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Friday, October 25, 2013

Striking the right balance

Publication: NST
Date of publication: Oct 25, 2013
Section heading: Main Section
Page number: 002
Byline / Author: By Mustapha Kamil

KUALA LUMPUR: INCLUSIVE and realistic. The 2014 Budget to be tabled today will help ease the burden of the people and yet, be fiscally responsible enough to help the nation weather global economic turbulence.

The budget is expected to propose measures to deal with the rising cost of living, especially skyrocketing house prices, provide incentives for certain priority sectors and ensure continued spending on value-added infrastructure projects.

It is also expected to shed some light on whether the government will introduce the goods and services tax and if yes, set the timetable on the implementation of the consumption tax. There is broad acceptance of the GST but the government feels that much has to be done to get the buy-in from the people on its benefits.

Prime Minister Datuk Seri Najib Razak yesterday outlined some of what's in store in his budget speech today. The speech will be telecast live from Parliament at 4pm.

Najib, who is also the finance minister, said the government would continue to balance between ensuring a strong domestic economy, achieving the transformation agenda and reducing the burdens of the people.

As the first budget after the 13th General Election, Najib is likely to announce measures to fulfil promises made by the Barisan Nasional government to the people.

Najib said the economy must remain resilient to lay the foundation for future growth and prosperity.

At the same time, he said the government must fulfil its pledges to the people and avoid populist measures that could undermine economic stability.

He cited the recent global financial and Eurozone crises, saying that while what happens elsewhere was beyond Malaysia's control, a robust economy would safeguard the nation's future.

"The government will do what is right for our economy. Some measures may not be popular now, but over the medium term, what is good for the economy is also good for the people," he said in a statement.

Analysts said given the prevailing uncertain global economy, the budget is expected to contain measures to strengthen Malaysia's fiscal position and sharpen its competitive edge by making it cheaper and easier to conduct business.

Anticipation of a more disciplined spending plan was echoed positively on Bursa Malaysia yesterday, with the FTSE Bursa Malaysia KLCI closing at an all-time high of 1818.93 points. The ringgit has also strengthened slightly.

The government's gradual subsidy rationalisation measures are expected to continue, including by ensuring only the targeted segments will receive the benefits. Malaysia's subsidy bill for this year is RM42 billion, a large chunk of which was for petrol, diesel, gas and electricity.

The amount is still considered high by analysts and was one of the factors which resulted in international rating agency, Fitch Ratings, cutting the outlook for Malaysia's sovereign credit to "negative", from "stable", in July.

Should the ratings actually be downgraded, Malaysia will have to pay more to borrow from the international market, and the people will ultimately bear the brunt.

The budget is not expected to be expansionary in nature, especially since the government is expected to practise more prudent spending, putting money only into projects that will add value to the economy. Infrastructure projects that benefit the public, such as public transport, are expected to continue, but projects that are undertaken just for glory, may see their end.

The government is expected to come down hard on wastage and leakages in its financial management. The recently released Auditor-General's Report is expected to pave the way for the government to make every sen of its expenses count.

With prudent financial management, the government's goal of achieving a balanced budget by 2020 looks more attainable. Malaysia's budget deficit was 4.5 per cent of gross domestic product last year; four per cent in 2013.

Malaysia wants to trim the deficit further to 3.5 per cent next year before achieving either a balanced, or surplus budget, by 2020.

The 2014 Budget is also expected to include efforts to upscale human capital, largely through measures that will spur more innovation and entrepreneurship.

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