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Friday, November 1, 2013

2014 Budget aimed at accelerating transformation, progress

Posted on 25 October 2013 - 08:28pm
Last updated on 25 October 2013 - 09:40pm

KUALA LUMPUR (Oct 25, 2013): Prime Minister Datuk Seri Najib Abdul Razak today tabled the 2014 Budget amounting to RM264.2 billion, aimed at invigorating economic activity, strengthening fiscal management, inculcating excellence in human capital, intensifying urban and rural development and ensuring the well being of the people towards achieving a developed nation status.

When tabling the budget themed "Strengthening Economic Resilience, Accelerating Transformation and Fulfilling Promises" in Dewan Rakyat today, Najib who is also the Finance Minister said RM217.7 billion was allocated for operating expenditure and RM46 billion for development.

The Operating Expenditure include RM63.6 billion for emoluments, RM36.6 billion for supplies and services, RM114.5 billion for fixed charges and grants, RM1.4 billion for purchase of assets and the remaining RM1.5 billion for other expenditure.

From the Development Expenditure of RM46.5 billion, a sum of RM29 billion was allocated to the economic sector, a sum of RM10.5 billion was allocated for social sector, including education, training, health, welfare, housing, community development; RM3.9 billion for security sector; RM1.1 billion for general administration and RM2 billion for contingencies.

Najib said the government's revenue collection is estimated at RM224.1 billion, an increase of RM4 billion from 2013.

"Taking into account the estimated revenue and expenditure, the government's fiscal deficit will further drop from 4 per cent of GDP in 2013 to 3.5 per cent in 2014. This clearly indicates the government's commitment towards fiscal consolidation to further strengthen the financial position of the nation," he said.

Taking stock of the current international and domestic economic environment, Najib also underlined five thrusts which will be the basis of the 2014 Budget, namely invigorating economic activity, strengthening fiscal management, inculcating excellence in human capital, intensifying urban and rural development and ensuring the well being of the people.

This is the fifth budget tabled by Najib since 2009 and formulated to ensure that the economy continues to expand at a strong pace and to reduce the fiscal deficit, with the overall objective of prospering the nation and the people. Najib said the global economy is expected to grow at a slower pace of 2.9 percent in 2013 and Malaysia would not be spared from the modest growth.

"Nevertheless, the country's strong economic fundamentals and accommodative monetary policy will enable us to grow at a sustainable pace. In fact, the economy grew by 4.2 percent in the first half of 2013," he said.

For the whole of 2013, the domestic economy is expected to expand between 5.4 percent and 5 percent, he said. He said the growth was supported by private investment, increasing 16.2 percent to an estimated RM165 billion and in addition, private and public consumption are expected to grow 7.4 percent and 7.3 percent respectively and mainly supported by strong domestic economic activity.

Najib said next year, in tandem with an improved global economic outlook, the domestic economy is projected to grow at a stronger pace of 5 percent to 5.5 percent and this growth would be driven by private investment, expanding 12.7 percent and private consumption at 6.2 percent.

"International reserves remained strong at RM444.9 billion as of Oct 14, 2013 and sufficient to finance 9.7 months of retained imports and is 3.9 times the short-term external debt," he said.

The unemployment rate is estimated at 3.1 percent while the inflation rate will remain low between 2 percent and 3 percent.

He said the per capita income for 2014 is expected to reach RM34,126 compared with RM24,879 in 2009, an increase of 37 percent over 6 years and that will boost Malaysia's chances of achieving developed nation status much earlier and achieve the targeted per capita income of RM46,500 or USD15,000 by 2020.

"In short we are on the right track to achieve the developed nation status much earlier than 2020. The government will also continue to provide a conducive environment to attract more domestic and foreign investment," he said.

In 2014, private investment is expected to increase further to RM189 billion or 17.9 percent of GDP, particularly in oil and gas, textile industry, transport equipment and real estate development, he added.

Public investment is estimated to reach RM106 billion whereby projects to be implemented include the construction of the 316km West Coast Expressway from Banting to Taiping as well as double tracking projects from Ipoh to Padang Besar and later from Gemas to Johor Baharu.

Najib said the government will allocate RM1.6 billion for development in the five regional corridors, namely the agropolitan project and oil palm based industries in the Sabah Development Corridor as well as Samalaju Industrial Park and a halal hub in the Sarawak Regional Corridor.

He said the service sector is the key contributor to economic growth and has a huge potential for further development because the sector's contribution to GDP has increased from 49.3 percent in 2000 to 55 percent in 2013.

The government will therefore, launch the Service Sector Blueprint next year, which outlines strategies and measures as well as identify the following potential subsectors to be developed.

Najib said the government would also formulate the National Aviation Policy to outline measures to strengthen the ecosystem and services network in the aviation industry.

For the period January to July 2013, passenger traffic at airports nationwide increased to 43.9 million from 38.6 million passengers during the same period in 2012.

Najib said when KLIA2 is operational, passenger traffic is expected to increase to more than 70 million. Total air cargo handled increased to 529,000 tonnes during the first seven months and a new air traffic management centre would be build at a cost of RM700 million at the Kuala Lumpur International Airport (KLIA).

To increase passenger comfort, the government will upgrade several airports, such as the Kota Kinabalu and Sandakan airports in Sabah, as well as Miri, Sibu and Mukah in Sarawak at a cost of RM312 million, said Najib. In view of 2014 being declared Visit Malaysia Year (VMY), the government has allocated RM1.2 billion for operating and development expenditure, including for promotion and advertising.

