Making Sense of Budget 2021’s Ethnic Fault Lines

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By Lee Hwok Aun

The issue of ethnically targeted allocations rears its ugly head every year when the federal budget is tabled. Yet, public perception may not reflect the full reality. Could properly understanding the uneven distribution of the Budget 2021 pie mean a better push for alternative allocations and an end to this cycle of anger?

At face value, Malaysia’s Budget 2021 allocations might seem like an inverted pyramid – with Bumiputera-centric funds taking more room on the larger upper level while allocations for other ethnic groups occupy the levels below, each smaller than the last. This impression is reinforced by the Budget speech, with the government’s revelations on selected funding inevitably headlining news reports. In a nutshell, the message perceived is that next year, Bumiputera programmes can look forward to RM11.1 billion; while non-Bumiputera causes get RM530 million. Apparently, the majority, whose population is double that of the minorities, is receiving twenty times more help.  Looking at these general numbers alone, many people, predictably, get disgruntled, complaining about the seeming injustice and demanding more allocations for their group. No one offers detailed suggestions and nothing changes. Should Perikatan Nasional remain in power, we can expect this cycle to repeat when Budget 2022 rolls around. Allocations for ethnically-targeted programmes in Budget 2019 and Budget 2020, similarly, made the headlines – of course, with the tables turned. Then-finance minister Lim Guan Eng of the Pakatan Harapan government got a hammering during the previous Budget debates for not providing enough for the Bumiputera community. That’s not true; Pakatan actually allocated a lot. And after the dust settled, everything stayed the same once more. The sentiments spurring complaints about budget allocations for specific groups are understandable. There is widespread concern for the federal budget and public policy to look out for all Malaysians and to be fair in apportioning public funds. This is distorted as parliament huffs and puffs, and people keep reacting to the headlines.
Budget 2021 targeted allocation according to ethnic groups (RM million)
Budget 2021 targeted allocation according to ethnic groups (RM million)

What's really happening

Can we escape this annual loop of futility? Two steps might help: first, think clearly and coherently about what the government is doing and which groups are the designated beneficiaries; and second, scrutinise ethnically-targeted programmes with precision and propose specific ways of enhancing equity and fairness in the system.

To clearly and coherently grasp policy and public funding for the benefit of ethnic groups, we must be able to distinguish between measures that provide basic needs and help the poor, against those that seek to promote upward mobility and economic participation.”

An extensive range of federal programmes are to be funded to help people receive basic income (such as Bantuan Prihatin cash transfers and minimum wage), primary and secondary schooling, healthcare, and social protection. Covid-19 responses have expanded these or introduced new measures, such as the wage subsidy and loan moratorium. All of the above largely operate on the basis of equality – that Malaysians, regardless of ethnicity, religion, gender or other identifiers, have the right to access these.

Budget allocations are not broken down by ethnicity, and doing so in the annual budget process would not necessarily be practical or constructive. We can take assurance that Bumiputeras and non-Bumiputeras, alike, are being assisted. But we must also be mindful of the purpose of this massive range of assistance to provide basic needs. 

This distinction is important, because the programmes that designate Bumiputeras as the predominant or exclusive beneficiary pursue a different set of objectives. This range of policies revolves around promoting the group’s upward mobility and participation in higher socioeconomic levels; chiefly, through higher education and skills development; entrepreneurship; micro, small and medium enterprise (MSME) growth; professional and managerial employment; and wealth ownership. Regardless of one’s agreement – or vehement objection – to these policies, their designated role and scope as well as their location in the budget, must be acknowledged. These programmes are mainly targeted at the aspiring or emergent Bumiputera middle class, not so much the poor. 

In other words, enormous chunks for Bumiputera-centric programmes and small morsels for others do not mean the Bumiputera poor are being helped while the non-Bumiputera poor are being ignored.

Now we can delve into some specifics of Budget 2021. The budget speech sets out the agenda and content for debate, and it throws both information and confusion into the mix. Budget speeches have not helped the rakyat understand the scope of public assistance and ethnically-targeted programmes. 

This habit of using the finance minister’s pinnacle moment to broadcast the government’s championing of Bumiputera causes, while sprinkling a few assurances for minorities, leads to the false impression that the Bumiputera poor are being helped twenty times more than the non-Bumiputera poor. 

What we can say with more certainty is that there is a disparity between the allocations for Bumiputera-targeted programmes and allocations that specify other groups, as summarised in the chart below. Clearly, the system is a deeply embedded one that all ruling coalitions in recent years follow. In fact, the breakdown barely differs between Barisan Nasional (Budget 2018), Pakatan (2019 and 2020) and PN (2021). 

