What to expect

WHEN Barisan Nasional lost the 14th General Election and Pakatan Harapan formed the new government, the question on many investors’ minds was what would the fiscal deficit look like?

It is a pertinent question, given the plans to abolish the goods and services tax (GST) and replace it with the sales and service tax (SST).

The government then proceeded to announce that the GST would be abolished from June and it would take at least two to three months to introduce the SST. There will be a tax revenue shortfall of between the projected RM30bil the government expects to collect from the SST and the RM43.8bil it collected from the GST last year. This amount should be more this year.

Higher oil prices will help cushion that shortfall and a higher dividend from petroleum royalties and dividends will also plug the gap somewhat.

But the most important number the market will be looking at is the budget deficit.

This is expected to be about 2.8% this year, but the Pakatan alternative budget has factored in a figure of 2.04% of gross domestic product.

The much lower number will come about from also a relook at government spending, a much smaller number of ministries it has proposed and also an anti-corruption drive that will burnish government coffers.

While tax revenues will be greatly debated as to what its quantum would be, it is actually the implementation of anti-corruption measures, and as a consequence better procurement, that would help with government revenue.

Lower corruption will help reduce wastage but it is in the government-linked companies (GLCs) that these efforts would also be felt.

GLCs have for years been dogged by questions of questionable procurement practices and also the award of contracts. Should the GLCs practise meritocracy when it comes to procurement, there will be tangible benefits for these companies and investors.

There is no doubt that the dispensing of past practices will help bump up the profits of GLCs and in return help with their profitability. And that can only be a positive for corporate Malaysia, investors and the stock market.