Najib said in efforts to attract more tourist arrivals, 2015 has been declared the Year of Festivals and in conjunction, a variety of cultural programmes and festivals will be organised.

He said to further promote the tourism industry, a sum of RM2 billion will be provided through the introduction of a Special Tourism Infrastructure Fund to provide soft loans at low interest to finance the cost of building infrastructure such as hotels, resorts and theme parks as well as purchase equipment related to tourism sector.

Najib said to expand internet coverage, the government through collaboration with the private sector would invest RM1.8 billion for the benefit of 2.8 million household in urban areas and another RM1.6 billion for the benefit of the rural folks.

To increase Internet coverage in rural areas, 1,000 telecommunication transmission towers will be build over the next three years with an investment of RM1.5 billion, he said.

Najib said an allocation of RM6 billion would be provided for the implementation of high value added and commercially viable agriculture and Agro-Based Industry. He said the government will allocate a sum of RM2.4 billion for subsidies and incentives, including subsidies for fertilizer, seeds, paddy and rice as well as for higher production of paddy and fish landing.

The government has also allocated RM243 million for the replanting programme of rubber, oil palm and cocoa as well as forest plantation programme and to increase productivity and promote agriculture produce with high demand, an allocation of RM634 million has also been set aside under the National Key Economic Area.

The Prime Minister also proposed to expeditiously implement a fair and comprehensive tax system that benefits all Malaysians through the abolishment of the sales and service tax and be replaced by a single tax known as the Goods and Service Tax (GST).

"I must stress that GST is not a new tax. Through the implementation of the GST, the government will be able to address the weaknesses in the current taxation system. For example if we buy carbonated drink in a restaurant today, we would not notice that we are paying double taxes which are sales tax and service tax," he said.

Najib said the GST would be introduced effective April 1, 2015, about 17 months from now and fixed at a rate of 6 percent compared with the 5 percent sales tax and 10 percent service tax.

He said more than 160 countries have implemented GST, which is an endorsement that the system has been recognised while the rate of 6 percent is the lowest among ASEAN countries.

GST will not be imposed on basic food items such as rice, sugar, salt, flour, cooking oil, lentils, herbs, spices, salted fish, piped water supply, and the first 200 units of electricity per month for domestic consumers, transportation services such as bus, train, LRT, taxi, ferry, boat, highway toll as well as education and health services.

Najib said during the transition period of the GST implementation, the government would provide various forms of assistance, including cash assistance and income tax reduction for individuals.

The government takes cognisance that the current sales tax and service tax have certain weaknesses such as the impact of double taxation on consumers, the absence of full tax relief on exported goods and transfer pricing issue which will ultimately result in losses to the consumers and the government, he said.

Just like in previous budgets, the biggest allocation goes to the education sector, and for the 2014 Budget it is no different as RM54.6 billion or 21 percent of the total budget has been allocated, said Najib.

In addition, the government will ensure that the implementation of the Malaysia Education Blueprint achieves the objective of ranking Malaysia in the top one third category of the world's best education, within a span of 15 years.

He said the government will continue giving RM100 to all primary and secondary school students to ease the burden of schooling expenses and for that RM540 million has been allocated and benefit 5.4 million students.

Najib said the 1Malaysia Book Voucher Programme valued at RM250 to students of pre-university and institutions of higher learning will continue and hoped to benefit about 1.3 million students involving an allocation of RM325 million.

To further strengthen and improve the living standards of people in rural areas, a sum of RM4.1 billion is provided for rural development programmes for basic infrastructure projects.

Najib said to beef up security and public order, the government has allocated RM8.8 billion to the police and RM13.2 billion to the Armed Forces while RM22.1 billion was allocated for the health sector.

To increase the ability of the people to buy a house and ensure stable house prices, as well as to control excessive speculation activities, the government will implement a number of steps.

He added that Real Property Gains Tax would be reviewed and increase the minimum price of property that can be purchased by foreigners from RM500,000 to RM1 million.

Najib said the government and private sector will build 223,000 units of new houses next year to increase access to home ownership at affordable prices while the government would also introduce the Private Affordable Ownership Housing Scheme (MyHome) as a step to encourage the private sector to build more low and medium cost houses.

The scheme provides a subsidy of RM30,000 to the private developers for each unit.

Najib said the government has never neglected the middle income group who form the largest number of tax payers while they are burdened by increasing cost of living. As such the government has proposed a special tax relief of RM2,000 be given to tax payers with a monthly income of up to RM8,000 received in 2013.

The Prime Minister also announced the Bantuan Rakyat 1Malaysia (BR1M) to households with a monthly income of RM3,000 be increased from RM500 to RM650 while BR1M for single individuals aged 21 and above and with a monthly income not exceeding RM2,000 be increased from RM250 to RM300.

For the first time, BR1M assistance of RM450 will be extended to households with a monthly income of between RM3,000 and RM4,000 to alleviate the rising cost of living borne by the lower middle income group.

Najib said about 1.4 million civil servants will get a half month bonus or a minimum payment of RM500, adding that pensioners would also receive a special financial assistance of RM250 to assist them meet the rising cost of living.

"The bonus and the special financial assistance will be paid early next year," he said when tabling the 2014 Budget at the Dewan Rakyat today.

In August, just before Aidilfitri, civil servants and pensioners received special assistance of RM500 and RM250 respectively. The special assistance was meant for civil servants from Grade 1 to 54.

Najib said, apart from giving three increments to 182,434 civil servants, who have reached their maximum pay in all scheme of services, the government has agreed to improve 81 schemes of service from November.

In July, the government gave an additional annual increment to all civil servants involving an allocation of RM1.6 billion. – Bernama

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