From Platform Flexibility to Fair Work: What Malaysia Should Adopt from China and Other Countries.

Introduction: Flexibility should not mean financial insecurity

Digital platforms have transformed how Malaysians earn a living. E-hailing drivers, food-delivery riders, couriers and other gig workers can choose when to work, supplement their income and access customers through digital technology. These benefits matter, particularly in a labour market where flexibility and alternative income opportunities are valuable.

However, flexibility does not automatically translate into economic security. A worker may be free to log in and out of an application yet have limited influence over remuneration, task allocation, performance ratings, incentive rules or account suspension. The platform's technology can therefore become a powerful mechanism for determining the practical terms of work.

Malaysia has already taken an important legislative step through the Gig Workers Act 2025 (Act 872), which became operational on 31 March 2026. The Act establishes rights concerning contractual terms, earnings, automated monitoring and decision-making, deactivation, social security, occupational safety and dispute resolution. It also creates a Gig Workers Consultative Council and a Gig Workers Tribunal.¹,²

The policy challenge has consequently changed. Malaysia no longer needs to begin by designing an entirely new legal framework. It needs to ensure that existing rights are effective, address gaps in the coverage and detail of the current law, and learn from international approaches that have tested ways to make platform work fairer.

China's proposed labour-protection measures, Singapore's enacted platform-worker legislation, Australia's minimum-standards framework, the European Union's Platform Work Directive and emerging International Labour Organization standards offer different kinds of lessons. They should not be treated as equivalent: some are binding laws, some are proposals or announced measures, and some are international or empirical reference points.

Malaysia could also consider a dedicated Gig Worker Protection and Transition Fund, financed partly by larger platform operators. The recent decision to establish a Postal Service Fund using the institutional model of Malaysia's telecommunications Universal Service Provision (USP) Fund provides a relevant example of how a sector-specific funding mechanism can support a defined public-policy objective.¹⁵,¹⁶

The objective should be clear: preserve the legitimate flexibility of platform work while ensuring that workers receive fair treatment, meaningful social protection, accountable algorithmic management and a reasonable ability to challenge decisions affecting their livelihoods.

1. Malaysia has established a legal foundation, but implementation matters

Act 872 establishes a statutory framework specifically for gig workers. It requires service agreements to specify matters including the services to be provided, the parties' obligations, earnings rates and payment arrangements. Workers must be informed of the agreed rate before undertaking a service and consulted and informed when the contractual terms change. The Act also prohibits discrimination in working conditions, service assignment and payment of earnings.¹

For platform workers, section 8(2) requires information about automated monitoring and decision-making systems and provides for a non-automated review mechanism. Section 14 establishes procedures concerning deactivation, including an inquiry process and remedies where a suspension or modification is found unjustified. The Act also recognises gig workers' rights to form, join and participate in associations.

Dispute resolution is another important improvement. The framework provides for internal grievance mechanisms, conciliation and a specialist tribunal. Parts VIII and IX address social security and occupational safety and health, respectively.¹,²

These provisions should not be understated. Malaysia already has several protections that policymakers might otherwise propose borrowing from foreign jurisdictions.

Nevertheless, a statutory right is only as useful as the process through which a worker can exercise it. A formal right to review an automated decision may offer little practical protection if the worker cannot understand the reasons for the decision, obtain the relevant records or secure a timely reconsideration by someone with authority to correct an error.

The same principle applies to earnings. A contractual right to know the agreed rate is valuable, but it does not necessarily explain how incentives, waiting time, cancellations, deductions or changes in platform pricing affect the worker's final remuneration.

Malaysia should therefore concentrate on making existing rights measurable, accessible and enforceable before adding overlapping obligations. The measures proposed below are recommendations, not descriptions of current Malaysian law unless expressly identified as such.

2. Malaysian research shows why further protection is justified

Policy reform should be grounded in evidence from Malaysia rather than assumptions drawn entirely from foreign markets.

Mohd Daud, Osman, Samsudin and Phang (2024) examined financial resilience among 452 Malaysian gig workers using survey data collected between June and November 2022. Their study found low resilience against adverse financial shocks, with income, age and financial literacy among the relevant determinants. The authors highlighted the need for better-targeted financial education, income support and regulatory protection.⁵

The study does not establish that every gig worker experiences financial hardship, nor does it provide a current census of the gig workforce. It nevertheless provides empirical evidence of an important policy question: how can workers manage income volatility and build financial security when their earnings and access to work may fluctuate?

Occupational health is another concern. Daud and colleagues (2025) studied 191 food-delivery riders in Eastern Peninsular Malaysia. The cross-sectional study reported work-related musculoskeletal disorders among 74.9% of the participants and identified associations with factors including working days, vibration exposure and exercise habits.⁶ These findings relate to a particular sample and should not be interpreted as a national prevalence estimate.

The results nevertheless support targeted preventive measures for delivery workers, whose work exposes them to physical demands and road-safety risks.

Malaysia's platform-worker disputes provide further evidence of the issues workers consider important. Uchiyama, Furuoka and Omar (2025) analysed food-delivery boycotts in 2022 and 2024, examining worker resistance, organising and the relationship between platforms and riders.⁷ This research illustrates that disputes over earnings, working arrangements and collective voice are established features of Malaysia's platform economy.

Together, these studies support further action on income security, occupational safety and worker representation. They do not justify claiming that all platform work is exploitative or that every platform uses unfair algorithms. Effective regulation must distinguish documented risks from allegations that require further investigation.

3. Algorithmic fairness: the next major regulatory challenge

One of the most important issues for Malaysia is the growing influence of algorithmic management.

Platforms use automated systems to match customers and workers, calculate or present earnings, monitor performance, allocate incentives and identify possible misconduct. Some decisions may be routine and beneficial. Others can materially affect a worker's income or ability to continue working.

The difficulty arises when the platform has detailed information about the system's operation while the worker sees only an offer, score, penalty or suspension. This creates an information imbalance that can make it difficult to identify errors or challenge unjustified decisions.

International research demonstrates why this deserves attention. Binns et al. (2025), in a peer-reviewed study published in the proceedings of the ACM Conference on Fairness, Accountability, and Transparency, analysed approximately 1.5 million Uber trips involving 258 drivers in the United Kingdom. Their longitudinal research reported that following the introduction of dynamic pricing, driver pay decreased, the platform's share increased, job allocation and pay became less predictable, inequality between drivers increased, and drivers spent more time waiting for jobs.⁸

The Guardian's June 2025 reporting also described a separate US analysis associated with Columbia Business School that raised concerns about the relationship between upfront pricing, passenger fares, driver payments and the platform's retained share of revenue. Uber disputed the interpretation and maintained that its pricing was designed to be transparent and fair.⁹

These findings should not be directly extrapolated to Malaysia. The studies concern Uber in other markets, with different operating conditions and regulatory arrangements. They do, however, demonstrate that changes in platform pricing and allocation systems can have consequences that are difficult to detect from individual transactions alone.

Algorithmic pricing is not inherently unfair. Opaque, arbitrary or discriminatory decision-making is the more appropriate regulatory target.

Malaysia should strengthen its existing framework in five ways.

First, platforms should provide understandable explanations of the principal factors affecting remuneration, incentive eligibility and significant adverse decisions. Workers do not need unrestricted access to source code, but they should be able to understand the material rules that influence their earnings.

Second, workers should receive itemised earnings statements automatically at appropriate settlement intervals. Section 13 of Act 872 provides a right to request an earnings slip from a qualifying contracting entity. Making detailed statements routine would help workers verify their payments and provide evidence in disputes.

Third, human review must be meaningful. Where a significant automated decision suspends an account or materially affects access to work, the reviewer should have sufficient information and authority to reverse the decision. Workers should receive reasons, access to relevant evidence and a clear appeal process.

Fourth, material changes to remuneration formulas, incentives and allocation rules should be accompanied by appropriate advance notice and consultation. Section 8 already addresses variations to service-agreement terms; further guidance should clarify when an algorithmic or incentive change is sufficiently material to require this process.¹

Finally, Malaysia should introduce risk-based algorithmic audits. These should examine changes in net earnings, waiting time, payout calculations, task allocation, deactivation and appeal outcomes. The purpose is not to assume wrongdoing, but to identify patterns that individual complaints cannot reveal.

The regulator should be able to inspect relevant records confidentially, while public reporting uses aggregated data and safeguards personal information and legitimate commercial secrets.

4. What Malaysia can learn from China's proposed framework

On 8 October 2026, China's Ministry of Human Resources and Social Security published the draft Measures for Protecting the Rights and Interests of Workers in New Forms of Employment for public consultation until 8 November 2026. The official announcement identifies basic labour-rights protection, regulation of labour rules and algorithms, classification of employment arrangements, dispute resolution, supervisory responsibilities and legal liability as central elements of the proposal.¹⁰

The distinction between a draft and an enacted law is essential. As at 15 October 2026, these proposed measures should not be presented as binding Chinese legislation. They represent a proposed regulatory direction, not operative law.

Nevertheless, their policy direction is relevant to Malaysia. China is addressing the challenge of protecting workers who are subject to enterprise labour management but may not satisfy all the criteria for a conventional employment relationship.

