Less dependent on petroleum revenues

FRIDAY, SEPTEMBER 07, 2012 - 13:33

The Malaysian Reserve

Location: 

KUALA LUMPUR

TACKLING CONCERNS: (From left) Malaysian Financial Planning Council president Kwo Shih Kang, Lim, Securities Commission executive director Goh Ching Yin and Financial Planning Association of Malaysia president Wong Boon Choy at the private retirement scheme forum yesterday — Pic: HAFZI MOHAMED

MALAYSIA would continue to reduce its dependence on petroleum income which constitutes about one-third of the national revenue by increasing contribution from other sectors, said Deputy Finance Minister Senator Datuk Donald Lim Siang.

“We would continue to reduce our dependence on our petroleum revenues and we expect other sectors such as the services sector, the financial sector, tourism and manufacturing to increase their contributions in the years to come,” he said yesterday.

Fitch Ratings, a global sovereign credit rating agency, had expressed concern a month ago that Malaysia would have to reduce its heavy dependence on petroleum-linked revenue and implement the goods and services tax (GST) due to concerns on weakening public finances.

Fitch Ratings said it was concerned that negative pressures may build and eventually offset the existing strengths of the sovereign credit profile unless structural weaknesses in the public finances are addressed.

However, it said efforts to address the underlying structural weaknesses within Malaysia’s public finances will be limited until after the general election has occurred as its policymakers’ foremost concern lies in winning favour with the electorate, especially after the ruling coalition Barisan Nasional lost three states in the 2008 elections.

On government debt, Lim said that the debt to gross domestic product (GDP) ratio as at December last year was 51.8% — not as high as the debt levels of the developed countries and the US which was about 200%.

He said while it was imperative that it keeps the level of debt down, it would have to continue to spend on development.

“The substantial expenditure involving billions on Mass Rapid Transit line would have to continue and we need to continue to spend on healthcare and infrastructure,” he said.

He said that implementation of the GST was in the offing but it would have to consider the timing of its implementation carefully.

On Malaysia’s fiscal deficit pattern, Fitch had said that despite having narrowed its deficit for last year at 4.8% of GDP, lower than the budgeted 5.4% due to additional revenue of 2.3% of GDP, the gains were offset by higher personnel expenditure and ‘higher than expected’ subsidy due to high global oil prices.

It added that the this year’s budget faces headwinds from global developments and the unrevised original deficit target of 4.7% of GDP deficit for this year.