Transcript Document
Budget 2009 A Policy Perspective Budget Allocation Budget Deficit & Growth Rates Revenue Streams Impacts on the Middle-Class Malaysian Businesses Enhanced? It’s the Economy, Stupid 1. Budget Allocation Budget 2008 Total = RM176.9 b 48.1; 27% Operating Expenditure Development Expenditure 128.8; 73% Budget 2009 Total = RM207.9 b (4.4% increase) 53.7; 26% Operating Expenditure Development Expenditure 154.2; 74% “Blink” Expansionary Budget Low-income groups East Malaysia Civil service & Retirees Budgeted spending: 3.9% increase in 2008 22.1% increase in 2009 Huge jump in subsidy bill (food & fuel) 2007: RM10.5 bn (8.5% of op. ex.) 2008: RM34.1 bn (225% increase, 22.6% of op. ex.; Fuel subsidies form 18.1 bn) 2009: RM33.9 bn (Fuel subsidies form 21 bn) Increase of operational expenditure by almost 200% in 8 years -Rental -Maintenance -Stationery supplies -General supplies -Emoluments -Compensation to toll concessionaires -Civil service wages -Services -Administration expenses Source: Tony Pua, PJU MP 2. Budget Deficit 2009: 12th year running in deficit (since 1997 Asian financial crisis) Attempt to move to a lower deficit for 2009 Lower revenue growth forecast of 9.1% (15.5% in 2008) Unhealthy fiscal management “Obsessed with growth; pump-priming the economy” Inflation being fuelled (8.5% in July), lessening the “bang for the buck” Budget Deficit (% of GDP) 6 5 4 3 2 1 0 Budget Deficit (% of GDP) 2003 2004 2005 2006 2007 2008 (original estd) 3.3 3.2 4.3 3.3 3.2 3.1 2008 (actual) 2009 (estd) 4.8 3.6 3. Revenue Streams Revenue Inflows: RM139.9 bn (2006) to RM176.2 bn (2009) Revenue from oil & gas industry 2008: estimated 37% 2009: estimated 46.4% (due to oil price increase) Net oil importer in several years 40% of oil & gas revenues from investments abroad – sustainable? (not to mention the countries we invest in: Sudan, Burma etc.) Petronas generated RM60 bn profit, 2007 (9% of GDP) “Off-Budget” Increasing Tax Base GST? 4. Impacts on the Middle-class Malaysian Low-wage earners-those earning a taxable income of RM35,000 per year or less-can claim RM400 rebate (vs. RM350 previously). RM35k – RM50k p.a.: 1% reduction in marginal tax rate (13 to 12%) RM230k p.a.: 28% to 27% reduction in tax rate Tax exemption medical benefits provided by employer extended to maternity expenses, traditional medicine (acupuncture, ayurvedic) Impacts… Cigarette prices: 60 sen more per 20-pack. Free electricity from October 1st 2008 until end-2009 will be provided to those using < RM20 a month. Reduced import duties on various consumer durables (rice cookers, electric kettles, blenders) and full import duty exemption from selected food items (biscuits, vermicelli, fruit juices, canned sweet corn). Purchase of medium-cost houses up to RM250k – 50% reduction in stamp duty on transfer document & loan agreement. Safety: Police receive RM5.4 b increased allocation New equipment for crime prevention New police stations with facilities Education RM14.1 b for institutes of higher learning … for employees Travel allowance for commuting to work provided by employers be given full tax deduction, while the employees receiving such allowance tax exemption up to RM2.4k p.a. Tax exemption given to employees on: Interest subsidies on housing, motor vehicles & education loans. (up to RM300K) Mobile phones, telephone & internet bills paid by employer Childcare allowance (up to RM2.4K p.a.) Public Transportation (2009-14): RM35 bn LRT lines extended in KJ and Ampang, Kota Damansara – Cheras Upgrading KTMB Contractors Cars Road tax rates for diesel cars = petrol cars Abolishing 100% import duty & 50% excise duty for hybrid cars = definition very narrow (only Civic Hybrid & Prius; franchise holders) “encourage local assembly” 5. Businesses Enhanced? Firms can claim working capital allowance for upgrading staff skills Corporate responsibility: companies contributing to charitable institutions, increased tax deduction (10% of agg. Income) Recruitment costs (payments to employment agencies) & participation in job fairs – tax deductible. Venture capitalists: 5-yr tax exemption SME assets acquired in 09 & 2010 Accelerated Capital Allowance No substantive initiatives to encourage businesses No significant plans to increase investment confidence 6. It’s the Economy, Stupid Rakyat-centric Budget but little to grow the economy itself; welfare state can only be sustainable with growth GDP growth UNCTAD’s latest figures in World Investment Report 2008 2008: 5.7% (estimated) 2009: 5.4% (estimated) Malaysia INFLOW OUTFLOW 2004 4,624 2,061 2005 3,967 2,971 2006 6,048 6,041 2007 8,403 10,989 (for the first time) 2008: Net inflow RM21b (Q1); Net outflow RM24b (Q2) International reserves RM388 bn But June-September, more than RM20 bn erased from reserves Current account surplus up 56% in Q2 Manufacturing sector shrinking Services sector “engine of growth” – to liberalise sector Inflation rate 8.5%, a 27-year high (overall of 4.8% in 2008) • Fuel prices reduced by 10 sen today, to RM2.45 •Public subsidy of 33 sen per litre on gasoline Source: Malaysiakini US economy and its effects on Malaysia Malaysia must contain growth of development and operating expenditure Public spending must be efficiently spent Liberalisation of economy Malaysia is US’ 17th largest trading partner Impacts of Paulson Plan; crisis deepening into global crisis Removal of import duty & sales tax exemptions on broadband Stimulating investment Removing FIC requirements; transparent Bumi policies Public tenders Institutional reform Money allocated upfront for judiciary etc. Accountability in implementing budget Rapid, changing environment Budget is important but environment changes daily Need to consider policy decisions on daily basis Stop focus on hard infrastructure but reforming of soft skills, human capital, channel ideas and not instruments Need for quick, rapid response to the changing economy.