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General : Highlights Of PM’s Special Address On The Economy

KUALA LUMPUR, Jan 20 (Bernama) — Following are the highlights of the special address by Prime Minister and Finance Minister Datuk Seri Najib Tun Razak on current developments and the government’s financial position at the Putrajaya International Convention Centre (PICC) Tuesday:

* The external (global economic) situation has changed lately and we are impacted directly as Malaysia is among the largest trading nations in the world.

* Compared to the situation a few months ago, the global economic landscape has since changed significantly. This necessitates us to review and clarify some of our earlier macro and fiscal assumptions.

* As a responsible government, we will continue to ensure economic development and safeguard the well-being of the ‘rakyat’ (people). * The government will take specific and proactive measures to align the economy with the recent global economic developments.

* The recent reduction in pump prices of petrol and diesel by 35 sen and 30 sen per litre, respectively, will increase the overall disposable income of consumers by RM7.5 billion.

* Government has revised downwards its forecast for the average baseline oil price to USD55 per barrel for 2015.

* At the forecast price of USD55 per barrel, there will be a revenue shortfall of RM13.8 billion.

* Despite the savings of RM10.7 billion from the implementation of the managed float mechanism for retail fuel prices, the Government still faces a revenue shortfall of RM8.3 billion to accommodate the 2015 Budget measures.

* Taking into account the revised estimates, the government is revising the fiscal deficit target to 3.2% of GDP in 2015.

* The government will not compromise on national development planning as it will enhance productive capacity of the economy.

* The government will not neglect the people s welfare, particularly the bottom 40% of households.

* The fluctuations in the ringgit are influenced by developments in the global economy. Hence, the ringgit is not the only currency to have weakened against the US dollar.

* The government must ensure that the current account in the balance of payments must remain in surplus.

* The government must continue with fiscal reforms and consolidation.

* The government must ensure that economic activity must be further diversified to enable the country to cope with falling crude oil and commodity prices.

* The government is confident that the exchange rate will over time adjust to reflect the strong economic fundamentals. Of importance, our financial system continues to function in an orderly manner.

* Most importantly, there has been no disruption to financial intermediation, with lending activities continuing smoothly.

* Businesses continue to have access to financing from banking institutions and the capital market.

* Greater policy flexibility, adequate international reserves, deeper and more diversified financial markets, sound banking system and strong domestic institutional investors such as the Employees Provident Fund will increase resilience to volatile capital flows.

* Malaysia is a crude oil exporter. Thus, when oil prices plummeted recently, there was a perception that export receipts will also decline drastically and result in a current account deficit. Indeed, this perception is not correct.

* As a net crude oil exporter, Malaysia had a surplus of RM7.7 billion from January to November 2014.

* Malaysia is an importer of petroleum products with a net import bill of RM8.9 billion during the same period.

* The perception that Malaysia is a large oil producer is also not true.

* With a better outlook for the global economy in 2015, the shortfall in commodity receipts is expected to be cushioned by increased demand for manufactured goods, such as electrical and electronic products, wood-based products, textile products and others, which account for 76 per cent of total exports.

* Malaysia is confident of achieving GDP growth in the range of 4.5 to 5.5 per cent this year.

* The government will ensure balanced, inclusive and sustainable economic growth.

* The government will provide assistance to the people and business community to rebuild infrastructure damaged by floods.

* The government will actively promote import-substitution services such as shipping, port, education and professional services. This will reduce dependence on foreign sources for procurement of goods and services.

* The Padang Besar railway terminal will be upgraded.

* The operational efficiency of import and export processes will be improved.

* Visa fee will be waived for tourists from, among others, China.

* The levy on foreign workers will be reviewed.

* Priority will be given to local Class G1 (Class F), G2 (Class E) and G3 (Class D) contractors registered with CIDB to undertake reconstruction works in their respective flood-affected areas.

* Promotion of ‘Buy Malaysia’ products will be intensified.

* The frequency will be increased and the shopping hours extended for nationwide mega sales.

* Promotion of domestic tourism through competitive domestic air fares will be accelerated.

