Saturday, 16 October 2010

A painless, facilitative budget

A QUESTION OF BUSINESS BY P.GUNASEGARAM

Najib has packaged a smattering of goodies while paving the path for growth with a sprinkling of incentives and expenditure.

IT’S a budget which is rather difficult to juggle with coming at a time when the world economic scenario is again uncertain as growth already shows definite signs of slowing in the second half.

The stimulus packages can’t be cut back quickly or the economy might slow even more. However, there is still the prudent need to ensure that the overall budget deficit – the excess of development and operational expenditure over total revenue – does not become too unmanageable.

That is reflected in only a marginal decline in the budget deficit to 5.4% of gross domestic product (GDP – goods and services produced within the country) for 2011 from 5.6% this year. The real cuts have to be postponed.

In the meantime, such spending is not sustainable especially in the face of what may be a slowing in government revenue as a result of a smaller growth in the economy. That means in 2011, the private sector has to firmly take over the reins of growth.

For that to happen, it is vital for confidence to be maintained and for the Government to do all it can to facilitate both private investment as well as consumption.

In a sense then, the budget announced yesterday by Prime Minister and Finance Minister Datuk Seri Najib Tun Razak is facilitative – it lays the groundwork for sustained economic activity in the face of renewed adversity on the external front by encouraging private investment and consumption.

Thus, it is that Najib put emphasis on a slew of projects announced earlier, most of which are to be undertaken largely by the private sector with some impetus provided by government agencies. On that will depend much of the push for economic growth.

There is realisation too that Malaysians do have a lot of money in the banks with savings of over RM200bil. The cut on a range of imported consumption goods no doubt indicates a desire to tap this savings pool to fuel demand in addition to making Malaysia a shopping haven for tourists as well.

An interesting aside was the politically charged issue of toll rates and their increase. Najib stands to increase his and the Barisan Nasional’s popularity by announcing that there will be no toll increase for the next five years.

Reportedly the government investment company Khazanah Nasional, and the Employees Provident Fund are launching a general offer for PLUS, the north-south highway operator, for over RM20bil. As part of the deal and the subsequent restructuring of equity and debt, the public will get some toll relief.

The call for the establishment of a minimum wage has been deftly deferred by the establishment of the National Wages Council with representation from all stakeholders. The council will come up with a recommendation on minimum wages as well as other measures related to wages.

The attempt to give some to the small man was reflected in the move to increase wages of security guards in government services so that they will earn more than RM1,000 a month in wages and fixed allowances.

While earlier measures by Bank Negara to curb property speculation was reflected in higher down-payments, the Government has encouraged first time buyers by coming up with a scheme whereby the 10% down-payment will be guaranteed by Cagamas, the national mortgage corporation.

Finally, it must have come as some relief to those who enjoy the occasional tipple or two (sometimes more) to know that alcohol has been left well alone. On that note, here’s to the budget!

> Managing editor P. Gunasegaram is convinced it is false to argue that less expensive alcohol and tourism go hand-in-hand – look at Singapore! But he isn’t complaining.

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