Contents
1.0
INTRODUCTION INTRODUCTIO N .................................. ................. .................................. ................................... ................................... .................................. ................................... ..................... ... 2
1.1
BUDGET ................................... .................. .................................. ................................... ................................... ................................... .................................... ............................. ........... 2
1.2
BUDGET POLICY .................................. ................. ................................... ................................... ................................... ................................... ................................ ............... 3
2.0
BUDGET TRENDS ................................... ................. ................................... .................................. ................................... ................................... ................................... .................. 4
2.1
PUBLIC SECTOR SPENDING ................................... ................. ................................... ................................... .................................... ............................. ........... 5
2.2
DEVELOPMENT SPENDING ................................. ............... ................................... ................................... .................................... ................................ .............. 6
3.0
PUBLIC SECTOR REVENUE .................................. ................. .................................. ................................... .................................... ................................... ................. 8
3.1
TAX REVENUE .................................... .................. ................................... .................................. ................................... ................................... ................................... .................. 8
3.2
NON-TAX REVENUE .................................. ................. ................................... ................................... ................................... ................................... ........................ ....... 13
4.0
PUBLIC SECTOR EXPENDITURE ................................... ................. ................................... ................................... .................................... ........................ ...... 13
4.1
FEDERAL GOVERNMENT DEBT .................................. ................ ................................... .................................. ................................... ...................... .... 13
4.2
TRENDS OF FEDERAL GOVERNMENT DEBT ................................... ................. .................................... ................................. ............... 14
4.3
LOAN RESOURCE ................................. ................ ................................... ................................... ................................... ................................... .............................. ............. 17
4.4
NATION DEBT .................................. ................. .................................. ................................... ................................... .................................. ................................... .................... 19
5.0
PUBLIC SECTOR AND PRIVATIZATION PRIVATIZAT ION ................................. ................ ................................... ................................... .............................. ............. 21
Page 1
1.0
Introduction
Government budget is a legal government document where stated the estimation of revenue and expenses for a financial year that is often passed by the legislature, approved by the chief executive. Malaysia yearly budget is usually presented by our nation Finance Minister on the month of October. It is an economic and finance planning which describe the nation economic position on the particular year and economic prospect for the following year. Beside describe issues and challenges faced and steps taken by government to overcome the issues, budget also describe resources nation revenue which the revenue spent for maintenance and development purpose with the sources of financing which includes taxes and loan within and outside the country. Budget speech and annual economic report are complete documents which explain the economic and finance data da ta for that particular year and projection for coming year. 1.1
Budget
Budget is a statement of revenue and government expenditure a particular year. Revenue and expenses are two basic elements in government budget. Revenues are obtained from taxes in the case of the government and government expenses are included government consumption, government investment expenditure and transfer payment. There are three type of government budget such as balanced budget, surplus budget and deficit budget. Balance budget is when government revenue equal to government expenditure. This situation normally does not exist.
Surplus budget is when anticipated revenue exceeds
expenditure. This situation normally happen when government reduces the expenses, increases the tax or both. Deficit budget is anticipated expenditure greater greater than revenue. This situation situation
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normally happen when government increase the expenses or reduce the taxes or implement both together. Deficit will financed by loan from financial institution. 1.2
Budget Policy
Budget is an annual planning which important to create economic growth and income distribution in steady financial framework. There are objective and the importance of budget policy presented in every year such as toward efficient economic management, controlling expenditure, economic growth, the price stability and controlling inflation. Generally, objective of annual budget is leads to stability and growth in economic and finance of nation. The aim of efficient economic management is to achieve the development goal. The important role of economic management to ensure financial position and balance of payment is steady. Private sector and non-government association have to play role as engine of role and government has to play role as supporter by providing good facilities in order to achieve good economic growth. Expenditure controlled is the main important target in budget policy. It stated that development expenditure and maintenance expenditure are increase rapidly which unable accommodated by revenue collected. There are many steps taken in order to reduce the government expenditure since year 1980. Besides that, there are step taken to absorb bank excess liquidity and stem consumer consumption expenditure. Price stability and inflation control are important goal in annual budget. Stable economic condition will lead to an increase in domestic demand which cause an increase in income and accent price increase and increase forecast inflation. The effort to stem inflation is taken by controlling price level in order to form price stability in market and encourage saving to attract money available in the market.
