This article first appeared in The Edge Financial Daily on April 19, 2018

KUALA LUMPUR: The Institute for Democracy and Economic Affairs (Ideas) has criticised the government’s decision to grant the East Coast Rail Link (ECRL) project a relief from the goods and services tax (GST), saying it sends “bad signals” to investors in other fields.

“Exemptions for GST should not be granted because it creates an unfair competitive advantage for the company [involved] and there will not be a healthy competition,” said the think tank’s acting chief executive officer Ali Salman.

The Royal Malaysian Customs Department has confirmed that China-owned Communications Construction Company (CCCC) is given a GST relief for the RM55 billion ECRL project.

This came after Parti Amanah Negara vice-president Datuk Husam Musa on Monday disclosed documents showing the relief is granted under a provision of the Goods and Services Tax Act 2014 concerning the finance minister’s power to grant GST relief.

Speaking at a press conference after Ideas’ seminar on intellectual property rights, Ali said if a company or a sector is granted a tax exemption, then other companies or sectors would also seek a similar relief.

He added that the government could instead grant tax holidays for the companies or sectors, which has been done before.

On the massive investments flowing into Malaysia from China, Ali said he is not against such investments.

He said Malaysia has been receiving large amounts of foreign direct investment (FDI) from various sources in the last 30 to 40 years, and the FDI-led export industry is key to Malaysia’s economic development and has also boosted job opportunities for Malaysians.

“We encourage foreign companies and governments to invest in the country,” he said, highlighting the importance of understanding the FDI’s benefits.

Ali noted that concerns have been expressed over the US$11.61 billion (RM45.16 billion) of Chinese FDI to Malaysia in the pipeline in a relatively short period.

He said the government must be very transparent in providing information relating to the FDI, noting the lack of such information has created doubts among the public.

“I think we should not say we are selling our country to China, but we should have the right to review all these contracts [with Chinese companies] and the government has to be very transparent.”