PUTRAJAYA, Jan 21 – Prime Minister Datuk Seri Najib Tun Razak’s special address today on the current economic developments and the country’s financial standing could not have been more timely in giving a sense of assurance to the rakyat that the government is tackling the problems arising from the slump in global crude oil prices.
While we may not have control over external factors wreaking havoc elsewhere globally and leaving a trail of economic challenges in our backyard, straight-to-the-point pre-emptive measures have boosted confidence that Malaysia’s financial footing will not be shaky.
With double whammy of the recent floods hitting the country and global crude oil prices taking a nosedive, our revenue has certainly been affected but not too significantly. Most importantly, Najib has, in a definitive manner, declared that the Malaysian economy is not in a state of crisis as painted by some sceptics.
But while he spelled out three specific measures to address ongoing economic and financial concerns in meeting gross domestic product target and fiscal reduction, he has managed to calm and reassure both the rakyat and the market that we are neither in a recession nor facing a crisis.
This is noteworthy as too many commentaries seem to be painting a doomsday scenario for Malaysia. On the contrary, Malaysia has faced much harder economic problems before and has come out of them stronger than ever through tough measures.
Although changes in global economic landscape are inevitable, the government’s decision to introduce a number of comprehensive, pre-emptive and proactive measures in ensuring Malaysia’s growth, development and deficit ambitions remain on track is commendable and realistic response to the problems arising from external factors.
Moreover, all these adjustment strategies were carefully planned without compromising development expenditure which undoubtedly spurs economic activity, whereas operating expenditure is expected to be reduced by RM5.5 billion. This is a step in the right direction.
Vital projects for the people such as public housing, flood mitigation, water supply, electricity and public transport infrastructure such as Pan-Borneo Highway will be maintained, in addition to projects such as the MRT Line 2, LRT 3, High-Speed Rail Kuala Lumpur-Singapore will be continued.
Meanwhile, to reduce cost of doing business, Najib also announced the postponement of both the scheduled electricity tariff and gas price increases for the industrial sector this year In order to meet the target of 4.5 per cent to 5.5 per cent economic growth this year, he said, Malaysia firstly needed to ensure a more balanced, inclusive and sustainable growth.
This is achievable by way of boosting exports of goods and services, enhancing private consumption and accelerating private investment. Secondly, the country needs to continue its fiscal reform and consolidation, should it want to reduce fiscal deficit to a revised target of 3.2 per cent for 2015.
Among the revenue-enhancement measures are to broaden tax base by encouraging companies to register for Goods and Services Tax (GST), besides realising additional dividends from government-linked companies and government-linked investment companies as well as other government entities.
The perfect timing for the GST would also further cushion the impact of low oil prices and the Royal Malaysian Customs is expected to collect an additional RM1.0 billion under GST this year. Contrary to some quarters criticising the GST and even calling for it to be postponed the new tax collection will prove to be a life-saver in view of the economic difficulties.
The third measure is specifically tailored to address the recent floods which affected around 400,000 people nationwide and incurred around RM2.9 billion in damage to infrastructure. The government will see to it that the people and the business community will be taken care of besides rebuilding damaged infrastructure.
The government would not only provide allocation for repair and reconstruction of basic infrastructure, it would also give priority to local contractors to undertake reconstruction works in their respective flood-hit areas to enhance private consumption and trigger business activities.
The oil and gas sector contributes about 30 per cent to the economy. The rest came mostly from services and manufacturing sectors. Therefore the perception that Malaysia is a net oil exporter must be rectified. We are undoubtedly a net crude oil and petroleum products importer.
In addition, the lower crude oil prices would benefit net oil importing and manufacturing country such as Malaysia. To further diversify the economy, the government has lined up various measures to strengthen and accelerate the small and medium enterprise sector. The most important bottomline from this adjustment measures is that people should not be alarmist.
Although challenges mount for Malaysia, the country is not facing an economic crisis and strategies announced by the government today are reality checks and thus proactive adjustment measures following external factors. It is indeed clear that the government is on top of the situation and that there is no need for irresponsible parties to paint a picture that all is gloom and doom when on the contrary the truth is that there is a lot going for Malaysia.