This article first appeared in The Edge Financial Daily on August 30, 2018

KUALA LUMPUR: The federal government is establishing two new committees as part of plans to lower the country’s fiscal deficit to 2.8% of gross domestic product (GDP) this year, Finance Minister Lim Guan Eng said yesterday.

The Public Finance Committee (PFC), to be chaired by Guan Eng, will outline the government’s medium-term fiscal plans.

“I will be joined by the Economic Affairs Minister [Datuk Seri Mohamed Azmin Ali] and the governor of Bank Negara Malaysia [Datuk Nor Shamsiah Mohd Yunus]. It will be the platform to balance the need for fiscal consolidation and the need for the government to spend to raise the rakyat’s living standards while contributing to future economic growth,” he said in a statement.

The Tax Reform Committee (TRC), meanwhile, will assess the Malaysian taxation system holistically to make it more efficient, neutral and progressive without burdening the people, while promoting the long-term productivity of the economy, Guan Eng said.

“The TRC will study measures to halt the decline by, among others, minimising tax leakages and tax evasion.”

Govt to monetise some of its holdings in non-critical, non-strategic firms

To augment these measures, Guan Eng said the federal government would monetise some of its holdings in non-critical, non-strategic companies in an orderly manner, while engaging in planned and scheduled public auctions of state land.

“Previously, these land assets were often sold at steep discounts to politically-connected entities under opaque arrangements, which deprived the federal government of additional revenue.”

Meanwhile, Guan Eng said focus group meetings have been scheduled in August and September to gather views and recommendations on specific issues including domestic workforce, quality of education system, sustainable development and living costs among the urban poor.

“Yesterday (Tuesday), I chaired the first focus group meeting to discuss ways of improving public finance. We shared views on means to strengthen the federal government’s fiscal position by diversifying its revenue sources, optimising its expenditure and rationalise its large RM1.087 trillion debt and liabilities that rose spectacularly after years of imprudent and opaque management of government finances.”

Despite various legacy challenges, he said the federal government is steadfast in lowering its fiscal deficit to 2.8% of GDP this year.

“We will proceed with our fiscal consolidation agenda gradually, in a more sustainable manner without hurting economic growth and the rakyat’s well-being.”

From a macro perspective, the federal government will also ensure the domestic environment is stable to support further growth.

“However, just like other emerging markets, the domestic capital market’s performance, as well as the strength of the ringgit are affected by global events,” noted Guan Eng.

“This is evident from the rise in sentiment among various economies after the US and Mexico reached a trade deal. The FBM KLCI rose 0.8% or 15.3 points yesterday (Tuesday) after the US and Mexico reach a trade deal. Year-to-date, the [FBM] KLCI has risen 1.7%.

“If the US and China could agree to resolve their trade disputes, then the Malaysian capital market and the value of the ringgit would rise. If no deal could be reached, the reverse would happen.

“The Malaysian government is monitoring this particular global development intently and is prepared to act accordingly if needed to protect the rakyat’s well-being.”

From now to Sept 30, Malaysians are invited to give their views and recommendations for Budget 2019, to be tabled in Parliament on Nov 2, via belanjawan2019.treasury.gov.my. Alternatively, they can provide input on Facebook, Instagram and Twitter with the hashtag #belanjawan2019.