* The private sector will be encouraged to leverage benefits from the establishment of the ASEAN Economic Community.

* The government will set up a Services Sector Guarantee Scheme amounting to RM5 billion for SMEs in the services sector, with maximum financing of RM5 million and 70 per cent government guarantee.

* The government will encourage GLCs and GLICs to invest domestically.

* The scheduled electricity tariff hike in 2015 and the scheduled gas price hike for the industrial sector in 2015 will be postponed.

* Local goods and services in government procurement will be increased.

* The tax base will be broadened by encouraging companies to register with the Royal Malaysian Customs to enable it to charge and collect the Goods and Services Tax (GST).

* As at mid-January 2015, more than 304,000 companies have registered under the GST requirement.

* Additional dividends from GLCs and GLICs as well as other government entities amounting to RM400 million will be realised.

* Outlays on supplies and services, especially overseas travel, events and functions and use of professional services will be optmised, resulting in savings of RM1.6 billion.

* The 2015 National Service Training Programme will be deferred to enable it to be reviewed and enhanced, with savings expected at RM400 million.

* Transfers and grants to statutory bodies, GLCs and Government Trust Funds, particularly those with a steady revenue stream and high reserves, will be reviewed. This measure will result in savings of RM3.2 billion.

* The purchase of non-critical assets, especially office equipment, software and vehicles, will be reviewed, with an expected savings of RM300 million.

* The recent floods affected around 400,000 people nationwide.

* The latest estimate of damage to infrastructure is about RM2.9 billion.

* The government has provided an initial allocation of RM500 million for rehabilitation works and welfare programmes for flood victims.

* This is in addition to the existing allocation to the National Security Council, bringing the total to RM787 million.

* The government has provided an initial allocation of RM800 million for repair and reconstruction of basic infrastructure such as schools, hospitals, roads and bridges.

* RM893 million is provided under the 2015 Budget for flood mitigation projects.

* Eight-foot stilt houses will be built for those who have land and whose homes were damaged by the floods.

* 1,000 units of completed low-cost houses in Gua Musang will be handed over.

* RM500 would be provided per flood-affected household and RM5,000 for the next-of-kin who have lost family members.

* An additional RM100 million will be provided to TEKUN (Tabung Ekonomi Kumpulan Usahaniaga Nasional) and RM100 million to AIM (Amanah Ikhtiar Malaysia) to provide soft loans to support SMEs and microenterprises.

* BSN (Bank Simpanan Nasional), Agrobank, SME Bank, TEKUN and AIM to defer existing loan repayments of up to six months.

* Bank Negara Malaysia will establish a RM500-million Special Relief Facility for SME loan financing at a concessionary rate of 2.25 per cent with a grace period of up to six months through banking and development financial institutions.

* Bank Rakyat will offer a personal loan scheme of up to RM50,000 at a financing rate as low as 3.9 per cent, while loan repayments will start after six months from loan disbursement.

* A sum of RM500 million will be provided by financial institutions with a 70 per cent guarantee under a Flood Relief Loan Guarantee Scheme. The scheme will be administered by Prokhas.

* Levy payment to the Human Resources Development Fund (HRDF) will be exempted for a period of six months for SMEs in the flood-affected areas with effect from Feb 1, 2015.

* Malaysia is neither in a recession nor a crisis as experienced in 1997/1998 and 2009 which warranted stimulus packages.

* The strategies announced by the government are proactive initiatives to make the necessary adjustments following the challenging external developments which is beyond Malaysia’s control.

* The current account balance is expected to remain in surplus.

* The financial markets remain orderly and resilient.

* Although the ringgit has depreciated, it is expected to stabilise over time to reflect the strong economic fundamentals.

* The Development Expenditure of RM48.5 billion for 2015 will be maintained and spent.

* Projects such as the MRT Line 2, LRT 3, Kuala Lumpur-Singapore High-Speed Rail will be continued.

* The Eleventh Malaysia Plan (11MP) to outline the development expenditure until 2020 will be tabled in May.

* Operating Expenditure is expected to be reduced by RM5.5 billion through reprioritising expenditure.

— BERNAMA


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