‘Debt donation drive more populist than economic’

Firdaos Rosli from ISIS says crowdsourcing may not be the best way forward for Malaysia, while IDEAS chief Ali Salman says the initiative may not collect an amount big enough to ease the country’s debt.

(FMT) – A prominent economist says the government’s crowdfunding initiative to help “ease” the country’s debt appears to be another policy geared towards populism rather than sound economics.

Speaking to FMT, Firdaos Rosli from the Institute of Strategic and International Studies (ISIS) said Malaysia needed to move forward but expressed doubt that crowdsourcing was the way to do so.

He questioned the rationale behind Tabung Harapan Malaysia, a donation drive announced by Prime Minister Dr Mahathir Mohamad yesterday, noting that the government had also announced that World Cup matches would be aired live on RTM and that National Higher Education Fund (PTPTN) borrowers would be allowed to delay settling their loans if their salaries are below RM4,000 a month.

“The initiative reaffirms my earlier assessment that there is no better alternative to replace the shortfall of at least RM20 billion revenue due to the planned abolishment of the goods and services tax (GST).

“Besides, one would also wonder whether the donation is tax deductible, or if this is the government’s answer to supplement taxes due to the zero-rating of the GST during the tax holiday period.”

Another economist, Ali Salman who is the CEO of the Institute for Democracy and Economic Affairs (IDEAS), praised the people’s resolve to help, given that debt repayment is the responsibility of the federal government.

“It is, however, unlikely that common citizens can collect an amount big enough to make a dent in the public debt reduction, and frankly, they are not liable to pay.

“I hope that the new government can soon announce an adjusted debt repayment plan accounting for liabilities and guarantees which the government has now included in the gross public debt.”

Ali said he saw no immediate risk in Malaysia’s debt situation given the country’s strong fundamentals on the back of export growth and the increase in oil prices.

However, he said investors sentiment would be negatively affected if crowdfunding was presented as a major strategy for reducing debt.

Meanwhile, the Centre to Combat Corruption and Cronyism (C4) urged the government to appoint an independent auditor to monitor and regulate Tabung Harapan Malaysia.

C4 executive director Cynthia Gabriel told FMT it was important that there be transparency in the management of the fund.

“The donations should be made public and shouldn’t be anonymous. Transparency can help mitigate any wrongdoings or abuse.”

The official government debt is currently at RM686.8 billion, which is 50.8% of the gross domestic product.