Malaysia should adopt three lessons from this approach.

First, legislation should consider how work is actually organised rather than relying exclusively on contractual labels. A person's practical dependence on a platform, the platform's control over remuneration and work allocation, and its disciplinary authority can be relevant to determining what protections should apply.

Second, rules governing labour and algorithmic management should be sufficiently clear to support enforcement. A general obligation to disclose automated systems is a starting point, but it may not be enough to resolve disputes over how a decision was reached.

Third, rights should be accompanied by identifiable enforcement responsibilities and workable dispute-resolution procedures.

Malaysia should not copy China's draft wholesale. The two jurisdictions have different legal systems, administrative arrangements and labour-market institutions. China's proposal is best treated as a source of regulatory ideas whose relevance must be tested against Malaysia's existing Act 872.

5. Lessons from Singapore, Australia and the European Union

Other jurisdictions offer more developed examples of specific mechanisms that Malaysia can adapt. Their legal status differs and should be kept distinct.

Singapore's Platform Workers Act introduced protections from 1 January 2025 covering work injury compensation, Central Provident Fund (CPF) contributions and representation rights. Platform operators are responsible for providing work injury compensation insurance and handling applicable CPF contributions. Higher CPF contribution rates are mandatory for platform workers born on or after 1 January 1995, while older workers may opt in.¹¹

Malaysia can learn from Singapore's approach to ensuring that platform work generates a contribution record and that workers are not left solely responsible for navigating social-protection systems. Its contribution design should, however, reflect Malaysian incomes, institutions and the separate roles of EPF and PERKESO.

Australia offers a different lesson. Its first interim minimum-standards order for qualifying on-demand delivery workers took effect on 17 August 2026. The legally enforceable order includes minimum pay standards, an earnings-floor top-up mechanism, record-keeping requirements, rules concerning vehicle-related expenses and consultation about significant changes.¹²

Malaysia should study the mechanism rather than copy Australia's nominal pay rate. An effective Malaysian earnings standard should be informed by domestic evidence on remuneration, work-related expenses and economically relevant working time. It should also provide clear rules for calculating the shortfall where a qualifying worker's earnings fall below the prescribed floor.

The European Union's Platform Work Directive places particular emphasis on correct employment classification and algorithmic management. It requires Member States to establish effective procedures for determining employment status, using the facts of actual work, including how automated systems organise it. It also provides for a rebuttable presumption of employment where the applicable national criteria indicate direction and control.¹³

As at 15 October 2026, the deadline for Member States to transpose the Directive into national law—2 December 2026—had not yet passed. The Directive should therefore be understood as an adopted EU legislative framework with implementation still due, rather than a uniform set of fully implemented national rules.

Malaysia can adapt the underlying principle: where a platform effectively exercises employer-like control, the legal classification should be assessed on the substance of the relationship. This would not mean that every platform worker must automatically become an employee. It would mean that the law should provide an effective route to determine status where the actual working arrangements justify it.

6. Social protection: strengthen PERKESO and develop platform-funded EPF contributions

Social protection is another area where Malaysia should move beyond reliance on voluntary participation alone.

The Gig Workers Act provides a statutory mechanism for registration and contributions under the Self-Employment Social Security Scheme administered by PERKESO. The implementing social-security regulations specify a contribution deduction rate of 1.25% for the relevant platform transactions, subject to the applicable requirements.¹,² These provisions are an important improvement, but they should not be confused with a separate platform-funded contribution.

Malaysia should consider requiring platform operators to contribute directly towards qualifying workers' PERKESO coverage, with a clear allocation of responsibility and coordination with applicable government matching incentives. This is a recommendation, not a description of an existing general platform-funded contribution obligation.

The Government's Budget 2027 speech announced a matching incentive of 35% for relevant PERKESO contributions, increasing to 50% if platform companies also contribute towards workers' contributions. It also announced a RM160 million package intended to improve net earnings and assist with vehicle maintenance, insurance and social-security contributions from 2027. These are announced measures whose final implementation details should be checked as they are introduced.⁴

Retirement saving requires a complementary approach. EPF's i-Saraan Plus is a voluntary contribution initiative for eligible e-hailing and p-hailing drivers. It provides a government matching incentive of 20% of eligible voluntary contributions, capped at RM600 annually and RM6,000 over a lifetime, subject to its terms and conditions. Platform providers facilitate contributions on behalf of workers, with worker consent.³

Malaysia should consider requiring a compulsory platform-funded EPF contribution for qualifying platform earnings, distinct from the worker's own voluntary saving. One possible starting point for consultation is a contribution equal to 2% of eligible platform remuneration, with a formal review after two years. This is a proposed policy rate, not a rate established as optimal by Malaysian research or current law.

Workers who legally qualify as employees should continue to receive the EPF protections required under ordinary employment law. A lower platform-specific contribution must not become a means of avoiding those obligations.

The Government should also clarify how a new compulsory platform contribution would interact with i-Saraan Plus eligibility. The objective should be to preserve the incentive for eligible workers to make additional voluntary contributions without treating a mandatory platform payment as though it were the worker's own voluntary saving.

7. A proposed Gig Worker Protection and Transition Fund

Beyond individual contributions and platform-specific duties, Malaysia should consider establishing a dedicated Gig Worker Protection and Transition Fund to finance shared services and targeted support that benefit workers across the platform economy.

The proposal draws on a recent Malaysian institutional precedent. On 10 October 2026, the Government announced that it would activate a Postal Service Fund with an initial allocation of RM150 million. Administered by MCMC, the fund is expected to begin operating in the first quarter of 2027 and is intended to support universal postal services, particularly delivery to rural, remote and island communities. The Government said the fund uses the same principle as the telecommunications USP Fund, with relevant provisions already contained in the Postal Services Act 2012.¹⁵

The example is relevant because it demonstrates how a dedicated fund can be organised around a defined statutory purpose. It does not establish that MCMC has the legal authority to levy gig platforms or that the Postal Service Fund itself can finance worker protection. A gig-worker fund would require its own legal basis, contribution rules, governance and spending conditions.

The telecommunications USP Fund provides a second lesson. Established under section 204 of the Communications and Multimedia Act 1998 and administered under the USP Regulations 2002, it requires eligible telecommunications companies with more than RM2 million in relevant annual net revenue to contribute 6% of the determined revenue under the applicable rules.¹⁶,¹⁷ The purpose is to support universal communications access, particularly in underserved areas and among underserved groups.

Malaysia should adapt the principle of pooled sectoral contributions—not copy the 6% telecommunications rate. Telecommunications and gig platforms have different cost structures, revenue models and regulatory objectives. Applying the same percentage to gig platforms without a separate policy analysis would be unjustified.

Why establish a fund?

A dedicated fund could address several needs that are shared across competing platforms. These include independent scrutiny of algorithmic management, preventive occupational-safety programmes, worker access to rights information, targeted support for social-protection contributions and training for workers whose opportunities change as platforms and automation evolve.

The fund should finance additional protections and common services, not replace the legal responsibilities of individual platforms. It must not allow an operator to pay a levy instead of complying with its obligations under Act 872, applicable PERKESO rules or any future EPF contribution requirements.

Nor should it duplicate existing government programmes. Budget 2027 has already announced a RM160 million package, jointly funded by the Government and Grab, to support e-hailing and p-hailing workers from 2027. The new fund should finance only additional eligible activities where there is a clear gap, with the different funding sources disclosed transparently.⁴

Who should contribute?

The fairest starting point would be to require contributions from larger platform operators based on their Malaysian revenue from covered gig services. Smaller operators should receive a meaningful exemption or low threshold so that the regime does not unnecessarily discourage new entry or impose disproportionate administrative costs.

The contribution base should be Malaysia-attributable net platform-service revenue, not the total customer transaction value. Gross merchandise value includes amounts passed through to drivers, riders, merchants and other service providers. Charging directly on that entire amount could create an excessive burden and may encourage platforms to shift costs to workers or consumers.

The rules should define qualifying revenue clearly. Relevant commissions, platform fees and other revenue attributable to covered gig services could be included, with appropriate treatment of refunds, statutory taxes, gratuities and genuine pass-through payments. Related companies should be aggregated where necessary to prevent businesses from splitting their operations merely to avoid the threshold.

A possible starting point for public consultation would exempt the first RM5 million of annual Malaysian covered platform-service revenue. A progressive contribution could then apply to the qualifying portions above the threshold: 1% on the portion up to RM100 million, 1.5% on the portion between RM100 million and RM500 million, and 2% on the portion above RM500 million.

These figures are policy proposals, not existing statutory rates or empirically proven optimal levels. The thresholds and rates should be tested against confidential, auditable platform accounts before legislation is introduced.

A marginal schedule is preferable to applying one percentage to an operator's entire revenue as soon as it crosses a threshold. It avoids a sudden jump in liability and allows the contribution to increase progressively with the scale of the business.

How large might the fund be?

The amount cannot yet be forecast reliably because a complete, publicly verified dataset of Malaysian platform-service revenue by operator is not available in a form sufficient to calculate the contribution base.

