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SPEECH BY
THE HONOURABLE MR. LIM GUAN ENG,
MINISTER OF FINANCE

 

2020 BUDGET CONSULTATION

 


THURSDAY, 27TH JUNE 2019, 9.15 AM
MAIN HALL, GROUND FLOOR
MINISTRY OF FINANCE MALAYSIA

 

Yang Berhormat Dato’ Ir. Hj. Amiruddin Hamzah
Timbalan Menteri Kewangan

Yang Berbahagia Datuk Ahmad Badri Mohd Zahir
Ketua Setiausaha Perbendaharaan

YBhg. Tan Sri, Datuk Seri, Dato’, Datin, Tuan, Puan sekalian

Selamat Pagi, Salam Sejahtera dan Salam Harapan


INTRODUCTION

1. Saya ingin merakamkan penghargaan kepada semua pihak yang hadir, serta yang telah mengemukakan memorandum dan cadangan bagi penyediaan Belanjawan 2020. Untuk makluman semua, Belanjawan 2020 akan dibentangkan di Parlimen pada 11 Oktober 2019.

2. Majlis Konsultasi ini merupakan platform interaksi antara Kerajaan dan sektor awam, swasta serta pertubuhan bukan Kerajaan (NGOs) untuk memberi pandangan dan maklum balas terhadap cabaran semasa serta langkah-langkah bagi menanganinya.

3. Memandangkan sesi pada hari ini turut dihadiri tetamu dari luar negara, izinkan saya meneruskan program ini dalam Bahasa Inggeris.

Ladies and Gentlemen,

THE SHARED PROSPERITY AGENDA

4.The theme for the 2020 Budget Consultation Session is Shared Prosperity: Sustainable And Inclusive Growth Towards High Income Economy (Kemakmuran Bersama: Menjana Pertumbuhan Inklusif yang Mampan ke Arah Ekonomi Berpendapatan Tinggi). It reflects this administration’s ongoing policy shift towards high-quality growth to achieve developed nation status. Just as important, the growth must be felt by every segment of our society.

5. I believe inclusive growth involves a vision of “adequate medical care,” “good education,” “a useful and remunerative job,” “a decent home” and “freedom from unfair competition and monopolies” as the birth right of all Malaysians. Sustainable growth must essentially be private sector driven, with the government providing the environment of a well-regulated eco-system based on rule of law, competitive environment, transparency, competency, sound economic fundamentals, and safe and secure environment. Both inclusive and sustainable growth must try to establish an entrepreneurial economy centred on 4P partnership of the public sector, private sector, professionals and people.

BUILDING A WIDER SOCIAL SAFETY NET

6. To fulfil the goals of Shared Prosperity, we are building a social safety net to protect the most vulnerable groups.

7. In the first year of this administration, we have successfully introduced the mySalam insurance scheme for the B40 group that augments the public health system that we have today. mySalam improves the financial security of approximately 3.8 million Malaysians belonging to the low income group by providing its beneficiaries with a one-off RM8,000 payment, if a person is diagnosed with one of the 36 covered critical illness. mySalam also offers income replacement of RM50 per day in case of hospitalisation, up to RM700 annually. We are looking to improve the scheme in the near term.

8. On the labour market front, the Government is evaluating and formulating a new plan to get half a million young Malaysians to work through multiple programmes. This is an important initiative since youth unemployment rate has risen to 10.9% in 2018, from 9.9% in 2011. These rates are considerable higher than the 3.4% national unemployment rate.

9. While we think about the numbers, we must remember the social aspects of unemployment. Being jobless can be demeaning and damaging to a person’s self-esteem. Holding a job is not merely about fulfilling our personal economic needs but it also invests us with a sense of pride and purpose.

MANAGING COST OF LIVING

10. The Government is actively managing living cost pressures faced by the people. Inflation rates for March, April and May 2019 were low and stable at 0.2%, proving the Government’s success in checking price pressures.

