Published: 2013/10/16
The subsidy rationalisation programme (SRP) will continue to proceed gradually over a reasonable period of time, said Maybank Investment Bank Research.
Its economics team, in a meeting with Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar, together with other research houses, last Friday said subsidy was the session's "hot topic".
The question was on the subsidy rollback going forward - whether the government should announce a detailed timetable for the sake of transparency and credibility.
"In response, the minister stated that subsidy rationalisation would proceed gradually over a reasonable period of time, that is, we quote, "not too short or not too long".
"We interpret this remark to mean that the original SRP target of ending all subsidies for essential food items (sugar, flour, cooking oil), fuel (petrol, diesel, LPG) and energy (gas, electricity) by 2015 is no longer applicable."
According to Maybank, the government feels that rather than get fixated with outlining a timetable, it would be better for actions to do the talking and providing proof of commitment to carry out.
Although Wahid avoided queries on whether the goods and services tax (GST) would be introduced in the 2014 Budget and the time frame for it to come on board, he highlighted the need for a broad-based tax as source of income or revenue. Only 1.7 million of the 12.6 million workers in the country pay personal income tax.
Economists feel there is no guarantee the imposition of GST will be accompanied by the lowering of income tax as the government has to assess the revenue impact first.
This, they said, is because Malaysia looks set to introduce GST while having a budget deficit, so the pressure is for GST to be "revenue accretive" - which is in contrast with countries like Singapore and Australia that introduced GST amid balanced budgets, enabling the GST to be somewhat "revenue neutral" by providing lower income taxes in exchange.
The minister concurred with the call for BR1M to be tightened in view of the statistical anomaly between the 4.3 million recipients and the Department of Statistics' Household Income Survey 2012 that showed only 2.655 million households are eligible.
The cash handout programme for households earning below RM3,000 per month (RM500 per household last year and this year) will be announced in the 2014 Budget.
On the current account surplus, he said the country's current account would remain in surplus, albeit narrower than before, pointing to recent improvements in external trade statistics, in reference to the numbers for July to August this year. There will be rescheduling and deferment of some infrastructure and investment projects.
Projects to be deferred will be those with low economic multiplier effect and high import content, and a specific example mentioned was the proposed East Coast Economic Corridor's railway network, while there will also be some shifting in the implementation timeline for some projects, but by "months" rather than by "years".
However, a number of major infrastructure, oil and gas and government land development projects will proceed, like the KVMRT, RAPID and Warisan Merdeka (the latter will depend on its financial viability).
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