Friday May 6, 2011
KUALA LUMPUR: Budget 2012 may see a shift in emphasis to reforms under the New Economic Model (NEM) as opposed to the emphasis given to the National Key Economic Areas (NKEAs) projects under the current budget.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said there would be some finetuning in the transformation agenda as results from the implementation of the Economic Transformation Programme (ETP) became clearer.
“We should expect a shift to more foundation-building, especially transformational, measures and incentives that are fiscal and financial in nature,” he told a media briefing yesterday following a pre-Budget 2012 roundtable discussion among members of the Economic Council working group.
Yeah said the country’s economy was underperforming and stepping up implementation of NEM measures would ensure the economy move in the right direction, especially in luring more private-sector investments from locals and foreigners, which was a key strategy in lifting growth.
The ETP incorporates the NEM, which was announced by Prime Minister Datuk Seri Najib Razak last year, and the NKEAs, which included entry point projects identified for quicker implementation.
“There’s increasing consensus that we need to refocus the transformation agenda on the real stuff, which is to rebuild our competitive foundations,” Yeah said, adding that this was also the sentiment of the working group whose members included senior officials from both the public and private sectors.
On Wednesday, the Asian Development Bank said in a report titled “Asia 2050” that Malaysia had the potential to become one of seven economies that would drive growth in the region in the next 40 years but faced challenges if the country along with peers did not upgrade human capital as well as strengthen governance and institutional capacity.
“I think the Government does have a good sense of what the current concerns are over the implementation (of the NEM) measures,” Yeah said.
Investors, which had been sceptical of the pace of cross-cutting reforms under the NEM so far, could expect a more concerted budget that would help accelerate the transformation process, he said.
Yeah said if these concerns were addressed, then it would go a long way in building and reaffirming confidence in the public sector as the facilitator of the reforms. “We need to shift to a new business-friendly environment that actually leverages on all the key findings and challenges that have been covered in both the World Bank as well as other studies that have highlighted these concerns.”
Yeah said the gradual lowering of subsidies for fuel were some of the structural reforms that investors were looking for as spending could be directed at activities with greater multiplier effects while the remaining subsidies could be finetuned to target those who needed it.
“However, these kind of reforms will be more difficult to implement and we do expect a more gradual rolling-back of subsidies,” he said.
Meanwhile, Deputy Finance Minister Datuk Donald Lim Siang Chai said in Pasir Gudang that further reductions in the corporate and individual taxes would be included Budget 2012, which is expected to be tabled at Parliament on Oct 7. He said the reductions could be made once the implementation of the long-awaited goods and service tax (GST) took place in the country.
“There are more than 225 countries in the world that have already implemented the GST and Malaysia will have to do it sooner or later,’’ he told a press conference yesterday.
Lim said with the GST in place, the Government was hoping to reduce the country’s deficit level at 5% currently to between 2.8% and 3% by 2015.
http://biz.thestar.com.my/news/story.asp?file=/2011/5/6/business/8616841&sec=business
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