11. Currently, the Government is designing a Cost of Living Index to complement the existing Consumer Price Index. Unlike the CPI which tracks the general change in consumers prices, the new Index will determine the minimum living cost required for a person to live comfortably. It will help the Government design a more precise policy in addressing living costs faced by Malaysians.

12. The Government is also tackling living costs by curbing monopolistic behaviour. Perhaps the greatest success has been with regards to broadband services where the speed has been raised for many consumers at affordable prices. A reliable, cheap and fast broadband service will the key in pushing the digitalisation of the Malaysian economy.

ENCOURAGING ECONOMIC GROWTH

13. But wage growth is just as crucial as managing living costs. There is little comfort to take from GDP growth if our wages do not increase as well. To have higher growth, the only sustainable way of doing so is to raise our productivity. The Government has identified Industry 4.0 as the new source of productivity and economic growth. This specifically means the digitalisation of the economy, and wider application of new technology such as artificial intelligence, big data and robotics in our daily life.

14. We need to digitalise our economy rapidly, or risked being left behind. In 2019 Budget, the Government has introduced several measures to catalyse the digitalisation process, especially among the SMEs. Among them include guarantee schemes by the Government-owned Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP), of which RM2 billion is to ease financing access for SMEs to apply Industry 4.0 technology in its business. This is part of the RM6.5 billion guarantee scheme for SMEs, of which RM1 billion has been reserved for bumiputra SMEs.

15. Apart from the guarantee scheme, the Government provides RM3 billion via the Industry Digitalisation Transformation Fund managed by Bank Pembangunan Malaysia Berhad to accelerate adoption of new technology including artificial intelligence, automation, big data and robotics among Malaysian companies.

16. But the Government cannot be doing this alone. We hope to grow the economy through 4P Partnership. One of such example has been the Government support in boosting innovative new fundraising methods such as equity crowdfunding (ECF) and peer-to-peer (P2P) financing. In 2019, we have committed RM50 million towards a co-investment fund (CIF) for ECF and P2P investment for micro-SMEs, where the government would match private investment.

17.But perhaps it would be good to leverage on the strength of our universities to create an entrepreneurial state. Having a one-stop centre within the proximity of our universities and high-tech manufacturing zones could the key to unleash innovation by providing entrepreneurs and students having great ideas with easy access to patent office, trade bureau and financing office, as well as start-up incubators and accelerators.

COMPETITIVENESS AMID TRADE WAR

18. Digitalisation and the creation of the entrepreneurial state will help the Malaysian economy raise its competitiveness. Malaysia has already been acknowledged as the 22nd most competitive economy in the world by IMD in 2019, while the World Bank has ranked Malaysia as the 15th easiest place to do business in the same year.

19. Malaysian competitiveness has enabled us to benefit greatly from the ongoing trade war between China and the United States, via business relocation as well as trade and investment diversion. As I have repeatedly mentioned, approved foreign direct investment (FDI) for all sectors during the first quarter of 2019 rose 73.4% to RM29.3 billion from RM16.9 billion a year ago.

20. The approved FDI increase was driven by a 127% manufacturing investment surge to RM20.2 billion, compared to RM8.9 billion a year ago. Out of the RM20.2 billion in approved manufacturing FDI, RM11.5 billion came from the United States and RM4.4 billion originated from China, again proving that Malaysia is benefiting from the trade war between two of the world’s largest economy.

21. Approved FDI is a leading indicator and its increase will increase actual investment in the near future. The Government will work to ensure these approved investments get realised as soon as possible to improve our productivity and wages.

22. Nevertheless, a prolonged and escalating trade will hurt everybody. Indeed, the IMF has cut its 2019 global GDP growth to 3.3% from 3.5% due to the persisting trade tensions. Eventual Malaysia as a great trading nation will be affected as well.