An indicative estimate is nevertheless possible. The Google, Temasek and Bain e-Conomy SEA 2025 Malaysia report places the transport-and-food digital sector at approximately US$4 billion in gross merchandise value in 2025.¹⁸ This is transaction value, not platform revenue. Using an illustrative exchange rate of RM4.30 per US dollar gives a market value of approximately RM17.2 billion.

The Southeast Asian report gives regional 2025 estimates of approximately US$2.4 billion in food-delivery revenue on US$23 billion in GMV, and US$1.9 billion in transport revenue on US$11.5 billion in GMV.¹⁹ Those ratios suggest that platform revenue may be much smaller than transaction value, with food delivery and transport showing different revenue-to-GMV relationships.

If these regional ratios are used only as rough benchmarks for Malaysia, they imply platform-service revenue of approximately RM1.8 billion to RM2.8 billion from the transport-and-food segment. This is an analytical proxy, not observed Malaysian revenue or a forecast of the amount legally subject to a levy.

The proportion of that revenue above the proposed exemption threshold is also unknown. If, purely for scenario analysis, 60% to 90% of the proxy revenue qualified, the contribution base would be approximately RM1.1 billion to RM2.6 billion. A flat effective rate of 1.5% on that illustrative base would generate roughly RM16 million to RM38 million annually, with a central scenario of about RM26 million.

A reasonable initial planning range is therefore approximately RM20 million to RM40 million per year, subject to validation. The actual yield from the proposed graduated rate schedule could be different because the distribution of revenue across operators is not known. The Government should not present this estimate as a committed revenue forecast.

Before deciding the final rate, regulators should obtain confidential data on covered Malaysian revenues, related-company structures, commissions, other qualifying fees and current expenditure on worker protection. These data would allow a more reliable estimate of the contribution base and the burden on individual platforms.

How should the fund be administered?

Although the MCMC examples are valuable, the proposed fund should not automatically be placed under MCMC. Telecommunications and postal-service funds have sector-specific legal purposes. A fund principally concerned with labour protection, social insurance and worker transition would fit more naturally within Malaysia's labour and social-protection institutions.

The preferred arrangement would be a dedicated statutory fund under the Ministry of Human Resources, with PERKESO and EPF involved in matters within their respective mandates. MCMC could participate in platform-related regulatory coordination and technical issues where this falls within its legal powers.

The fund's governance should include government, gig-worker representatives, platform operators and independent experts. It should publish audited accounts, contribution rules, allocation criteria, administrative expenditure, approved commitments and measurable outcomes. Workers and the public should be able to see how the money is used.

This transparency requirement is especially important in light of the telecommunications USP experience. Khazanah Research Institute's 2023 assessment reported that the USP Fund had accumulated RM10.6 billion by the end of 2021, while recommending more detailed programme reporting and easier access to allocation information. That balance is a historical figure, not the current balance.¹⁶

A new gig-worker fund should not accumulate money merely because the law permits it to collect contributions. It should maintain a defined reserve, allocate resources against measurable needs and undergo independent review after three years. If contributions consistently exceed justified expenditure, the rate should be reconsidered rather than allowing the balance to grow without a clear public purpose.

8. Collective representation, safety and effective remedies

Fair platform work cannot be achieved through individual disclosures alone. Workers need practical channels to raise collective concerns.

Act 872 recognises gig workers' rights to form, join and participate in associations. Malaysia should build on this foundation by encouraging regular, structured dialogue between worker representatives, platforms and public authorities. Discussions should include material changes to earnings, incentives, safety rules and automated decision-making.

The proposed Gig Worker Protection and Transition Fund could support worker education and access to independent advice, but it should not act as a substitute for collective representation or the dispute-resolution mechanisms established by the Act.

Occupational safety requires similar attention. The Malaysian rider study provides evidence that physical risks deserve preventive intervention, but the law should not assume that every injury arises from an algorithm. Platforms should review dispatch deadlines, performance incentives and working conditions for risks that can reasonably be prevented.¹,⁶

The existing conciliation and tribunal framework should also be monitored carefully. The Government should publish aggregated information on complaint volumes, resolution times, outcomes and compliance with awards. Such publication would help determine whether the new legal remedies are accessible and effective.

An additional question deserves scrutiny: Act 872 defines a gig worker by reference to Malaysian citizenship or permanent residence.¹ The Government should assess how platform workers who fall outside that definition are treated under other applicable laws and ensure that the relationship between the regimes is clear. This is a question for legal review, not proof that every excluded person lacks all protection.

9. A practical reform agenda for Malaysia

The next stage should focus on measures that can be implemented through existing institutions where legally authorised, with targeted regulation or amendments where necessary.

First, Malaysia should finalise an evidence-based minimum-earnings standard through the Gig Workers Consultative Council. The standard should account for relevant work-related expenses and establish a transparent method for determining whether qualifying earnings fall below the prescribed floor.

Second, the Government should make earnings statements more accessible and strengthen the rules governing significant automated decisions. Workers should be able to understand material pay calculations, challenge serious errors and receive timely human review.

Third, Malaysia should strengthen social protection by evaluating platform-funded contributions to PERKESO and developing an appropriate EPF contribution for qualifying platform earnings. The interaction with existing statutory protections and i-Saraan Plus eligibility must be clarified before introducing new obligations.

Fourth, it should consult on the Gig Worker Protection and Transition Fund, publishing the proposed contribution base, exemption threshold, rate schedule, spending purposes and governance arrangements. The RM20 million to RM40 million annual planning range should be refined using actual platform data before any final rate is prescribed.

Fifth, regulators should establish a common set of indicators for assessing worker outcomes, including net earnings, contribution coverage, complaints, deactivation, dispute-resolution times, workplace injuries and the results of algorithmic audits. The new fund should be evaluated against the same principle: resources should be directed towards measurable improvements, not merely collected or spent.

Finally, the Government should review the framework after sufficient implementation data have accumulated, with worker representatives, platforms and independent researchers participating in the process.

The Budget 2027 speech states that the Gig Workers Consultative Council was still negotiating minimum-income rates, the formula for calculating income and minimum social-protection standards, with completion expected in early 2027.⁴ Those matters should therefore be treated as announced or ongoing policy processes rather than settled legal standards.

Conclusion: regulate the exercise of platform power, not technology for its own sake

Malaysia should not seek to eliminate the flexibility that makes platform work valuable. Nor should it assume that every algorithm, incentive or variable price is inherently unfair.

The more defensible objective is to ensure that flexibility does not become a justification for opaque remuneration, arbitrary decisions, inadequate protection or ineffective remedies.

China's draft framework demonstrates the importance of addressing workers subject to enterprise labour management and regulating algorithmic systems, but it remains a proposed measure rather than enacted Chinese law. Singapore shows how platform operators can be assigned explicit responsibilities for injury protection, retirement contributions and representation. Australia offers a model for enforceable minimum standards and earnings-floor top-ups. The EU provides an adopted legislative framework for employment-status determination and algorithmic accountability, with national implementation still due as of the date considered here.

Malaysia's strongest path is to build on Act 872 rather than duplicate it: make earnings records automatic, clarify algorithmic disclosure and review, audit high-impact decisions, improve social protection, support collective representation and publish evidence of implementation.

The proposed Gig Worker Protection and Transition Fund could add a further layer of support by financing shared services and targeted assistance that individual platforms may not provide adequately on their own. The MCMC USP and Postal Service Fund models show that pooled sectoral funding is institutionally possible, but they do not establish that a gig-platform levy is automatically justified. A dedicated fund would need its own legal basis, proportionate contribution rules, clear objectives and transparent governance.

The central test is straightforward: can a gig worker understand how pay is determined, challenge a significant error, obtain the social protection provided by law and participate meaningfully in discussions that affect working conditions?

A regulatory framework that can answer yes to those questions would preserve the benefits of digital platforms while making gig work more secure, accountable and fair.

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References (APA 7th edition)

1. Malaysia. (2025). Gig Workers Act 2025 (Act 872). Ministry of Human Resources. https://www.mohr.gov.my/aktapekerjagig2025/assets/documents/Act%20872.pdf

2. Ministry of Human Resources, Malaysia. (2026). Akta Pekerja Gig 2025: Subsidiary legislation and implementation materials [Gig Workers Act 2025]. https://www.mohr.gov.my/aktapekerjagig2025/download.html

3. Employees Provident Fund. (n.d.). i-Saraan Plus for e-Hailing & p-Hailing Drivers. Retrieved October 15, 2026, from https://www.kwsp.gov.my/en/member/savings/i-saraan-plus

4. Ministry of Finance Malaysia. (2026, October 9). Speech: The Fifth MADANI Budget 2027. https://www.mof.gov.my/portal/en/news/speech/speech-the-fifth-madani-budget-2027

5. Mohd Daud, S. N., Osman, Z., Samsudin, S., & Phang, I. G. (2024). Adapting to the gig economy: Determinants of financial resilience among “Giggers.” Economic Analysis and Policy, 81, 756–771. https://doi.org/10.1016/j.eap.2024.01.002

6. Daud, A., Mohd Basri, I. S., Ahmad, E., Hairon, S. M., Azmir, N. A., Md Jalil, A. S., & Nordin, R. (2025). Determinants of work-related musculoskeletal disorders among food delivery riders in Eastern Peninsular Malaysia: An ergonomic risk assessment. Healthcare, 13(6), Article 645. https://doi.org/10.3390/healthcare13060645