At the risk of belabouring the point, I must reiterate the importance of not equating these figures with the amounts of funding for needy Bumiputeras versus needy non-Bumiputeras. The B40 and M40 of all groups substantially benefit through basic assistance in income, health, education and social protection.

Ethnicity-targeted programmes in the Budget speech (RM million; % of total)

Ethnicity-targeted programmes in the Budget Speech (RM million; % of total)
Source: Author’s compilations from Budget speeches
Source: Author’s compilations from Budget speeches

Where do we go from here?

By no means is this the end of the story. We just need to spend a bit of time gleaning the speech to arrive at something like the table below. 

Again, information from the budget speeches are selective, and inconsistently detailed from year to year. But they are still the best resource we have for this purpose. 

Now we can engage in the second crucial step of proper budget scrutiny – to bring specific criticisms on the big differences and offer specific suggestions, beyond general unease with the disproportionality shown in the chart above.

Ethnically-targeted programmes: Budget allocations (RM millions)1
Bumiputera

2018

RM 6,725
  • Higher education: YPPB2 RM100
  • RM1,825 MSME support, including:

    • RM700 Tekun & PUNB

2020

RM 8,200
  • Higher education: YPPB2 RM192
  • RM1,825 MSME support, including:

    • RM1,000 SJPP3 guarantee & SME Bank

    • RM320 Tekun, PUNB, etc4

2021

RM 11,150
  • Higher education (MARA, UiTM, etc): Total RM6,500
  • RM4,600 MSME support, including:

    • RM2,000 SJPP

    • RM1,300 Dana Kemakmuran Bumiputera

    • RM510 Tekun & PUNB
Orang Asli

2018

RM 110
  • RM50 food assistance
  • RM60 settlement development

2020

RM 145
  • RM142 JAKOA & "overall economic development"

2021

RM 183
  • RM158 "well-being"
Chinese

2018

RM 195
  • RM80 SMEs & hawkers
  • RM65 new villages

2020

RM 270
  • RM85 new villages

2021

RM 177
  • RM177 "Lump sum payments for education, SMEs, news villages"
Indian

2018

RM 150
  • RM50 Tekun
  • RM50 "community development"

2020

RM 170
  • RM20 Tekun
  • RM100 MITRA

2021

RM 170
  • RM20 Tekun
  • RM100 MITRA

Notes: 1 Totals include funding for maintenance and upgrading of schools (MRSM, tahfiz, religious, Chinese and Tamil vernacular schools, etc.), and exclude public procurement; 2 Yayasan Peneraju Pendidikan Bumiputera; 3 Skim Jaminan Pembiayaan Perniagaan, a guarantee scheme for borrowing without collateral, runs programmes for Malaysian SMEs, with some specially designated for Bumiputera SMEs; 4 including SME Bank and Pelaburan Hartanah.


Source: Author’s compilations from Budget speeches.

We can unpack a few points. First, funding for Bumiputera SMEs has been steeply increased, from RM8.2 billion in 2020 to RM11.1 billion in 2021. Specifically, funding for Dana Kemakmuran Bumiputera for SMEs and Skim Jaminan Pembiayaan Perniagaan (a guarantee scheme for non-collateralised loans) surged RM2.3 billion. 

In the context of continuing economic uncertainty, a heightened risk environment and Budget 2021’s drastic wage subsidy cuts, it is highly questionable that so much funding should be channeled into SME support.

Second, the microfinance space perhaps presents the clearest case for a rebalance. Tekun was established for low-income Bumiputeras, but subsequently introduced one scheme for low-income Indians. The RM20 million allocated for Indians under Tekun is staggeringly dwarfed by the hundreds of millions availed to Bumiputeras through Tekun, PUNB and other agencies.

Third, a consideration of policy specifics and budget allocations also helps us identify exclusive programmes that can transition to an inclusive composition. The generously funded Yayasan Peneraju Pendidikan Bumiputera (YPPB) stands out. YPPB expressly reaches out to students from disadvantaged backgrounds, providing financial and moral support for technical and vocational education.

While it has started out solely for Bumiputera youth, the case can surely be made for this institution to expand to disadvantaged households of all communities. A Yayasan Peneraju Pendidikan Malaysia would wholesomely follow in the footsteps of Amanah Saham Nasional and Tekun, which over time opened some doors to non-Bumiputeras. 

These are just a few examples, but hopefully a foretaste of the possibilities. 

In the end, ethnicity and the federal budget need not be an annual cycle of predictable politicking and reflexive reaction.

Lee Hwok Aun is a Senior Fellow at the ISEAS-Yusof Ishak Institute in Singapore and author of the recently published Affirmative Action in Malaysia and South Africa: Preference for Parity. His research focuses on affirmative action, discrimination, inequality, social protection, labour and education.

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