23. The trade war is reorienting the global supply chain permanently. Malaysia must be ready to grab any opportunity arising from the global shift. I look forward to listening and discussing your ideas on how we could position ourselves as the crucial manufacturing base in the new global supply chain.

FULFILLING THE PROMISE OF INSTITUTIONAL REFORMS

24. As we pursue economic growth, must be always be mindful of its quality. Guided by the principles of Competency, Accountability and Transparency (CAT), the Government will be fulling converting to accrual-based accounting from cash-based accounting by 2021. This will ensure a more transparent disclosure of our debt and liabilities, as well as the value of our assets.

25. The switch to accrual accounting is allowing us to have a wholesome consolidated view of the government debt and liabilities. We have been making good progress at managing it. From 79.3% of GDP in 2017, the level of the government debt and liabilities has decreased to 75.4% of GDP in 2018. The reduction was possible due tighter control over expenditure on various projects as well as due to our expanding economy. 

26. We are also embarking on fiscal consolidation. The Government cutting the fiscal deficit gradually from 3.7% of GDP in 2018, to 3.4% this year and 3.0% in 2020. By 2021, we should be able to cut it below 3.0%. The consolidation is necessary to preserve our high credit ratings of A3/A-. Nevertheless, Malaysia places a premium on economic growth, and the consolidation is proceeding without sacrificing the wellbeing of the rakyat.

27. The Government would like to spend more but at the end of the day, legacy issues are like 1MDB are still something we have to deal with. No country can lose RM150 billion without being hurt from it.

28. Other reform initiatives such as the introduction of Fiscal Responsibility Act (FRA) and the Government Procurement Act (GPA) will further enhance credibility and accountability of public finances. In addition, the Government has established the Debt Management Office to pro-actively manage the overall Government debt and liabilities as well as undertake comprehensive assessment and reporting of fiscal risks exposure.

BUDGET CONSULTATION 2020

29. I am happy to share that we have received an overwhelming response from 162 organisations from across the country covering 1,516 issues. This is the highest number of responses the Ministry of Finance has received in history, which demonstrates the eagerness of Malaysians to participate in efforts to make Malaysia a better place for us all. As a responsive government, we will evaluate all proposals carefully.

Tuan-tuan dan puan-puan,

CLOSING

30. In closing, I am aware of the six main issues that are often raised. First, on the need to loosen loan procedure so that businesses are able to gain wider access to loans. Second, on taxation matters. Third, are those that relate to the hiring of workers, especially foreign workers. Fourth, some in the private sector think that government bureaucracy can be reduced, and the quality of government delivery can be improved further by simplifying requirements and procedures. Fifth, concerns over the ongoing trade war between the United States and the People’s Republic of China which will impact the country’s economic climate, but is beyond the control of countries like Malaysia. Sixth, is the need to carry our transformations towards Industry 4.0 so that we may be a part of the digital economy, which is necessary to ensure that today’s businesses can continue to exist and thrive in today’s digital economy.

31. Other than those issues, we have also given emphasis to social and security issues. Security is a pre-requisite to economic growth. Without a secure environment, it will be very difficult to ensure continuous growth. Therefore, the Government has given special attention to members of security forces so that they are able to perform their duties well and professionally. I am confident that under the leadership of the present government, which is committed to doing its job with integrity and efficiently, security issues will continue to be managed well. As for welfare issues, existing welfare programmes will continue and we are open to receiving new suggestions. However, we hope that all parties can sympathise with the financial constraints that we face, where we have to face issues, especially those that relate to filling the RM150 billion hole, and that is a huge obstacle to us carrying out all the welfare programmes as intended.

Perbincangan dan konsultasi ini tidak akan berakhir di sini. Dalam beberapa bulan yang akan datang, pelbagai diskusi dan mesyuarat akan diadakan untuk memahami dengan lebih lanjut isu dan cadangan yang telah dikemukakan pada hari ini.

Sekian, terima kasih.