7. Uchiyama, Y., Furuoka, F., & Omar, S. A. (2025). The rise and contestation of platform capitalism: Evidence from two food delivery blackouts in Malaysia. Journal of Industrial Relations, 67(3), 481–508. https://doi.org/10.1177/00221856241294107

8. Binns, R., Stein, J., Datta, S., Van Kleek, M., & Shadbolt, N. (2025). Not even nice work if you can get it: A longitudinal study of Uber's algorithmic pay and pricing. In Proceedings of the 2025 ACM Conference on Fairness, Accountability, and Transparency (pp. 1484–1497). Association for Computing Machinery. https://doi.org/10.1145/3715275.3732099

9. Goodley, S. (2025, June 25). Second study finds Uber used opaque algorithm to dramatically boost profits. The Guardian. https://www.theguardian.com/technology/2025/jun/25/second-study-finds-uber-used-opaque-algorithm-to-dramatically-boost-profits

10. Ministry of Human Resources and Social Security of the People's Republic of China. (2026, October 8). 《新就业形态劳动者权益保障办法（征求意见稿）》公开征求意见 [Draft measures for protecting the rights and interests of workers in new forms of employment: Public consultation]. https://www.mohrss.gov.cn/SYrlzyhshbzb/zcfg/SYzhengqiuyijian/zq_fgs/202610/t20261008_585156.html

11. Ministry of Manpower, Singapore. (n.d.). Platform Workers Act: What it covers. Retrieved October 15, 2026, from https://www.mom.gov.sg/employment-practices/platform-workers-act/what-it-covers

12. Fair Work Ombudsman. (2026, August 17). On-demand delivery workers' minimum pay rates and other standards start today. Australian Government. https://www.fairwork.gov.au/newsroom/media-releases/2026-media-releases/august-2026/20260817-minimum-standards-for-delivery-drivers-media-release

13. European Parliament & Council of the European Union. (2024). Directive (EU) 2024/2831 of 23 October 2024 on improving working conditions in platform work. Official Journal of the European Union. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32024L2831

14. International Labour Organization. (2026). Decent Work in the Platform Economy Convention, 2026 (No. 193). https://www.ilo.org/resource/record-decisions/convention-concerning-decent-work-platform-economy-2026

15. Bernama. (2026, October 10). Govt creates Postal Fund with initial allocation of RM150 mln—Fahmi. https://mcmc.bernama.com/news.php?id=2618153

16. Gong, R., & Mohd Ghazali, A. N. (2023, March 30). The USP Fund: A tool to close Malaysia's digital divide. Khazanah Research Institute. https://www.krinstitute.org/publications/the-usp-fund-a-tool-to-close-malaysia-s-digital-divide

17. Malaysian Communications and Multimedia Commission. (2022). Universal Service Provision Fund: Annual report 2021. https://mcmc.stagingweb101.com/wp-content/uploads/2022/08/MCMC-USP-2021_Eng_pages_compressed.pdf

18. Google, Temasek, & Bain & Company. (2025). e-Conomy SEA 2025: Malaysia country report. https://services.google.com/fh/files/misc/malaysia_e_conomy_sea_2025_report.pdf

19. Google, Temasek, & Bain & Company. (2025). e-Conomy SEA 2025: From digital decade to AI reality—Accelerating the future in ASEAN. https://economysea.withgoogle.com/

Malaysia Budget 2027: 25 Evidence-Based Recommendations to Improve Citizens’ Welfare, Strengthen Public Finances and Build a More Productive Economy.

An independent policy perspective on “Reaching for the Sky, While Anchored on Our Values”

Date: 10 October 2026

Introduction: Beyond the Size of the Budget

Malaysia’s Fifth MADANI Budget for 2027, presented on 9 October 2026 under the theme “Reaching for the Sky, While Anchored on Our Values”, sets out an ambition to combine economic advancement with social justice, institutional integrity and fiscal responsibility. The budget proposes RM459.8 billion in federal expenditure, with federal revenue projected at RM380.8 billion and the fiscal deficit targeted at 3.3% of gross domestic product (GDP).¹ ²

The government has introduced important measures, including RM16 billion for Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA), continued targeted assistance, higher minimum wages and additional investment in public services. The budget also maintains a substantial commitment to subsidies, assistance and incentives, expected to exceed RM80 billion in 2027, including approximately RM40 billion for fuel subsidies.¹

These commitments demonstrate the continuing challenge facing Malaysia: how to improve household welfare and productive capacity while reducing the fiscal deficit, managing public debt and funding future development.

The central question is therefore not simply whether Malaysia can afford additional programmes. It is whether the country can obtain greater social and economic value from each ringgit spent, collect revenue more fairly, reduce inefficient expenditure and invest in programmes that strengthen citizens’ long-term opportunities.

The International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have independently identified several relevant priorities, including stronger tax administration, better-targeted subsidies, a broader and more coherent tax base, improved public spending and stronger social protection.³ ⁴ These findings support further reform, although they do not mean that every proposed measure will automatically produce the same results in Malaysia.

This article presents 25 ranked recommendations for strengthening Budget 2027 and the Thirteenth Malaysia Plan (RMK13), covering revenue, household welfare, productivity, transport, education, healthcare, digitalisation, climate resilience and governance. The rankings reflect expected citizen benefit, evidence strength, fiscal implications and the feasibility of achieving measurable outcomes.

The recommendations are proposals, not measures already approved by the government. Revenue scenarios and programme costs are explicitly distinguished from official budget figures.

Part I: The 25 Recommendations, Ranked by Public Value

Rank 1. Strengthen e-Invoicing and Digital Tax Compliance

Malaysia should make digital tax administration a central instrument of fiscal reform.

The existing e-Invoicing programme provides an opportunity to improve the matching of business transactions, income-tax returns, sales and services tax (SST) declarations and other legally available information.⁵ The next priority is to ensure that digital records translate into better compliance without imposing disproportionate burdens on smaller businesses.

A more effective system would identify material discrepancies, prioritise risk-based audits, simplify compliant taxpayers’ reporting obligations and provide straightforward correction mechanisms.

Benefit to citizens: Better tax compliance can strengthen revenue without automatically increasing statutory rates on compliant households and firms.

Fiscal trade-off: Initial expenditure on digital infrastructure, data security and audit capacity. Additional receipts cannot be reliably quantified without Malaysian tax-gap data and post-implementation evaluation.

Rank 2. Establish a Comprehensive Tax-Expenditure Register

Tax exemptions, deductions, allowances and preferential rates constitute public support through forgone revenue. Their fiscal cost should receive scrutiny comparable to that applied to direct grants and spending programmes.

Malaysia should publish a consolidated register identifying major tax incentives, their estimated revenue costs, intended beneficiaries, policy objectives and expiry dates. Independent reviews should determine whether incentives generate additional investment, productivity, skilled employment or other measurable public benefits.

Incentives that are ineffective, duplicative or poorly targeted should be redesigned or discontinued, subject to transparent transition arrangements.

Benefit to citizens: More fiscal capacity for healthcare, education, social protection and infrastructure, with less public support tied up in ineffective concessions.

Fiscal trade-off: Revenue recovery is uncertain and may take time. Sudden withdrawal of effective incentives could reduce investment, so decisions should depend on evidence rather than arbitrary expenditure cuts. The IMF specifically recommends rationalising corporate tax incentives.³

Rank 3. Make Public Procurement More Competitive and Transparent

The Government Procurement Act and the commitment to publish project and contractor information provide an important foundation.¹ The next objective should be to ensure that procurement disclosure improves value for money, not merely transparency.

Material contracts should provide accessible information on tender participation, award rationale, contractor ownership where relevant, original contract values, variation orders, final costs and completion performance.

Repeated single-bid awards, unexplained price differences, large cost overruns and frequent contract variations warrant risk-based scrutiny. Legitimate emergency and specialised procurement should remain possible, but exceptions must be justified and auditable.

Benefit to citizens: Potentially lower procurement costs, better-quality public infrastructure and more confidence that public money is spent fairly.

Fiscal trade-off: Better data systems, procurement expertise and independent oversight cost money. Gross savings should be measured against credible reference prices rather than assumed in advance.

Rank 4. Publish a Consolidated Fiscal-Risk Statement

Malaysia’s headline spending and investment figures cover different types of government activity. Federal operating and development expenditure must be distinguished from investments by government-linked investment companies, public-private partnerships and other government-linked entities.¹

Budget documents should provide a clearer account of guarantees, contingent liabilities, long-term commitments, maintenance obligations and material risks associated with government-backed projects.

This should complement the Fiscal Responsibility Act and existing reporting requirements.

Benefit to citizens: Greater protection against hidden liabilities and future expenditure pressures that could otherwise lead to higher borrowing, taxes or reductions in public services.

Fiscal trade-off: Primarily administrative and analytical costs. Better disclosure does not necessarily create immediate cash savings, but it improves the quality of fiscal decisions.

