Date: 29 September 2011
BUDGET 2012 can be examined from two perspectives, the macro or how it affects the economy as a whole, and the micro, in terms of how it influences the people on the ground.
The deficit must be seriously addressed. It has to be reduced to less than 5% of the budget. This means that expenditure must be trimmed and revenue raised, otherwise the national debt will have to rise and this is not good for good governance and greater financial prudence.
Private investment has risen and must be sustained, otherwise our investment and economic growth targets, employment and national wealth will decline. The investment climate has to be improved by new policies that will attract rather than drive away investment, both domestic and foreign.
Structural impediments like the abuses of many aspects of the NEP have to be removed. We should not be unduly encouraged by the current price rise in petroleum and gas.
The present corporate and income tax rates could be reduced by 2 percentage points as part of a package of new incentives to retain and pull in foreign direct investments.
The efficiency index has to be further improved by removing present constraints to economic expansion.
Tenders have to be made much more transparent, and competition further enhanced to build greater confidence in the economy.
Incentives have to be given to raise productivity and preferably encouraging joint bumi/non-bumi companies to harness the cooperation and collaboration and synergies of all promising entrepreneurs.
Adequate expenditures must be provided to strengthen the major government institutions, such as the judiciary, MACC, police, etc.
The fight against corruption has to be stepped up as one weapon against inflation and wastage of resources, so that more funds can be allocated to fight poverty and to help the under-privileged.
Inflation can be alleviated by increasing food supply. This can be done by allocating more land for agriculture to efficient farmers who often find it difficult to expand their current farms. More licences and permits could be given to hawkers to sell cheaper food and more 1Malaysia restaurants can be formed.
The minimum wage policy should be introduced and not delayed further. This will help the poor and low income groups cope with rising inflation.
However, the Government must insist on greater productivity from the 1.2 million civil servants whose efficiency has to be monitored closely. The good performers should be rewarded and the bad apples phased out, like in the private sector.
The general service tax has to be introduced, after such a long delay, to help reduce the deficit – but the basket of goods/services of the poor should be exempted.
Subsidies should be phased out to save more for the poor, instead of benefitting the rich. Subsidies for petroleum, sugar, cooking oil, etc, benefit the rich as well!
There can be mechanisms put in place to ensure that the subsidies are enjoyed only by the target groups. Green stamps is one way, and in any case these mechanisms are practised elsewhere and can be adopted here too!
Training and short courses and even more micro financing should be extended to small and medium-size enterprises as they provide the bulk of our employment and production of consumer goods and services to benefit the poor and the low income groups.
The Government should better enforce its rules and regulations so that more fines are collected and less is spent on maintenance due to careless use of public utilities. Local authorities and state governments should monitor their expenditures to ensure greater efficiencies and economies of scale.
The Budget is expected to be a generous budget in view of the coming general election. But it has to be realistic so as not to worsen the budget deficit.
TAN SRI RAMON NAVARATNAM
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