May 7, 2004
Malaysia Times

'Malaysia's budget deficit likely to fall'

KUALA LUMPUR - Higher private investment and prudent financial management will help push Malaysia's budget deficit this year to below the official estimate of 4.5% of gross domestic product, Prime Minister Abdullah Ahmad Badawi says. Abdullah, who is also finance minister, said he would form a special taskforce to identify investment opportunities for the private sector including government-linked companies to give them a bigger role in economic growth.
With effective financial management, Abdullah said the government expected to be able to reduce this year's budget deficit to less than the estimated 4.5% of GDP.
"I believe the private sector can accommodate whatever reduction in government's expenditure as against the past," he was quoted as saying by Bernama news agency at the start of a three-day budget consultation session with the private sector.
Abdullah is expected to unveil the 2005 budget on September 10, his first since taking over as premier from Mahathir Mohamad who retired last October after 22 years in power.
The 2004 budget originally aimed to shrink the deficit to 3.3 percent of GDP from 5.4% last year through a 21% drop in development expenditure.
But the central bank in March revised the deficit up to 4.5 percent of GDP, citing lower tax revenues and lower development expenditure. It stressed however, that fiscal consolidation remained on track and development would be targetted at strengthening longer-term productivity and competitiveness.
Abdullah said the government would continue to emphasise domestic investment and the development of small- and medium-sized industries (SMI), besides continuing to promote foreign direct investment.
As part of efforts to enhance the efficiency of the government's service delivery system, he said red-tape, corrupt practices and inefficiency would be stamped out, and the tendering of government contracts would be made more transparent. Private think-tank Asian Strategy and Leadership Institute (ASLI), meanwhile, called for more economic liberalisation to promote private investment.
"A new wave of deregulations is urgently needed and Budget 2005 should identify specific areas where there can be further deregulation and liberalisation to make it easier for the private sector to do business," it said in a memorandum to the finance ministry.
It also proposed that a third board be set up on the stock exchange to allow SMIs to raise funds from the capital market for expansion.
Malaysia has raised its economic growth target this year to 6.0-6.5%, up from 5.5-6.0% previously, after a better-than-expected showing of 5.2% in 2003.

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