Rank 5. Improve Subsidy Targeting and Reinvest Verified Savings

Fuel subsidies remain a significant fiscal commitment. Better targeting can reduce subsidies that do not reach intended beneficiaries while protecting households that depend on affordable transport and energy.

Malaysia should continue improving eligibility assessment using reliable socioeconomic information, transparent rules and effective appeals. Particular attention should be given to rural households, people with disabilities, shift workers and communities without practical public-transport alternatives.

Any savings should be reported against a clearly defined baseline, including the cost of compensating vulnerable households.

Benefit to citizens: Better protection for those who need assistance most and more fiscal room for services that improve long-term welfare.

Fiscal trade-off: Poor targeting can wrongly exclude eligible households or raise living costs. The IMF’s reform scenarios estimate potential fiscal improvements of approximately 0.1–0.5% of GDP from further fuel-subsidy reform and a similar range from improved targeting of non-fuel subsidies and assistance. These are modelled scenarios, not guaranteed Budget 2027 savings.³

Rank 6. Create a More Integrated Digital System for Citizen Benefits

Malaysia should build on existing digital-government infrastructure to reduce repeated applications, duplicated paperwork and missed entitlements.

A secure, integrated system could help eligible households access relevant assistance across agencies, check application status, update household information and appeal erroneous decisions.

Digital access must not become a barrier. Citizens without smartphones, reliable internet or the ability to navigate online services must retain equivalent assisted-digital, telephone and counter-based options.

Benefit to citizens: Less time spent navigating government services and fewer missed benefits due to administrative barriers.

Fiscal trade-off: Investment in cybersecurity, data governance, interoperability and service quality. Savings should be demonstrated through lower administrative costs and improved service outcomes.

Rank 7. Improve the SST System Without Reintroducing GST

Malaysia should prioritise a more coherent and predictable SST regime rather than assume that increasing headline rates is the best source of additional revenue.

Reforms should clarify treatment across business-to-business transactions, remove unjustified coverage gaps, improve compliance procedures and reduce avoidable tax cascading where feasible.

Businesses need clear guidance and reasonable transition periods. The objective should be to collect revenue more effectively while limiting unnecessary distortions and compliance expenses.

Benefit to citizens: More predictable business costs and prices, alongside a stronger revenue base.

Fiscal trade-off: Some exemptions may have legitimate social or economic purposes. The IMF estimates that consumption-tax reform—through GST reintroduction or, as a second-best option, further SST base broadening—could yield 0.5–1.0% of GDP under its fiscal reform scenarios. That range is not a forecast of SST-only receipts for 2027.³

Rank 8. Improve Taxation of Non-Resident Income and Strengthen Existing Levies

Malaysia should improve compliance among non-residents earning Malaysian-source income and review existing foreign-worker levy arrangements before introducing a general surcharge on non-citizens.

Priorities include accurate payroll reporting, tax clearance where required, correct withholding on payments to non-residents, reliable collection of existing immigration and accommodation charges, and enforcement of the foreign-purchaser stamp duty already in force.

Foreign workers, expatriate professionals, tourists, students and overseas investors have different circumstances. Charges should reflect taxable income, employer obligations, property transactions or identifiable service costs—not merely citizenship.

Benefit to citizens: Better collection from existing economic activity without imposing a new general tax on compliant households and businesses.

Fiscal trade-off: Enforcement, data matching and administration require resources. Any change to foreign-worker levies must account for labour shortages, wage effects, small-business costs and the risk of encouraging undocumented employment.

Rank 9. Improve the Taxation of Material Capital Income

Malaysia should review differences in the treatment of economically similar forms of income, including relevant capital gains, dividends, rental income and investment returns.

The objective is to reduce unjustified exemptions and disparities while retaining sensible treatment for ordinary savings and smaller investors. Reform should be coordinated with existing taxes to avoid unintended double taxation.

This is preferable to rushing into a broad annual net-wealth tax before valuation and enforcement capacity are well established.

Benefit to citizens: A more consistent distribution of the tax burden and a stronger relationship between tax liability and economic capacity.

Fiscal trade-off: Revenue depends on the eligible base, exemptions, avoidance responses and investment behaviour. The IMF identifies strengthening personal income taxation as a potential revenue measure, but its 0.5–1.0% of GDP scenario concerns the broader personal-tax framework, not capital-income reform alone.³

Rank 10. Introduce a Credible Carbon-Pricing Framework

Malaysia should provide a clear and predictable framework for carbon pricing, including covered sectors, emissions measurement, price-setting principles and revenue use.

A gradual approach would allow firms and workers to adjust while providing stronger incentives for energy efficiency and emissions reduction. Vulnerable households and viable small suppliers may require targeted transition support.

Benefit to citizens: Reduced environmental damage, greater incentives for cleaner investment and potentially lower long-term climate-related costs.

Fiscal trade-off: Carbon pricing can raise production and household energy costs unless designed carefully. The OECD models a potential long-run fiscal improvement of around 0.5% of GDP, but that is not a guaranteed 2027 revenue forecast.⁴

Rank 11. Introduce a Progressive Vehicle-Emissions Levy

Malaysia should consider reforming motor-vehicle taxation so that high-emission new vehicles face progressively higher charges, while cleaner vehicles receive appropriately designed incentives.

The levy should be integrated with existing vehicle taxes rather than simply added to them without reviewing the overall burden. Separate rules are needed for private cars, light commercial vehicles and heavy-duty transport, reflecting different emissions characteristics and practical alternatives.

The OECD reports that environmental or fuel-efficiency criteria are incorporated into vehicle purchase or registration taxes or incentives in 34 of its 38 member countries.¹³ Singapore provides a relevant regional example through its Vehicular Emissions Scheme.¹⁴

Benefit to citizens: Stronger incentives for cleaner vehicles, potentially lower urban air pollution and a more consistent signal for vehicle manufacturers and consumers.

Fiscal trade-off: Higher upfront costs for some vehicle buyers and potentially lower receipts over time if purchasing shifts to lower-emission models. Revenue should be modelled against Malaysia’s vehicle-registration data rather than assumed.

Rank 12. Expand Klang Valley Bus Services, Prioritising Electric Buses

The Klang Valley requires a stronger, more reliable bus network to complement its rail system and improve access to stations, employment centres and underserved suburbs.

A recent analysis in The Edge estimates that approximately 1,200 buses operate across the Klang Valley and suggests a remaining shortfall of around 4,000 buses after accounting for an existing procurement programme.⁷ The Public-Private Infrastructure Advisory Facility cautions that bus requirements depend on population, route design, capacity, utilisation and the availability of other transport modes.⁶

A preliminary five-year capital planning envelope of RM5.5–7.5 billion for 4,000 additional buses, including an allowance for electric-bus charging and depot infrastructure, is plausible for discussion but is not an approved procurement cost.

Benefit to citizens: Better access to jobs, education and public services; potentially lower household transport expenditure and reduced reliance on private vehicles.

Fiscal trade-off: Significant upfront capital spending, together with continuing costs for drivers, electricity, maintenance, batteries and service contracts. The investment only delivers value if buses operate reliably and at useful frequencies. Evidence from Indonesia also supports prioritising public-transport electrification alongside fleet expansion rather than treating electric vehicles solely as a private-car policy.⁸

Rank 13. Move Towards Universal School Meals, Starting with Primary Schools

Malaysia’s existing Rancangan Makanan Tambahan (RMT) provides targeted meals to eligible primary-school pupils, while Budget 2027 allocates RM870 million for more than 800,000 pupils under the programme.¹ ¹⁰

A universal primary-school lunch programme could be considered as a longer-term extension, drawing lessons from Japan’s public primary-school meal support while adapting standards and delivery arrangements to Malaysia’s circumstances.¹¹

For illustration, feeding 2.754 million primary pupils for 190 school days at RM5 per meal would cost approximately RM2.62 billion annually in food alone. Extending the same assumption to 5.3 million pupils would cost approximately RM5.04 billion annually. These are scenario calculations, not official programme estimates, and exclude delivery, infrastructure, administration and monitoring.

Benefit to citizens: Lower household food expenditure during the school day, more consistent access to nutritious food and potential benefits for child development.

Fiscal trade-off: A permanent recurring expense, potentially several billion ringgit annually. It requires credible costing and evidence on nutrition, participation, food waste and delivery quality. KRI supports considering wider school feeding but also identifies the need for more rigorous evaluation of existing programmes.⁹

Rank 14. Expand Affordable, High-Quality Childcare and Preschool

Affordable early-childhood care is both a social-policy issue and a labour-force participation issue.

Malaysia should improve access to registered childcare, strengthen quality standards and consider more targeted subsidies for families facing financial barriers. Priority should go to disadvantaged children and working parents, including single-parent households.

Benefit to citizens: Better early learning opportunities, lower childcare costs and improved ability for parents—especially mothers—to remain in paid employment.

Fiscal trade-off: Additional recurrent spending and the cost of quality assurance. The OECD identifies limited childcare capacity as an important constraint and recommends expanding access to affordable, quality-assured provision.⁴

Rank 15. Strengthen Minimum Income Protection in Old Age

Malaysia should improve support for older people who lack adequate retirement income, particularly those who spent their working lives in informal or low-paid employment.

