best at it globally.
I was disappointed to learn that Facebook has decided to locate their Asian Data Hub in Singapore and not across the Causeway in Johor. We just lost a USD1.7bil investment.
Remember Cyberjaya? It was an idea to create a world-class IT hub for ASEAN. It was a class leader, very visionary even before the explosion of cloud computing which was not envisioned at the time.
It failed as it was left to create its own momentum and issues with broadband speed, cost and global connectivity sapped its global appeal. Now everyone wants to locate their data centres in Singapore whereas we have ample power but no connectivity. So, we need to fix that. Malaysia should have the fastest and cheapest broadband speed in Asia. Period. That will spawn a host of other industries that will want to locate here.
So what else are we good at? Here is a list to consider:
Banking – we have the best banking system but it is lagging behind in terms of Fintech. Let’s invest in Fintech as the other countries are embracing this at a much faster rate than we are.
Healthcare – Medical tourism is a big money spinner but I don’t see us building capacity or marketing ourselves well. Thailand is ahead of us here. We also need to leverage on technology to improve our services to the rakyat.
Industrial Development – Vietnam and Thailand (and now Indonesia) are aggressively courting foreign manufacturers with state of the art industrial estates. It is time to raise the quality of our industrial estates and we should also get out there to sell our capacity and talent. This is the only way we will address the current low wages earned by the large proportion of the Malaysian workforce also known as the B40.
The Look East policy lifted many Malaysians out of poverty in the 70’s, and now we need to apply those lessons learnt today. Sizeable investments in revamping MITI, MIDA, EMDEC and our Trade Associations can do wonders for our economy.
Education – Malaysia is strategically located as an education hub in Asia but we need to do more to attract the big global universities to come here. This, in turn, will attract the best students to study here as well as contribute to our research and development. Education consumes a large portion of the Malaysia Budget. Last year RM61.6bil was allocated to the education sector alone.
Among the notable points was the RM190mil allocated for 2,000 classrooms to develop Science, Technology, Engineering and Mathematics (STEM) centres and to improve Computer Science modules, including for Coding programmes.
Despite consuming a large part of the annual government budget, most Malaysians still have the perception that our educational system is failing us. Let’s hope our new Education Minister will find a way to address this.
Electronics – with the global trade war taking off, Malaysia could be a net beneficiary if we can position ourselves as a second source of production for the global supply chain. We should open more new industrial parks to cater for electronics, train our youth and improve our marketability.
Agriculture – Malaysia still leads in the oil palm production but we should aspire to become a global leader in oleochemicals. We need to invest and find out what it takes to scale up the capacity. Other research to be considered include the automation of rice and food production for self-sufficiency.
Property development – our building technology is predicated on cheap labour. As a result, we are lagging behind other countries in building technology. Singapore uses Johor to produce precast structures for their buildings and we are slow to adopt the technique. New incentives are required here.
These are just are some of the ideas that I hope the government will be considering in the Budget 2019. Hopefully, with whatever allocation being made, we could monitor the execution and disclose it to everyone.
To date, I have no idea if any of the RM190mil spent on the STEM classrooms have been completed, and if they are producing results today. We need a bold approach to future-proof our economy and not rely on a rehash of the 2018 budget when formulating this one. I can only hope that things will change this time.
About the Contributor
Datuk Stewart LaBrooy is the Executive Chairman of AREA Management Sdn Bhd, a subsidiary of AREA Advisors Pte Ltd (AREA), an appointment he has taken since his retirement as CEO and Executive Director of Axis REIT Managers Bhd on 31 December 2015. AXIS-REIT is the first Shariah-compliant industry REIT in the world and one of the first REITs to be listed on Bursa Malaysia. He is also the founding chairman of the Malaysian REIT Managers Association (MRMA) and is currently an Honorary Secretary of the Association. Dato' LaBrooy is also a board member of the Asia Pacific Real Estate Association.
With a career spanning over 40 years in the industrial sector, he has spent well over a decade since 2005 in heading Axis-REIT and establishing REITs as an essential component of the capital markets. He is a prominent speaker on the subject of real estate investment and has presented numerous papers at conferences globally.
He holds a Bachelor of Engineering (Hons) degree and a Post Graduate Diploma in Business Studies from the University of Sheffield and is a member of the Institute of Engineers, Malaysia.
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