Reforms bear fruit
The tough decisions and reforms taken by the Government have put the country’s economic fundamentals on a stronger footing than ever, Datuk Seri Najib Tun Razak said. Summing up its economic track record since 2009 in his Invest Malaysia Kuala Lumpur keyn
KUALA LUMPUR: The country’s fundamentals are stronger than ever thanks to the reforms and tough decisions made by the Government, Prime Minister Datuk Seri Najib Tun Razak said in summarising his economic track record since taking over the top position in 2009.
Among the difficult decisions that the Najib administration made was implementing the Goods and Services Tax (GST) in April 2015, which allowed the Government’s finances to rely less on revenue from oil and gas, and implement multi-billion ringgit urban transportation infrastructure.
“We have only arrived at that position of strength because we put in place a far-reaching economic plan and have been unafraid to make the tough decisions to build up the resilience of the Malaysian economy,” he said in his keynote address at the 13th Invest Malaysia Kuala Lumpur here yesterday.
The two-day forum is themed “Malaysia at 60: Maximising Potential”.
“We have diversified government sources of income, including reducing reliance on oil and gas revenues,” Najib said.
“Given the huge drop in the price of oil, just imagine how we would be suffering if we had not done that.
“We needed to widen the tax base so we introduced GST. It was not popular, but it was the right thing to do – as every reputable economist has confirmed.”
Najib highlighted economic statistics and improvements in fundamentals to date.
Among them was that gross national income (GNI) increased by nearly 50%, and GNI per capita rose to US$9,850 (RM42,177). Based on the threshold of US$12,235 (RM52,390), Malaysia has narrowed the gap to its high-income target from 33% to 19%.
For the first six months this year, the stock market saw a net inflow of funds of RM11bil compared to a net outflow of RM3bil for the whole of last year.
“The capital market increased by 9% to a level of RM3.1 trillion in the first six months of this year, and now ranks fifth in Asia relative to GDP,” the Prime Minister said.
Najib said: “Seven years ago, I introduced our New Economic Model – right here, at Invest Malaysia 2010 ... we had a plan of reform, economic transformation and the willingness to make tough choices.
“And it is clear today that, aided by the hard work of millions of Malaysians, the plan has worked and is continuing to work.”
He noted that since 2009, 2.26 million jobs had been created, accounting for 69% of the 3.3 million target by 2020.
“Inflation and unemployment have been kept low. We have attracted unprecedented levels of foreign direct investment (FDI), which shows the confidence the world has in Malaysia,” he noted.
Among the notable FDIs in Malaysia in recent years were Huawei’s RM2.2bil project, which would employ 2,370 people; Saudi Aramco’s US$7bil (RM30bil) investment in Petronas’ Refinery and Petrochemical Integrated Development in Johor; as well as Finisar Corp and Coca Cola.
“The confidence and certainty global businesses have in Malaysia brings jobs, lifts wages and helps our workforce upskill.
“This Government offers that certainty to businesses both in Malaysia and overseas. The Opposition offers none at all. They are in chaos.”
Najib slammed the Opposition for spreading misinformation about Malaysia’s economy and calling for GST to be abolished.
“There has been a concerted effort to send misinformation overseas to damage Malaysia’s economy for their own selfish political objectives,” Najib said.
“It is not fair to the Malaysian people, and it’s not fair to the business community, both at home and abroad,” he added.
Najib pointed out that Malaysia’s economy had been touted by the Organisation for Economic Cooperation and Development (OECD) as “one of the most successful SouthEast Asian economies thanks to sound macroeconomic fundamentals”; by the International Monetary Fund (IMF) as “among the fastest growing economies among peers”; and by the World Bank as “progressing from a position of strength”.
“Does that really sound like the Malaysian economy is failing, and that we are in danger of going bankrupt, as the Opposition would have you believe?” Najib asked.
“I think the World Bank, the OECD and the IMF know what they are talking about.”
On GST, Najib said it had helped reduce the country’s deficit.
“GST has helped us in our determination to steadily reduce the deficit – we are on course to reduce it to 3% this year from 6.7% in 2009 – and GST has been crucial to retaining our good assessments by the international rating agencies,” Najib explained.
“Yet the Opposition would abolish it. Tell me, from where exactly would they produce the RM41bil in GST revenue last year?
“If GST were abolished, it would not just be a revenue shortfall. The deficit would rise from 3.1% to 5%. Our ability to fund the construction of schools, hospitals and other essentials would be affected.”
In addition, the Government debt would also exceed the self-imposed level of 55% of gross domestic product (GDP).
“Our sovereign ratings would then be downgraded. Lending costs ... would increase. The people would suffer,” Najib said.
He pointed out that when the Opposition faced tough choices, they would seek the easy or the populist way out, regardless of whether it made sense or was even possible.
On growth projections for Malaysia, Najib said the upward revision of GDP growth forecasts by several prominent financial institutions showed Malaysia was on the right track.
The World Bank raised its 2017 GDP growth forecast for Malaysia to 4.9% from 4.3%, while the IMF raised its projection to 4.8% from 4.5%. Morgan Stanley, on the other hand, expected Malaysia’s GDP to expand 5% this year, while Nomura projected a growth rate of 5.3%.