A carefully assessed, means-tested social-pension framework could complement existing EPF savings, pensions and other assistance. Eligibility should reflect household circumstances and avoid abrupt loss of benefits when income rises slightly.

Benefit to citizens: Better protection against poverty and deprivation in later life.

Fiscal trade-off: A permanent spending commitment that grows as the population ages. The OECD reports that fewer than 20% of older people receive any form of social benefit and recommends broader means-tested social-pension coverage.⁴

Rank 16. Link TVET and Tertiary Funding to Employment Quality

Skills programmes should be assessed by whether they lead to useful capabilities and sustainable employment, rather than enrolment and graduation figures alone.

Malaysia should publish comparable information on programme completion, employment, earnings, skills matching and employer satisfaction. Institutions should work closely with industry in curriculum design, apprenticeships and equipment planning.

Outcomes must be interpreted carefully so that rural institutions and essential public-service occupations are not unfairly penalised for lower starting salaries.

Benefit to citizens: Better employment prospects and more productive use of education funding.

Fiscal trade-off: Costs of data collection, assessment and programme redesign. The OECD identifies skill-related underemployment among tertiary graduates as a continuing concern.⁴

Rank 17. Consolidate SME Support and Fund Measurable Productivity Gains

Malaysia has numerous grants, financing facilities and advisory programmes for micro, small and medium-sized enterprises (MSMEs). Their value would improve if businesses could navigate them more easily and government could evaluate results consistently.

A consolidated support framework should prioritise digital accounting, automation, quality certification, energy efficiency, export readiness and workforce upgrading.

Benefit to citizens: More competitive local businesses, potentially better-paying jobs and improved productivity.

Fiscal trade-off: Some administrative consolidation costs, with potential savings from reducing duplicated programmes. Funding should be judged by additional productivity and employment outcomes, not merely the value of grants disbursed.

Rank 18. Improve Healthcare Purchasing and Digital Records

Malaysia should seek more health services and better continuity of care from each ringgit of public spending.

Priority areas include transparent reference prices for frequently purchased medicines and equipment, appropriate use of quality-assured generics, better inventory management and secure interoperability of electronic medical records.

Benefit to citizens: Less avoidable wastage, better continuity of care and potentially shorter waiting times.

Fiscal trade-off: Technology, cybersecurity and system-transition costs. Clinical independence, privacy and access controls must be protected. The main benefit is better service quality and efficiency rather than an assured immediate cash saving.

Rank 19. Modernise Property Taxation and Evaluate Land-Value Capture

Malaysia should improve the administration of existing property-related taxes and evaluate mechanisms through which a share of publicly created land-value gains can support infrastructure.

Any review should be gradual, transparent and coordinated with state and local authorities. Appropriate deferrals may be necessary for low-income owner-occupiers who have valuable property but limited cash income.

Benefit to citizens: Potentially stronger local services, more sustainable infrastructure funding and better alignment between publicly financed development and the value it creates.

Fiscal trade-off: Revaluation and administration costs, political sensitivity and possible distributional effects. Property taxes and land-value capture are not interchangeable with broad new transaction taxes.

Rank 20. Strengthen Health-Related Excise Duties

Malaysia should review the effectiveness of existing taxes on tobacco, nicotine products and sugar-sweetened beverages, with an emphasis on reducing harmful consumption.

A sugar-content-based tax structure may offer manufacturers incentives to reformulate products. Tobacco and nicotine duties should be accompanied by strong enforcement against illicit supply.

Benefit to citizens: Potentially lower preventable disease and long-term healthcare burdens.

Fiscal trade-off: Consumption may decline, so a successful health tax may not provide continuously rising revenue. Distributional effects and illicit-market responses must be monitored.

Rank 21. Improve Social Protection for Gig Workers

Budget 2027 already provides a RM160 million package shared by the government and Grab to support gig-worker income and protection.¹ The next priority is a coherent system that does not depend excessively on a single platform or employment arrangement.

Portable social protection, clearer net-income statements and consistent contribution rules across comparable platforms would improve protection for workers with multiple sources of earnings.

Benefit to citizens: More predictable net income and better protection against occupational injury and income shocks.

Fiscal trade-off: Government matching contributions and administration may require continuing expenditure. The existing package should be evaluated before expanding subsidies.

Rank 22. Improve Affordable Housing Through Supply and Land-Use Reform

Stamp-duty relief can lower some home-purchase costs, but it cannot by itself resolve housing shortages, unsuitable locations or limited access to rental housing.

Malaysia should improve the supply of affordable homes in suitable locations, streamline predictable planning processes and coordinate housing with public transport and employment centres. Public and GLC land should be assessed transparently where it can support genuinely affordable housing.

Benefit to citizens: More practical housing options and potentially lower commuting costs.

Fiscal trade-off: Infrastructure and development costs, together with the risk that buyer subsidies are absorbed into higher prices when supply is constrained.

Rank 23. Prioritise Energy Efficiency and Climate Adaptation

Public investment should reduce households’ exposure to energy costs, floods, extreme heat and other climate-related risks.

Targeted energy-efficiency improvements for low-income homes can complement appliance rebates by reaching households unable to afford the initial purchase. Adaptation investments should be evaluated by the damage they are expected to prevent over their lifetime.

Benefit to citizens: Lower recurring energy costs and reduced disruption and damage from climate hazards.

Fiscal trade-off: Some programmes require upfront spending, and benefits may accrue over many years. Prioritisation should depend on measured energy savings and expected losses avoided.

Rank 24. Strengthen Competition and Reduce Unnecessary Regulatory Burdens

Competition enforcement and simpler regulation can help firms grow without requiring continual grants or tax incentives.

Malaysia should strengthen detection of bid-rigging and anti-competitive conduct, improve governance in government-linked companies and review duplicative business permits and reporting requirements.

Benefit to citizens: Potentially better prices, stronger service quality and more competitive markets.

Fiscal trade-off: Enforcement and regulatory review require expertise and resources. Benefits depend on actual changes in market behaviour, not just new rules.

Rank 25. Require Rigorous Evaluation of Major Budget Programmes

Every major new programme should be assessed against a clear baseline and measurable outcomes.

Where feasible, credible comparison groups and suitable causal-evaluation methods should be used to distinguish the effects of a policy from broader economic changes. Randomised evaluations may be appropriate for some interventions; others require quasi-experimental or different rigorous approaches.

Benefit to citizens: More effective programmes, less repeated spending on unsuccessful measures and stronger accountability.

Fiscal trade-off: Evaluation has a cost, but well-designed assessment can prevent far greater waste. A programme’s popularity or rapid disbursement should not substitute for evidence of its results.

Part II: Non-GST Revenue Measures, Ranked by Merit

Malaysia needs a stronger and more sustainable revenue base. That does not mean every possible tax should be introduced. The most defensible measures are those that relate reasonably closely to taxable income, consumption, pollution or identifiable public costs, while limiting unnecessary economic distortions.

The following ranking excludes GST, as requested.

1. E-Invoice Enforcement and Digital Tax Administration

Merit: Very high.

Improve compliance with existing tax obligations by using e-invoice information, risk-based audits and legally available third-party data. Publish the net additional revenue obtained from enforcement after accounting for audit and administrative costs.

The revenue yield should remain unquantified until supported by Malaysian tax-gap data.

2. Rationalise Tax Expenditures

Merit: Very high.

Publish the cost of major exemptions and incentives, review their effectiveness, and redesign or discontinue those that cannot demonstrate additional public value.

This is potentially more defensible than raising rates across the board, although the revenue impact depends on the existing incentive base and the behaviour of affected businesses.³

3. Strengthen Personal and Capital-Income Taxation

Merit: High.

Review material exemptions, deductions and inconsistent tax treatment of capital income, with appropriate protection for ordinary savers and careful coordination between tax provisions.

The IMF identifies strengthening the personal income-tax framework as a possible source of additional revenue, but a Malaysian-specific estimate is needed for any particular change.³

4. Broaden the SST Base and Improve Its Design

Merit: High.

Clarify tax coverage, reduce avoidable cascading, close unjustified gaps and improve compliance without assuming a general rate increase is necessary.

The IMF estimates a potential 0.5–1.0% of GDP for consumption-tax reform through GST or, as a second-best option, broader SST. This is a modelled policy scenario, not a forecast for SST alone.³

5. Introduce Carbon Pricing with Targeted Household Protection

Merit: High, with environmental benefits.

Establish a predictable framework for charging covered emissions while directing support towards vulnerable households and viable transition investments.

The OECD’s modelled long-run estimate of around 0.5% of GDP is indicative rather than a guaranteed near-term yield.⁴

6. Improve Foreign-Worker Levy Design and Non-Resident Tax Compliance

Merit: High if properly targeted.

Review the existing foreign-worker levy and strengthen collection of tax on Malaysian-source income. The obligation should depend on the relevant tax and employment rules, rather than citizenship alone.

An illustrative sensitivity scenario can be built from the Ministry of Finance’s projected RM3.7 billion in foreign-worker levy revenue for 2027: a 5%, 10% or 15% increase in the effective aggregate yield would represent RM185 million, RM370 million or RM555 million respectively. These figures are assumptions, not forecasts that a progressive levy reform would deliver those increases. Revenue may be lower if behaviour changes or exemptions increase.

