MALAYSIA’S upcoming six state elections are a good opportunity to propose economic reforms that may be beneficial for the country as a whole.
On this note, the Centre for Market Education (CME) hopes Prime Minister Datuk Seri Anwar Ibrahim and the unity government will chance upon the Aug 12’s six state polls to promote a brave reformistic agenda while their outcome will provide the right conditions to pursue the long-term pro-investment Ekonomi Madani platform or even unpopular measures.
“This would include, among others, tax reforms, liberalisations and harm reduction strategies on different crucial fronts,” CME’s CEO Dr Carmelo Ferlito pointed out in a media statement.
“After the post-GE15 (15th General Election) enthusiasm, the content and the spark of the debate on economic reforms have dropped, hence the state elections should become an occasion to re-launch that debate so that the discussion would not be limited just to seat allocations.”
According to Ferlito, one important topic of discussion that must be raised before voters head to the polls is fiscal devolution or the legislation that will increase the power of local governments to collect fiscal revenues and spend these revenues for local development programmes.
“A good starting point would be the re-introduction of the goods and services tax (GST), which in contrast to the previous system, should be collected at state level. Revenues collected by the state could remain within the state,” he suggested.
“As an example, 80% of the total could remain within the state while the remaining 20% could contribute to the Federal government’s budget.”
Such a decentralised system, in Ferlito’s view, could benefit two priorities for local governments, namely (i) increased investment in development projects; and (ii) greater resources to fight against poverty.
“With regard to poverty, local governments are obviously better placed to know what the real needs on the ground are. Therefore, they could better decide what to do and how, responding more directly to bottom-up signals,” he stressed.
A strong argument in favour of fiscal devolution is also the possibility for the states to implement development projects which would be based on their local economic, geographic, and vocational conditions, according to Ferlito.
“Availability to collect and spend resources would create virtuous competition among states, pushing them ‘to fight’ to attract investment opportunities thanks to an increased power of action. This would produce positive effects for Malaysia as a whole in terms of FDI (foreign direct investment) attraction,” he reckoned.
“State elections can also become an occasion to further promote the debate around the importance of innovation and how it can sprout out of local entrepreneurship within the right institutional framework.” – Aug 8, 2023
