Get more with myNEWS

A personalised news feed of stories that matter to you

Learn more

Malaysia’s Prime Minister and Finance Minister Anwar Ibrahim holds a briefcase containing his 2023 budget speech. Photo: AFP

This Week in Asia Explained

Explainer | Winners and losers of Malaysian PM Anwar Ibrahim’s first budget

Malaysia’s poorest, small businesses as well as middle-income earners are expected to benefit the most from Anwar Ibrahim’s first budget as PM
Meanwhile, high-income earners and Malaysia’s unregulated electronic cigarette and vaping sector could have the most to gripe about

Malaysia

Hadi Azmi

Published: 9:45am, 25 Feb 2023

Why you can trust SCMP

Malaysia’s Prime Minister Anwar Ibrahim announced the first budget of his administration on Friday, with giveaways for the poor and taxes aimed mainly at the rich, in an effort to help offset soaring inflation. So who will benefit, and will be hurt by the budget?

Winners

Malaysia’s poorest

Pledging to “end extreme poverty”, the government is allocating 750 million ringgit (US$169 million) to upskill workers under a pilot programme dubbed the People’s Income Initiative. To be launched on Sunday, the scheme will focus first on agriculture.

“Malaysia has advantages in terms of geography, climate and perfect accessibility to support the agricultural sector to continue to grow,” said its minister Rafizi Ramli.

This is alongside the 2.5 billion ringgit the government has set aside for direct cash aid for more than 400,000 recipients.

Malaysia’s Anwar to focus on rising debt in budget; central bank to hike rates

Small businesses

With the rise of gig workers, particularly in the food delivery sector, the government allocated 330 million ringgit for micro and small businesses with 10 million ringgit earmarked for poor families to start a motorcycle delivery business.

According to government statistics, almost 98 per cent of gig workers in these sectors are young.

The government says it will foot the bill for those eligible to get motorcycle licences, as well as bus, taxi and e-hailing certifications.

This is on top of 40 billion ringgit in loans and assistance under a variety of programmes aimed at the sector.

Malaysia’s government allocated 330 million ringgit for small businesses in PM Anwar Ibrahim’s first budget. Photo: Bloomberg/File

Middle-income earners

Having long griped about being forgotten, some 2.4 million middle-income earners will get some respite with the government slashing up to 2 per cent of income tax for workers earning between 35,000 and 100,000 ringgit annually.

This move will cost the government 900 ringgit million in lost revenue but in turn translates to 1,300 ringgit annually in additional disposable income to those eligible.

The national debt

Malaysia’s national debt and its liabilities, which at its current size of 1.5 trillion ringgit (US$338 billion) or 81 per cent of the country’s GDP, is perhaps the biggest winner as the prime minister focuses on raising revenue to pare it down.

Comparing it to past debts that were incurred to invest in developing the country, Anwar described the cost of servicing these loans – including for the 1MDB corruption scandal – as a “betrayal” to Malaysia’s younger generations.

The chairman of Malaysia’s stock exchange Abdul Wahid Omar was pleased with the budget, saying the first step towards reform was “to admit that we have a problem”.

02:59

From prison to Malaysia’s new leader: Anwar Ibrahim appointed to top seat

Losers

Malaysia’s rich

In a clear – potentially popular – stroke against Malaysia’s wealthy, Anwar said he wanted a higher tax rate for those earning between 100,000 and 1 million ringgit annually, as that group would now have to fork out 2 per cent more in income tax.

Calling it a progressive move, Anwar said that less than 150,000 taxpayers would feel the brunt of this increased rate.

While those affected might not be all too happy with the announcement, it was received positively on Malaysia’s lively social media with some describing it as “long overdue”.

Those having to pay for it however said that “treating those earning 100,000 ringgit similar to those earning 1 million ringgit is ridiculous”.

1MDB: ex-banker says US$1.1 billion paid to Najib and others, not US$2 billion

Luxury buyers and investors

Aside from the tax on their income, the highest earners also face a new charge on their consumption with the introduction of a luxury tax which Anwar said will be imposed on watches, branded goods and “other luxuries”.

The government is also looking into introducing a capital-gains tax (CGT) from 2024, adding a qualifier that it would be “at a low rate”.

The move is in line with suggestions from the World Bank in 2021, saying Malaysia can broaden its tax base by adopting “a more comprehensive CGT and/or a tax on wealth, probably in the form of a tax on gifts and inheritance”.

Malaysian Prime Minister Anwar Ibrahim delivers his national budget at the Parliament in Kuala Lumpur. Photo: Malaysia’s Department of Information/ AFP

Vapers

Malaysia’s unregulated electronic cigarette and vaping sector, which have long operated in a grey area, will see the end of its bull run with the government setting its sights on imposing excise duty on the 2 billion ringgit (US$450 million) industry.

This money, along with half of the 11.97 billion ringgit it expects to collect in excise duty, will be funnelled to improve the quality of the public health sector which has been struggling with a lack of funds to hire more doctors and improve its service quality.

The move appears to be popular with the public, with some saying that “this should have been the plan from the start”.

Post