Thursday, October 4, 2012

PM: Strong domestic economy will be a cushion against volatility


Published: Wednesday October 3, 2012 MYT 12:00:00 AM 
Updated: Sunday June 2, 2013 MYT 2:00:30 PM

KUALA LUMPUR: The government's continuing quest to build a strong domestic economy is crucial to ensure sustainable growth and cushion the nation against downside risks due to the volatile global economy, Prime Minister Datuk Seri Najib Tun Razak said Wednesday.

He said that creating a stronger domestic economy and consolidating subsidies were among pivotal thrusts of the government as evidenced by proposals made in the 2013 Budget.

"There is always a downside risk of the external environment to the local economy for which pro-active steps should be taken to address them.

"It is not within our control. The external global economy is beyond us, you're absolutely right and we have to take that into account," said Najib, who is also Finance Minister.

He was responding to a question about the impact of the external environment on Malaysia which has shown good economic growth numbers, increased foreign direct investments (FDIs) and ringgit appreciation.

"We are trying to develop, first of all, a very strong domestic economy that will persevere and the engine of growth will come from the domestic economy," he said during a pre-recording of the CNBC Conversation programme here on Wednesday anchored by Martin Soong.

"That is why we have done everything that is possible to encourage business and facilitate domestic investments in this country," Najib said.

Getting a fresh mandate in the upcoming general election was crucial to ensure the continuity of the Economic Transformation Programme (ETP) and Malaysia achieving its high-income nation status, he said.

Through implementation of projects under the ETP, Malaysia would be able to reduce the country's dependency on resources like oil as the major source of revenue while developing other sectors that can generate new revenues, he said.

Besides diversifying the income stream for the country, Najib said that it was important to rationalise subsidies and deliver targeted subsidies to certain groups.

He said that it would not be right to raise prices of subsidised items just after getting a mandate for the next five years as the people might question the government's sincerity.

Measures to lower subsidies and raise prices for subsidised goods were the correct steps to take which should be beneficial to the people in the long run.

"The key is targeted subsidies.

"There's a lot of leakages in the system and you've got to plug these holes. You need to tell people that what is good for them (and) what is good for the country, is by focusing on targeted subsidies," he said when he was asked if reducing subsidies and implementing Goods and Services Tax (GST) would be priorities once Barisan Nasional wins the election.

Najib also pointed out the importance of having free trade agreements on the back of global uncertainties and strengthening trade relations between Asean countries and East Asian countries to build a strong domestic economy.

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