|Abdul Wahid talking to the media after the MoU signing ceremony for the development of KPJ Damansara Specialist Hospital II at Sime Darby Convention Centre, Kuala Lumpur yesterday. Photo by Chu Juck Seng|
PETALING JAYA: Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar yesterday downplayed criticisms raised by the opposition on the level of the government’s debt, saying that Malaysia has actually moved into a fiscal “safe zone”.
“If you look at the matrix, we have moved into the safe zone, meaning that our combined direct obligations and contingent liabilities are below 70% [of the gross domestic product (GDP)] and our fiscal deficit this year is at 3.5% and moving towards 3% [next year],” he told reporters yesterday.
“Our debt is also being kept well below 55% [of GDP]. If you look at the government’s announcement in last Friday’s budget, the level of government debt is below 53%. If you include contingent liabilities at 15%, it does not exceed 70%,” he said.
He was speaking to reporters after witnessing the signing of a memorandum of understanding (MoU) between KPJ Healthcare Bhd (KPJ), Pelaburan Hartanah Bhd (PHB) and Nadayu Properties Bhd (Nadayu) for the development of KPJ Damansara Specialist Hospital II.
According to Minister in the Prime Minister’s Department Datuk Seri Idris Jala in a statement on the Economic Transformation Programme webpage, a fiscal safe zone — a matrix developed by Boston Consulting Group Inc — is achieved if, as a percentage of the GDP, public debt is below 75% and deficit is at 4%, or below.
A danger zone is when the public debt equals or hits above the GDP, with a deficit of 8% and above.
Malaysia’s self-imposed ceiling for public debt is 55% of the GDP. Last year, Malaysia’s government debt was pared down from 55% to 53% of the GDP.
Petaling Jaya Utara MP and DAP publicity chief Tony Pua raised a red flag last Friday over the government’s debt, saying Prime Minister Datuk Seri Najib Razak had not been forthright on the matter.
Pua, quoting figures from the Economic Report 2014, said Malaysia’s contingent liabilities had increased significantly from RM84.3 billion in 2009 when Najib took office, to RM157.5 billion as at December 2013, an increase of 86.8% over the past five years.
He said this, coupled with a debt of 52.8% of GDP — just 2% shy of the official debt ceiling — is worrying as unchecked expenditure can have a serious negative impact on Malaysia’s financial system.
Meanwhile, on an unrelated matter, Abdul Wahid said the MoU signed among KPJ, PHB and Nadayu was a step forward in the development of Malay reserve land.
“In the past, Malay reserve land was viewed as an impediment to development. But what we have demonstrated here is that it is actually possible, and is not just limited to residential development but [also] commercial,” he said.
Earlier in his speech, Abdul Wahid said the leasing of Malay reserve land for development should be considered favourably, as it provides a sustainable economic development for bumiputeras and allows for the realisation of the land’s value.
KPJ Damansara Specialist Hospital II, to be completed in 2018 with a gross development value of RM370 million, will be constructed on a 2.8 acre (1.1ha) land in Bukit Lanjan, Selangor, near the commercial area of Mutiara Damansara.
The land will be sold by Nadayu to PHB. After the hospital has been constructed, it will be leased by PHB to KPJ for 15 years, with an option to continue for another 15 years.
KPJ president and managing director Datuk Amiruddin Abdul Satar, who was present, said the development of the new hospital will not adversely affect the cash flow of KPJ.
PHB managing director and chief executive officer Datuk Kamalul Arifin Othman said all three parties have yet to decide on the lease sum.
This article first appeared in The Edge Financial Daily, on October 17, 2014.