`Fortifying economy for future'

Publication: NST

Date of publication: Sep 3, 2013

Section heading: Main Section

Page number: 002

Byline / Author: By Azura Abas; Roziana Hamsawi

PUTRAJAYA: PRICES of RON95 and diesel have been raised by 20 sen to RM2.10 and RM2 from today.

Prime Minister Datuk Seri Najib Razak said the contraction of subsidies would save the government RM1.1 billion for the remainder of this year alone and a further RM3.3 billion annually.

The measure, he said, was part of the government's subsidy rationalisation initiative to ensure a more efficient and just distribution of benefits derived from its subsidy efforts.

"Currently, our subsidy system benefits everyone, including the higher-income group and foreigners. Thus, we need to move to a more targeted subsidy system that caters to the vulnerable groups.

"The subsidy rationalisation will be carried out in many stages. To reduce the burden of the low-income and vulnerable group following the fuel subsidy rationalisation, BR1M will be increased in the 2014 Budget," he said after chairing the Fiscal Policy Committee yesterday.

Najib, who is also finance minister, said the government was subsidising 83 sen for every litre of RON95 petrol and RM1 per litre of diesel prior to yesterday's announcement on the new prices.

"This brings the total fuel subsidy allocation for 2013 to RM24.8 billion. The reduction of 20 sen in fuel subsidy means the government will still subsidise 63 sen per litre of RON95 and 80 sen per litre of diesel."

Najib said the subsidy-cutting measures would bring about savings that would be ploughed back to benefit all, especially those in the low-income group.

"For now, many will see it as a higher fuel price, but it is actually a process to fortify the economy within short and medium-terms," he said, adding that Malaysians would benefit from the positive impact of the rationalisation programme once the economy grew stronger.

Najib said subsidy rationalisation initiatives such as the one involving fuel were made to consolidate the government's fiscal position as well as to boost confidence in Malaysia's commitment to bring down its fiscal deficit.

"Our target is to achieve a fiscal deficit target of three per cent of the gross domestic product by 2015 and a balanced budget by 2020. We must ensure we are on track."

On the impact of the fuel hike on inflation, Najib said inflation rate was still low and the reduction of the government's fuel subsidy "is not likely to cause hardship because the increase (in petrol price) is not that high".

Najib urged traders against profiteering by raising the prices of goods. "Please consider the rakyat's wellbeing."

Asked if the matter would be politicised by the opposition, Najib said he would not be surprised if this was the case.

"Well, whatever we (the government) do, they (the opposition) will try to play it up as a political issue. All of us have to understand that this is not about politics. This is about the future of the nation's economy.

"If the economy suffers, the people will suffer, too, as has been experienced by several countries because of their own failure in managing the economy."

Najib also said the government would also reschedule several public sector projects to address the narrowing current account surplus in the balance of payments.

Projects with low import content and high-multiplier effects, he said, would be given priority.

"However, projects with a high import component will be sequenced accordingly so as not to adversely impact the balance of payments position."

However, he said the Mass Rapid Transit (MRT) Lines 1, 2 and 3 projects would proceed as planned while the Southern Corridor High-Speed Rail (HSR) venture was still under negotiation.

"For HSR, no timeline has been fixed. We will come up with the schedule once we conclude the negotiations."

Details of the rescheduled projects, he said, may be announced in the upcoming 2014 Budget.

Najib said the measures undertaken would not only tackle the immediate concerns of the economy and the government's financial position, but also strengthen public finances over the medium and long term.

In pointing out that the current external environment was increasingly challenging, Najib said it was vital to sustain economic resilience.

"The moderation in the current account of the balance of payments, coupled with continued fiscal deficits, pose medium-term risks to the economy. Hence, strengthening the fiscal position is vital to sustain the resilience of the economy as well as further enhancing public and investor confidence."

Najib also said in the medium and longer term, the government would look at ways to enhance its competitiveness and further diversify the country's export markets.

One sector to be enhanced, he said, was tourism, which would be given greater focus in view of Visit Malaysia Year 2014.

Najib also said the Goods and Services Tax (GST) and Real Property Gains Tax (RPGT) issues would be part of his 2013 Budget but did no elaborate.

To a question on the ringgit weakening in recent months, Najib said this was the effect of the poor performance of external economies and beyond Malaysia's control.

"It is not causing us undue stress for the time being."

Present were Finance Minister II Datuk Seri Ahmad Husni Mohamed Hanadzlah and Minister in the Prime Minister's Department Senator Datuk Seri Abdul Wahid Omar.