Veteran economist Ramon Navaratnam calls Budget 2025 ‘Madani-less’

Veteran economist Ramon Navaratnam calls Budget 2025 ‘Madani-less’
"Veteran economist Ramon Navaratnam calls Budget 2025 ‘Madani-less’"

A veteran economist has labelled Budget 2025, as 'Madani-less', saying many pertinent issues set to affect the people next year have been left unexplained.

Tan Sri Ramon Navaratnam, a former economist with the Malaysian Treasury for 27 years, said one issue that needs to be given immediate attention by the government is the explanation and definition of the T15 group.

In 2022, the Department of Statistics Malaysia defined the T15 group as those with a household income of at least RM13,295.

It was announced under Budget 2025 that those in the T15 group would no longer be eligible for fuel, education, and health subsidies.

“Our taxation must become more progressive. This is a sign of regression because the government is raising tax too high, too soon,” said Navaratnam.

“We need to take a gradual approach instead. Things like this cannot be done overnight, and the government must explain to the people why subsidies are being removed so fast.”

Navaratnam was of the view that a household income of RM13,295 represented those in the middle-income group.

“RM13,000 is a reasonable household income. It is not right to call those who earn such an income ultra-rich,” Navaratnam said.

“We need to set a more practical household income before removing subsidies.”

Navaratnam's views echo those of MCA president Datuk Seri Wee Ka Siong, who had in the Dewan Rakyat on Tuesday said branding everyone in the T15 income group as "ultra-rich" would cause injustice to people, including hardworking families.

He said this would include a husband and wife who are teachers under the Grade DG48 group for the last 12 years.

Wee, who is also Ayer Hitam MP, had said it was not fair to claim that some under the T15 group were ultra-rich when corporate figures and millionaires are included in this group.

Navaratnam also raised questions as to whether proper studies were conducted on the ground before such an important policy was announced.

“In principle, subsidies must be reduced, but it cannot be done arbitrarily. The problem today is there has not been enough consultation with taxpayers.”

“Where is the Madani in the Budget? Budget 2025 appears to be Madani-less,” said Navaratnam, who was involved in the preparation of Malaysian budgets and five-year economic development plans for many years.

On Sunday, Economy Minister Rafizi Ramli said the government was still refining the definition of the T15. He explained that it would not be based solely on gross household income, and the definition would take into account variables such as net household income, locality, and basic household spending for a reasonable quality of life, among others.

Various groups from different sectors have also raised concerns regarding several policies under Budget 2025.

On Tuesday, Small and Medium Enterprises (SME) Association of Malaysia president Chin Chee Seong voiced grave concerns over the proposed wage increase and mandatory EPF contributions for foreign workers, urging policymakers to consult stakeholders to ensure future policies aligned with the realities on the ground. Chin said that while the government's focus on improving workers' welfare was commendable, these measures could impose unsustainable financial burdens on Malaysia's SMEs, which currently employ some 7.95 million local and foreign workers.

Other groups that have raised concerns regarding the mandatory EPF contribution for foreign workers include the Malaysian Plastics Manufacturers Association (MPMA) and the Federation of Malaysian Manufacturers.

MPMA's president C.C. Cheah said yesterday that the association was deeply disappointed by the lack of industry engagement or consultation on this critical policy change, which has far-reaching implications for the plastics industry and the wider manufacturing sector. He noted that the plastics industry employs approximately 170,000 individuals, of whom 30 per cent are foreign workers.

This new policy will have a direct and significant impact on labour costs, as foreign workers make up a substantial portion of the workforce. Labour costs already constitute 15-20 per cent of total production costs for plastics manufacturers," said Cheah.

“In addition, the increase in the minimum wage from RM1,500 to RM1,700 by February 2025 will undoubtedly place significant strain on businesses. These cost pressures threaten to squeeze manufacturers' margins, jeopardising the viability of many businesses in the plastics industry."

Cheah added that the repercussions of this policy extend beyond plastics manufacturers. The increased production costs will likely lead to higher prices for plastic products, which are critical components across numerous industries, including packaging, automotive, and construction. The sudden implementation of this mandate could also diminish Malaysia's export potential, as higher production costs could make Malaysian plastics less competitive in international markets.

Navaratnam, a former alternate director on the Board of Directors of the World Bank in Washington, added that Budget 2025 appears to lack research-oriented policies.

“The principle of any budget is about how a nation plans to handle the future direction of its economy. This means introducing fundamental structural policies.”

“But where are the fundamental structural policies? If the government is able to answer these questions, then the core doubts and uneasiness arising from Budget 2025 will be resolved.”