KUALA LUMPUR (Nov 5): The government should have put greater focus on spending efficiencies rather than adding new frictional costs such as the new levy on outbound flights, said the Institute for Democracy and Economic Affairs (IDEAS).

"[We are] disappointed by the new departure levy which just adds friction to the system in tourism and business travel industries which are important to Malaysia," it said in a statement today with reference to the Budget 2019 that was tabled on Friday.

IDEAS also expressed concern on the announced fuel subsidies, saying the government should approach the energy market more holistically.

"These subsidies create tension with the government's other objectives, such as promoting renewables; they also undermine the long-term development of the energy market in Malaysia, which is important when we consider the significant role that Petronas is playing in providing fiscal revenues," it said.

The think tank said it is important to study thoroughly the impacts the proposed measures will have and, if they turn out to have significant negative consequences, be open to revising them.

It also highlighted that although the government is being helped by a RM30 billion special dividend from Petronas, such payout cannot be counted on every year so there will need to be further reductions in spending in the near future. The government should move to balanced budgeting, it said.

Still, on the whole, it said the new budget was "a success for the government who can now demonstrate concrete delivery of many manifesto commitments without having to introduce significant new taxes".

In particular, it appreciates the new government's pledge to use more open tender instead of direct negotiations, which it said will reduce the leakage in the economy in the long run.

"It is encouraging to see that government has also recognized the revenue leakages such as illicit trade and has promised to recover some of these losses. It is also encouraging to see the formation of a task force to review the GLCs under MoF and to ensure that they do not compete with the private sector," it said.

"The budget does not provide any tax relief but it also does not impose any new broad tax or any increase in tax level barring some new duties such as sugar tax and an increase in duties on casino income. In this sense, the budget is pragmatic and well targeted," it added.

While the budget does not promise a revolution, it presents a wide range of steps which can help sustain growth and minimise wasteful expenditures, it noted.

"However, the depth of structural reform is yet to be fully explained and the government still has much work to do to reduce the deficit over the next few years," it added.