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The New Straits Times by RUPA DAMODARAN
SUSTAINABILITY: Government will target subsidies to trim deficit, says prime minister
KUALA LUMPUR: MALAYSIA is not only looking to trim its fiscal deficit but is also balancing the books after 2015, said Prime Minister Datuk Seri Najib Razak yesterday.
Last Friday, the government outlined its plan to reduce the deficit of the federal budget to four per cent next year from 4.5 per cent this year, progressing to three per cent by 2015.
"We hope for a budget surplus but I don't want to give firm commitment yet," he said, during a recording of The CNBC Conversation programme here yesterday.
The prime minister was replying to questions raised by host Martin Soong during the taping of the 30- minute programme which will air on CNBC at noon on Saturday.
The recording is part of the CNBC Summit Malaysia yesterday, which included a panel discussion with Minister in the Prime Minister's Department Datuk Seri Idris Jala, Malayan Banking Bhd president and chief executive officer Datuk Seri Abdul Wahid Omar and Nestle (Malaysia) Bhd managing director Peter R. Vogt.
Najib, who is also finance minister, said as a responsible government, his administration does not want to dish out more perks until the deficit was trimmed.
He described 2011 as an exceptional year when tax revenue jumped by RM26 billion through tightening of loopholes and this prompted the government to give back to the people.
Najib said there were still a lot of leakages in the system, which was not helping the government in its efforts to wean itself off from overdependence on national petroleum company Petronas.
For example, foreign workers, both legal and illegal, and tourists were among those enjoying Malaysian subsidies.
"The cash payment we decided on is to send the message that targeted subsidy will be only for households with RM3,000 a month."
The 2013 Budget provides for another round of RM500 1Malaysia People's Aid (BR1M) to households earning less than RM3,000 a month. This comes after a previous one given under the 2012 Budget.
The prime minister also stressed that Malaysians could not be over dependent on subsidies in the long run as it would impact government revenue.
"With the Economic Transformation Programme in place, this has created more growth industries, which would give us a strong financial base later," he added.
The ETP has also enabled the domestic economy to be the main engine of growth amidst the strong head wind of uncertainty coming from advanced economies.
Strong exports would be a bonus for trade-dependent Malaysia, which enjoys a trade and current account surpluses.
On the commodities front, Najib said while palm oil prices were satisfactory, he was concerned with the lot of smallholders following the dip in rubber prices to half of 2010's because of the drop in automobile sales in China.
Malaysia is looking to Asean as well as East Asia, where trade arrangements with Japan and China will help boost exports as in the case of the trade pacts that were inked with Australia and New Zealand.
On challenges to Malaysia, Najib said growth was necessary to make society more equitable.
"If we get five to six per cent growth within the time frame... we can ensure fair, equitable distribution of wealth in the country and also fair distribution of income."
Najib also touched on politics, saying that democracy was thriving in Malaysia and that the government considered it a fundamental right of the people to protest for reasonable concerns, such as the safety concerns surrounding the setting up of Lynas Corporation's plant in Kuantan.
"Political transformation is part of my promise to the people that we are moving to a more mature, vibrant democracy in the country."