Fortifying resilience

Publication: NST

Date of publication: Oct 23, 2013

Section heading: Main Section

Page number: 014

THE 2014 Budget is about to be unveiled in a few days and there have already been cautionary statements that Malaysians should not expect any manna from heaven this time around. The international trade and industry minister, a senior economic minister in the government, has said that several measures to be announced in the budget will "not go down well" with the people. The head of a prominent banking group also expects goodies to be less than forthcoming given that the country's debt to gross domestic debt ratio exceeds 50 per cent and the picture is much worse for household debt. Malaysia must then make the necessary corrections to prevent a rating downgrade which will cause the cost of borrowing to rise. The time then has come for some fiscal housekeeping if the economy is to go on flourishing as usual. Furthermore, the uncertain global economy is not about to do the country any favours.

Having operated on a fiscal deficit since 1998, a return to a balanced budget must now be the imperative. Much has been done to grow the economy steadily when subsidies and incentives to facilitate both production and demand end. If the perseverance of Malaysians have become flabby it is almost forgivable. Like spoilt brats we have become used to easy street waiting for the government to not only dish out subsidies, but also the protectionist policies. The regimen for global trade, however, is fast changing and free market competition is forcing greater self reliance on every citizen. It follows then that without public support for the budget, no matter how disagreeable some of its elements may be, Malaysians have only themselves to blame if the economy falters.

Expected in the 2014 Budget, therefore, are policies meant to balance revenues and expenditure. The Goods and Services Tax (GST) proposal is one, a long time coming because of its unpopularity. GST is, however, actually more efficient than the current sales and service tax. There will, too, be a continued rationalisation of subsidies. Both these policies are intended to reduce deficit expenditure. Unfortunately, to the average consumer everything will be more expensive and to the farmer, businesses and other beneficiaries, less financial support from the public purse. But such measures will go toward enhancing national resilience. For, Malaysia cannot emulate the American Dream policies of excessive government borrowing, which is now fast morphing America into a nightmare. Malaysia's 2014 Budget is intended to avoid similar fallacies. If some short-term discomfort is inevitable as a result, Malaysians must learn to bear with it.