7. Modernise Health-Related Excise Duties

Merit: Medium to high.

Review tobacco, nicotine and sugar-sweetened beverage taxes to strengthen health incentives and enforcement. Revenue should be treated as secondary to the reduction of harmful consumption.

8. Improve Property-Tax Administration and Evaluate Land-Value Capture

Merit: Medium to high.

Improve the administration of existing recurring property taxes and assess transparent arrangements to capture part of the value created by major public infrastructure. This requires cooperation with state and local authorities.

9. Strengthen Tourism-Tax Collection

Merit: Medium.

Improve registration and reporting by accommodation providers and relevant digital booking platforms before increasing rates. The government should establish a verified baseline of taxable room-nights and exemptions.

10. Progressively Tax High-Emission New Vehicles

Merit: Medium to high, primarily as environmental reform.

Integrate a progressive emissions levy with the existing vehicle-tax structure. The primary aim should be to encourage cleaner vehicle choices, not to create an uncertain permanent revenue stream.

11. Reassess the EPT Proposal, but Do Not Introduce It Yet

Merit: Low for immediate implementation.

A broad Electronic Payments Tax (EPT) could generate substantial gross revenue in theory, but taxing money movements rather than final economic activity risks cascading, regressivity and shifts towards untaxed channels.

A 2025 proposal reported by BusinessToday suggested RM7.2 billion at 0.25% and RM28.8 billion at 1%. Those calculations imply a taxable transaction base of RM2.88 trillion, but the article does not establish a sufficiently verified, net taxable base or fully account for behavioural responses.

The better course is for the Treasury to evaluate the proposal independently, compare it with available alternatives and require a credible assessment of net revenue, distributional effects and economic distortions before considering legislation.¹⁶

Taxes I Would Not Prioritise Now

I would not make a broad annual net-wealth tax, a new remittance tax, or an additional general surcharge solely on non-citizen status a priority for Budget 2027. Each creates substantial design, enforcement or distributional questions that need stronger evidence.

Where Malaysia already has taxes and fees, the immediate priority should be fair assessment and effective collection. Existing foreign-property stamp duty, tourism tax and public-service charges should be evaluated on their own legal and fiscal merits rather than counted as new measures when they are already in force.

Part III: What Does the Fiscal Evidence Tell Us?

The policy objective is to improve public welfare without weakening fiscal sustainability.

The 2027 budget projects RM380.8 billion in federal revenue against RM459.8 billion in expenditure and targets a deficit of 3.3% of GDP.¹ ² These figures leave limited room for large, permanent commitments without credible funding or offsetting reforms.

Three distinctions are essential.

First, capital and recurrent expenditure must be separated. A multi-year bus procurement is primarily a capital investment, although operating and maintenance costs recur. School meals, in contrast, create a recurring annual obligation. A programme costing RM5 billion in food alone each year cannot be assessed as if it were a one-off development project.

Second, modelled fiscal potential is not cash available to spend. IMF and OECD estimates describe particular reform scenarios and assumptions. They should not be added together as though they were independent, guaranteed receipts. Subsidy reform, tax compliance, tax-base changes and household compensation can interact.

Third, distribution matters. A policy can increase government revenue yet leave low-income households worse off. Targeted assistance, well-designed exemptions, accessible appeals and transparent reporting are therefore part of sound fiscal policy, not optional additions.

The Treasury should disclose expected net fiscal impacts, including administration, compensation, behavioural changes and recurring obligations, before major reforms are counted as funding for new spending.

Part IV: A Nobel-Informed Approach to Better Policy

The recommendations above are consistent with several influential research traditions associated with Nobel Prize-winning economists. These frameworks help clarify trade-offs, but a Nobel Prize does not itself validate a particular policy.

James Mirrlees’s work on optimal income taxation highlights the trade-off between raising revenue, achieving distributional objectives and preserving incentives.¹⁷ This supports considering the distribution of tax burdens and the treatment of different income sources rather than focusing solely on statutory rates.

Research on information asymmetry and incentives emphasises that institutions, information and enforcement influence how policies work in practice. This is directly relevant to tax administration, procurement, subsidies and public-service delivery.

The 2019 Nobel Prize in Economic Sciences recognised work on experimental approaches to alleviating global poverty, including the use of credible evaluation to identify which interventions produce results.¹⁸ That methodology supports testing whether school meals, childcare support, training programmes and SME grants generate the intended benefits rather than assuming that spending alone guarantees success.

Climate-economics research also highlights the need to account for pollution and other external costs that market prices may fail to reflect. This supports considering carbon pricing and emissions-based vehicle taxation, provided their distributional effects are addressed.⁴

The shared lesson is methodological: define the intended outcome, assess the costs and incentives, use the best available evidence, and revise policies when observed results differ from expectations.

Conclusion: Better Value for Every Ringgit

Budget 2027 already contains meaningful support for households, workers, businesses and public services. Its next improvement should be a stronger link between revenue reform, the quality of expenditure and measurable improvements in citizens’ lives.

The 25 recommendations in this article are not a demand to introduce 25 new programmes at once. They are a ranked policy agenda. The strongest immediate priorities are improved tax compliance, rationalisation of ineffective incentives, more competitive procurement, better-targeted subsidies and stronger fiscal transparency. These can help build the conditions for longer-term investments in buses, school meals, childcare, healthcare and social protection.

Malaysia should pursue revenue measures that are transparent, administratively feasible and economically defensible. A broader non-GST revenue strategy is possible, but it requires careful costing and prioritisation rather than speculative revenue targets.

Ultimately, the test of Budget 2027 is not the number of announcements or the size of the allocations. It is whether more Malaysians can access reliable public transport, afford essential needs, receive better education and healthcare, earn more productive wages and live with greater financial security.

That is what it means to reach for the sky while remaining rooted in the needs and dignity of the people.

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References

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13. Organisation for Economic Co-operation and Development. (2024). Consumption tax trends 2024: Taxing vehicles and their use. OECD Publishing. https://www.oecd.org/en/publications/consumption-tax-trends-2024_dcd4dd36-en/full-report/component-8.html

14. National Environment Agency, Singapore. (n.d.). Air pollution regulations: Vehicular Emissions Scheme. https://www.nea.gov.sg/our-services/pollution-control/air-pollution/air-pollution-regulations

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16. BusinessToday. (2025, October 8). Economist proposes e-payments levy to broaden revenue, backs fiscal discipline. https://www.businesstoday.com.my/2025/10/08/economist-proposes-e-payments-levy-to-broaden-revenue-backs-fiscal-discipline/

17. Mirrlees, J. A. (1971). An exploration in the theory of optimum income taxation. The Review of Economic Studies, 38(2), 175–208. https://doi.org/10.2307/2296779

18. Nobel Prize Outreach. (2019). The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019. NobelPrize.org. https://www.nobelprize.org/prizes/economic-sciences/2019/summary/

19. The Edge Malaysia. (2026, October 9). Highlights of Budget 2027. https://theedgemalaysia.com/node/821179

20. Organisation for Economic Co-operation and Development. (2024). OECD economic surveys: Malaysia 2024. OECD Publishing. https://www.oecd.org/en/publications/oecd-economic-surveys-malaysia-2024_e45ca31a-en.html

*Notes on estimates and interpretation

The bus procurement envelope and universal school-meal costs cited in this article are transparent planning scenarios, not approved Budget 2027 allocations. The illustrative bus cost of RM5.5–7.5 billion over five years includes a provisional allowance for charging and depot infrastructure and requires tender-level validation. School-meal calculations use 190 school days and assumed meal prices of RM3.50 or RM5; they exclude other delivery and capital costs.

Similarly, the foreign-worker levy and tourism-tax sensitivity scenarios are not official revenue forecasts. They should not be treated as guaranteed recurring receipts, nor should existing tax revenues be counted as additional revenue simply because a policy is being reviewed.

Reforming PTPTN as a Sustainable Social Investment System

A Policy Framework for Equitable Access, Graduate Financial Protection and Long-Term National Higher Education Sustainability.

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Executive Summary

The National Higher Education Fund Corporation (Perbadanan Tabung Pendidikan Tinggi Nasional, PTPTN) has played a critical role in expanding access to tertiary education in Malaysia. Since its establishment, PTPTN has enabled millions of Malaysian students, particularly those from lower- and middle-income households, to pursue diploma and degree-level education.

However, after decades of operation, PTPTN faces structural challenges requiring comprehensive reform. These challenges include rising higher education costs, graduate employment uncertainty, repayment difficulties, increasing public expectations regarding fairness, and the long-term sustainability of the education financing ecosystem.

This proposal argues that PTPTN should not be viewed merely as a debt collection institution. Instead, PTPTN should evolve into a sustainable social investment institution that balances:

1. Equitable access to higher education;
2. Fair and affordable repayment mechanisms;
3. Protection of graduates facing genuine financial hardship; and
4. Long-term sustainability for future generations.

The proposed reform framework recommends transitioning towards an income-sensitive repayment model, improved socioeconomic targeting, stronger governance, enhanced borrower support, transparent monitoring, and closer alignment between higher education quality and graduate economic outcomes.

