Friday, June 27, 2008


RM30 bln more to ease burden
Monorail among big projects scrapped as Govt shifts focus to people-centred projects


Malaysia shelved some large building projects yesterday and pledged to spend RM30 billion more to boost rice production and ease poverty, as the Government sought to quell growing public anger over rising prices. Under the Mid-Term Review of the Ninth Malaysia Plan (2006-2010) tabled by Prime Minister Datuk Seri Abdullah Ahmad Badawi, the Government stuck to its average annual economic growth target of 6 percent for 2006- 2010, saying domestic spending would offset the effects of weak global demand. The Government said it was reviewing spending to focus on projects that would benefit the public as high energy and building material prices strain its finances. To free up money for other projects, the Government put on hold a RM1 .5 billion road project and a RM2 billion monorail, both in northern Penang state, said Sulaiman Mahbob, Director General of the Economic Planning Unit. Penang is one of five states that fell to Opposition rule during the March poll. The Government also deferred plans to build administrative centres in Kelantan, Sarawak and Pahang for an unspecified sum. It allocated RM30 billion more to improve health, raise rice output, build schools and rural roads and reduce poverty, bringing development spending to RM230 billion under the Ninth Malaysia Plan. “The additional ceiling is to take into account additional development requirements and the increase in construction-related materials cost,” the Government said in the review report. “Development projects will also be reprioritised giving priority to people-centred projects.” Abdullah is battling perceptions that his Government hasn’t done enough to shield the public from rising inflation while it reaps hefty gains from high energy prices. Malaysia, Asia’s largest net oil exporter, earns RM250 million a year in revenue for every $1 rise in crude prices. It raised petrol prices by 41 percent and diesel by 63 percent this month as part of a broad revamp of its energy price system that would save it $4.23 billion. The Government said yesterday it would continue to gradually cut fuel subsidies, but did not elaborate. “While the subsidy on petroleum and gas will be systematically and gradually reduced, a social safety net will be introduced to ensure the poor and deserving continue to receive some form of support to mitigate its impact,” it said. Despite the planned increase in development spending, the Government said it would cut its fiscal deficit to 3.2 percent of GDP in 2010, lower than an earlier estimate of 3.4 percent. The Government expects a deficit of 3.1 percent this year, compared with 3.2 percent last year. Annual inflation was expected to average 3-4 percent in 2008-2010, above the 2 percent recorded last year, it said. Malaysian annual inflation hit a 22-month high of 3.8 percent in May and is expected to rise further, at a time when the authorities are eager to keep interest rates low to support domestic demand. At 3.50 percent, Malaysia’s key interest rate is among the lowest policy rates in the region. The Government also said it would increase the equity ownership of indigenous people, including ethnic Malays, to 20-25 percent in 2010 from 19 percent in 2006. The Government would do more to ensure the indigenous group, or bumiputras, have a controlling stake in private firms and review foreign investment and public procurement rules to facilitate more bumiputra participation in the economy. “A special package programme will be created, to facilitate greater bumiputra participation inthe economy, particularly in the new growth and high value-added sectors.” Abdullah stressed that the review was of utmost importance in ensuring continuity of the agenda of national development especially in the light of the current challenging economic situation. “In the absence of effective measures, the sharp rise in oil and commodity prices as well as the continued turbulence in global fmancial markets could potentially derail our efforts to maintain economic stability and achieve robust growth,” he said in his speech when tabling the review. He said the tabling of the review was aimed at implementing strategies and programmes as well as making provisions to mould Malaysia into a strong and united nation. As such, he said, one of the main objectives of the second phase of implementation of the ninth plan was to ensure that the quality of life of Malaysians was protected. He also said that programmes to increase earnings propensity as well as to provide social safety nets would continue to be implemented and enhanced. At the same time, the Mid-Term Review did not ignore the nation’s need to enhance capacity and competitiveness. “Infrastructure development, human resource improvements and expansion of sectors contributing towards new sources of growth will continue to be pursued, taking into account the long-term developmental needs of the nation,” he said. Abdullah said that to ensure that Malaysia was able to sustain a positive growth momentum, the national development agenda would continue to be based on the five main thrusts of the National Mission, which are: • to move the economy up the value chain;
• to raise the capacity for knowledge and innovation and nurture “first-class mentality”;
• to address persistent socio-economic inequalities constructively and productively;
• to improve the standard and sustainability of quality of life, and
• to strengthen the institutional and implementation capacity.
Abdullah also outlined several accomplishments during the first two years of the implementation of the ninth plan, including sustaining economic growth at an encouraging rate of 6.1 per cent per annum and enhancing the quality of life of Malaysians by increasing per capita income from RM18,840 in 2005 to RM23,066 in 2007. Also, during the period, the Government reduced the fiscal deficit from 3.6 per cent of Gross Domestic Product (GDP) in 2005 to 3.2 per cent in 2007 through prudent management of the budget, he said, adding that the Government cultivated new sources of economic growth and enhanced worker productivity levels. He said that the Government enhanced the quality and access to the national education system through the implementation of the Education Development Master Plan and the National Higher Education Strategic Plan. He said it also lowered the overall poverty rate from 5.7 per cent in 2004 to 3.6 per cent in 2007, whereby incidences of absolute poverty were reduced from 1.2 per cent to 0.7 per cent in 2007. The Government also reduced inter-ethnic, regional and urban-rural economic divides, he added. During the two-year period, the Government developed almost 68,000 new entrepreneurs as well as trained more than 120,000 existing entrepreneurs through various entrepreneurial development programmes, he said. Abdullah said the Government also ensured better health care services, housing amenities, rural road networks, public transportation and road safety. Besides, he added, it improved the effectiveness of the public service delivery system, which included replacing the Certificate of Fitness for Occupation (CFO) issued by local Governments with the Certificate of Completion and Compliance (CCC), as well as reduced the ct of doing business through the Special Taskforce to Facilitate Business (Pemudah). Abdullah said it was evident that the implementation of the Ninth Malaysia Plan was not confined to planning or limited to mere rhetoric and that it had resulted in tangible accomplishments.