The Prime Minister has invited the public to post suggestions for the
2013 Budget to his blog and I believe that many would ask questions of
personal concern. However, the best approach would be a proper financial management to help the national economy out of plight.
It is timely for Datuk Seri Najib Razak to advice officials of the Finance Ministry
to properly manage the country's economy. The country is having a
fiscal deficit for the 15th consecutive year, the priority should then
be on striking a fiscal balance and reducing the deficit, or the debt will continue to increase and the country might end up in bankruptcy, like Greece.
Stock market record high but ringgit depreciating
The Malaysian stock market has repeatedly hit record highs, but the ringgit has been depreciating.
The strength of a country's currency reflects its economic strength and competitiveness, as the currency exchange rate fluctuations are determined by the currency's supply and demand. If everyone has no confidence and sell them, the exchange rate will fall.
For example, after world's factory China was recognised as the world's
second largest economy, the yuan has been rising dramatically and it is
expected to become one of the world's three major currency in five
years.
The ringgit recently depreciated to record low of 2.5 against the Singapore dollar. Malaysians working in Singapore were so excited whereas local importers suffered the bitterness.
Malaysians used to spend strong ringgit in Singapore during the good old days but the situation changed. Singaporeans have now become "rich men" in Malaysia.
Net capital exporter for 5 years running
It was reported that Malaysia has become a net capital exporter for five
consecutive years. In the first quarter this year, Malaysian companies
had invested RM 16.9 billion
abroad, an increase of nearly 15% compared to RM14.7 billion in the
final quarter of last year. The outflow of capital has intensified the
depreciation of the ringgit.
There are many reasons for the outflow of money. In addition to the lack
of confidence, the repeatedly delayed general election, the
deterioration of local investment environment and the reduction of
business opportunities have all caused enterprises and businesses to
invest abroad.
It is baffling that if the country's economy is really as good as described by political leaders, why aren't the funds
inflowing, but outflowing? Particularly when other countries are
lowering their interest rates, Bank Negara still keeps our interest rate
at 3%. It might be because investors are not optimistic about
Malaysia's economic outlook.
The outflow of capital will affect the Economic
Transformation Programme (ETP) and thus, Najib announced the
establishment of a RM1 billion Domestic Investment Strategic Fund to
promote domestic direct investment. However, the tax structure is
unreasonable, particularly the high corporate tax is a barrier to the
efforts of attracting investment. Thailand adjusted its corporate tax
from 30% to 23% this year, and 20% next year. Since we are unable to
make ends meet, we are not able to cut corporate tax.
Revenue bottleneck but expenditure rising without check
The biggest shortcoming of the government's financial management is, the
revenue has reached a bottleneck, while the expenditure is rising
rapidly. After the fall of international crude oil prices,
oil revenues will shrink. Only less than 10% of employees are currently
paying income tax, but political expenditure has been increasing day by
day due to the delayed general election. Therefore, the deficit is more
likely to expand rather than reduce.
The country is currently facing other problems, including the global
economic slowdown in which even China is unable to escape. The strange
global climate is also brewing another round of food crisis.
In the month of Ramadan, the
seventh lunar month and before the 2013 Budget is tabled on September
28, the market is expected to be sluggish. Let's see how Najib is going
to stimulate the economy.
-Sin Chew Daily
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