The fundamental principle of this proposal is:

Education financing should create opportunity without creating unnecessary hardship, and repayment responsibility should be aligned with actual economic capacity.

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1. Introduction: The Strategic Role of PTPTN

Higher education is one of the most important drivers of national development. Investment in tertiary education contributes to economic growth, productivity improvement, innovation capability and social mobility.

Human capital theory recognises education as an investment that generates both individual and societal benefits. Individuals gain improved employment opportunities and earning potential, while society benefits from a more skilled and productive workforce [1].

However, higher education involves significant upfront costs. Without appropriate financing mechanisms, students from financially disadvantaged backgrounds may be unable to access tertiary education despite having academic potential.

Therefore, government intervention in education financing is justified because education produces wider public benefits beyond individual returns [2].

PTPTN was established within this policy context: ensuring that financial limitations do not become the primary barrier preventing Malaysians from pursuing higher education.

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2. Current Challenges Facing PTPTN

2.1 Balancing Access and Sustainability

PTPTN has successfully expanded educational opportunities. However, increasing participation in higher education has also created significant financial responsibilities.

The challenge is achieving a balance between:

• Maintaining broad access;
• Ensuring responsible borrowing;
• Recovering sufficient funds;
• Protecting future student access.

A system that focuses only on repayment recovery may reduce accessibility, while a system that ignores repayment sustainability may become financially unsustainable.

Therefore, PTPTN reform requires a balanced approach.

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3. Higher Education Affordability Challenge

The affordability of tertiary education remains a significant concern for Malaysian households.

Education costs extend beyond tuition fees and include:

• Accommodation;
• Food;
• Transportation;
• Learning materials;
• Digital requirements;
• Living expenses.

Research examining private tertiary education affordability in Malaysia highlights the financial burden experienced by households when education costs exceed family financial capacity [3].

The affordability challenge differs between students because of variations in:

• Household income;
• Institution type;
• Programme cost;
• Geographic location;
• Family responsibilities.

Therefore, a future PTPTN system should recognise that students do not begin their educational journey from equal economic positions.

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4. Why PTPTN Reform Is Necessary

The current student financing environment requires reform because education loans differ fundamentally from commercial loans.

Commercial loans usually depend on:

• Existing assets;
• Immediate repayment ability;
• Predictable income.

Education loans depend on:

• Future employment;
• Graduate earnings;
• Labour market conditions;
• Economic growth.

A graduate’s repayment ability is influenced by factors beyond individual effort, including:

• Economic cycles;
• Skills mismatch;
• Industry demand;
• Wage levels;
• Employment opportunities.

Therefore, repayment policy should incorporate graduate economic realities.

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5. Proposed Reform Principle: PTPTN as a Social Investment System

The proposed reform repositions PTPTN according to five principles:

5.1 Accessibility

No academically capable Malaysian should be denied higher education solely because of financial limitations.

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5.2 Ability to Repay

Repayment obligations should correspond with actual income capacity.

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5.3 Responsibility

Graduates who obtain sufficient income should contribute towards sustaining the system.

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5.4 Proportionality

Support and enforcement measures should reflect individual circumstances.

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5.5 Sustainability

The financing mechanism must remain available for future generations.

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6. Proposed Reform 1: Income-Sensitive Repayment System

A major reform recommendation is transitioning from a fixed repayment structure towards an income-sensitive repayment approach.

International experiences from countries such as Australia, the United Kingdom and New Zealand demonstrate that income-linked repayment mechanisms can improve fairness by aligning repayment obligations with graduate financial capacity [4][5].

Under this proposal:

Low-income graduates

• Protected from excessive repayment burden;
• Eligible for reduced repayment or temporary suspension.

Middle-income graduates

• Make proportional contributions.

Higher-income graduates

• Contribute more towards sustaining the financing system.

The principle is:

Graduates who benefit economically from higher education contribute more when they have the financial ability to do so.

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7. Proposed Reform 2: Socioeconomic Targeting of Financing Support

PTPTN should gradually move towards a more targeted financing approach.

Public resources should prioritise students who experience genuine financial barriers.

Assessment factors may include:

• Household income;
• Number of dependants;
• Geographic disadvantage;
• Disability;
• First-generation university status;
• Programme cost.

However, targeting mechanisms must remain practical and transparent to avoid excluding deserving students.

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8. Proposed Reform 3: Graduate Protection Mechanism

A modern education financing system must recognise economic uncertainty.

Graduates may experience:

• Unemployment;
• Low initial income;
• Economic recession;
• Temporary career disruption.

Therefore, PTPTN should introduce:

Temporary repayment adjustment

For graduates experiencing verified hardship.

Income-based adjustment

Repayment changes according to income changes.

Financial counselling

Graduates receive guidance regarding repayment options.

This approach improves repayment success while protecting vulnerable borrowers.

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9. Proposed Reform 4: Stronger Governance and Transparency

Public confidence requires transparent governance.

Recommended improvements:

Annual public reporting

PTPTN should publish:

• Loan distribution data;
• Recovery performance;
• Administrative costs;
• Graduate outcome indicators.

Independent oversight

A PTPTN Reform Council should include representatives from:

• Government;
• Higher education experts;
• Student representatives;
• Legal professionals;
• Civil society organisations;
• Economic analysts.

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10. Proposed Reform 5: Linking Financing with Higher Education Quality

Education financing cannot be separated from education quality.

Universities should be encouraged to improve:

• Graduate employability;
• Industry relevance;
• Skills development;
• Labour market alignment.

A sustainable financing system depends partly on graduates obtaining meaningful employment outcomes.

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11. Stakeholder Perspectives

Government Perspective

Government must balance:

• Fiscal responsibility;
• Educational access;
• National human capital development.

PTPTN should therefore be evaluated not only by repayment collection but also by social and economic returns.

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Student Council Perspective

Students require:

• Affordable access;
• Fair repayment;
• Predictability;
• Protection during economic hardship.

However, students also recognise that PTPTN represents a shared public resource requiring responsible participation.

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Legal Perspective

A fair PTPTN system should respect:

• Transparency;
• Due process;
• Proportionality;
• Administrative fairness.

Enforcement should distinguish between inability to pay and unwillingness to pay.

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Civil Society Organisation Perspective

Civil society organisations emphasise:

• Equity;
• Protection of vulnerable groups;
• Accountability;
• Public participation.

Reform should ensure that disadvantaged groups are not excluded.

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12. International Lessons

International evidence suggests several common principles.

Australia

Income-contingent repayment demonstrates the value of linking repayment with income capacity [4].

United Kingdom

Progressive repayment structures show how graduates can contribute according to economic benefit received [5].

New Zealand

Student financing demonstrates the importance of transparency and public confidence.

The Malaysian approach should adapt these principles according to local economic and administrative conditions.

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13. Implementation Roadmap

Phase 1: Preparation.

Actions:

• Establish reform governance structure;
• Conduct financial modelling;
• Improve data integration;
• Review legal framework.

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Phase 2: Pilot Implementation.

Actions:

• Test income-sensitive repayment;
• Evaluate borrower outcomes;
• Improve targeting mechanisms.

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Phase 3: Full Implementation

Actions:

• Expand successful reforms;
• Monitor outcomes;
• Conduct periodic policy reviews.

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14. Expected Impact

Students

Expected benefits:

• Improved access;
• Reduced uncertainty;
• Greater financial confidence.

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Graduates

Expected benefits:

• Lower hardship risk;
• Greater career flexibility;
• Improved economic participation.

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Government

Expected benefits:

• More sustainable financing;
• Better resource allocation;
• Stronger public confidence.

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Society

Expected benefits:

• Increased social mobility;
• Stronger human capital development;
• Reduced inequality.

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15. Conclusion

PTPTN reform should not be approached merely as a debt recovery exercise.

It should be recognised as a national higher education financing reform.

Malaysia requires a system where:

• Students can access education;
• Graduates repay fairly;
• Vulnerable individuals receive protection;
• Public resources remain sustainable.

The proposed reform framework transforms PTPTN into a modern social investment institution based on fairness, accountability and sustainability.

The guiding principle is:

A strong education financing system should provide opportunity today while protecting opportunity for future generations.

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References

[1] Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. National Bureau of Economic Research.

[2] Organisation for Economic Co-operation and Development (OECD). Education at a Glance: OECD Indicators. OECD Publishing.

[3] Benjamin, S. J., & Marathamuthu, M. S. (2011). Affordability of Private Tertiary Education in Malaysia.

[4] Chapman, B. (2006). Income Contingent Loans for Higher Education: International Reform. In Teixeira, P. et al. (eds.), Cost-Sharing and Accessibility in Higher Education.

[5] Barr, N. (2004). Higher Education Funding. Oxford Review of Economic Policy, 20(2), 264–283.

[6] World Bank. Higher Education Financing and Student Support Policies.

[7] Ministry of Higher Education Malaysia. Malaysia Education Blueprint 2015–2025 (Higher Education).

[8] Syawal public consultation comments (2019), https://tinyurl.com/dss99m4a

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Prepared by:
Muhammad Syawalfiza

15 August 2026