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Taxation and public expenditure are two element used in fiscal policy. The aim of fiscal policy implementation in budget is to achieve economic growth or remain the growth, increase production capacity; controlling price level and inflation pressure and ensure equitable distribution. Fiscal policy is implemented by restructuring tax system, update the existing tax incentive and erect capital market. 2.0
Budget Trends
Public sector spending in Malaysia includes spending of federal government; state government and. Public sector spending can be divided into two groups which are operating expenditure and development expenditure. Operating expenditure consists of service goods expenditure and transfer payments. The development expenditure is for model goods. The total expenditure of government Tahun
Jumlah perbelanjaan (RM million)
2009
206, 582
2010
204, 415
2011
229, 010
2012
249, 549
2013
244, 127 Source : www.treasury.gov.my
The table 1.1 shows the total public sector expenditure of Malaysia from 2009-2013. From the table we can see that the total expenditure of the government in public sector decreased by 1.04% from year 2009 to 2010. The expenditure shows an increasing trend from the year 2010 to 2012. The increase is about 22.07 %. By the year 2013, the total public sector expenditure decreased about 2.17%. Government allocated a amount of RM 264.2 billion for the expenditure in public sector for the current year, 2014. Page 4
2.1
Public Sector Spending
Operating expenditure is the expenditure of the Government or government recurrent expenditure for management and administration. This includes expenses for salaries (emoluments) civil servants, debt service, pensions and benefits, subsidies to producers and consumers, and grants and transfers to the State Government and statutory bodies. Government expenditure does not depend on the level of national income. While national income increased or decreased, government expenditure remains the same.
Source : www.treasury.gov.my Table 1.1 shows the governments operating expenditure from the year 2009 to 2013. The total operating expenditure increased rapidly from year 2009 to 2013, although the expenditure experiences fall in the year 2009 to 2010 and 2012 to 2013. Based on the table 1.1, the Page 5
government spent more on emoluments compared to the other criteria. The trend of expenditure on emoluments shows increase from year 2009 to 2013 with a increasing percentage of 37%. While, the expenditure on refunds and write-offs are the lowest among other expenditure. It shows an increasing trend from the year 2009 to 2012 and fall slightly from the year 2012 to 2013. The 2014 Budget will allocate a total of RM264.2 billion to implement programmes and projects for the well-being of the rakyat and national development. Of this amount, RM217.7 billion is for Operating Expenditure while RM46.5 billion for Development Expenditure. Under operating expenditure, RM63.6 billion is allocated for emoluments and RM36.6 billion for supplies and services. Meanwhile, RM114.5 billion is allocated for fixed charges and grants, while RM1.4 billion is for the purchase of assets. The remaining RM1.5 billion is for other expenditures. 2.2
Development Spending
Development expenses are expenses incurred to promote economic growth and social development. Development expenses include expenses to build schools, airports, and infrastructure. Typically, the level of government expenditure depends on the economic situation. When the economy goes into recession, the government will increase the amount of development expenditure to boost economic growth.
Page 6
Source : www.treasury.gov.my Based on table 1.2, the total development expenditure increased from the year 2009 to 2010 by 6.61% but it show a constantly decreasing trend from the year 2010 to 2013. The percentage in decrease from 2010 to 2013 is 20%. From the table above, we can conclude that expenditure for economic services are higher than other service sectors. In the budget allocation of 2014, government allocated a sum of RM46.5 billion for development expenditure. From the Development Expenditure of RM46.5 billion, a sum of RM29 billion is allocated to the economic sector. A sum of RM10.5 billion is allocated to the social sector for education and training, health, welfare, housing and community development. In addition, RM3.9 billion is allocated for the security sector. The balance of RM1.1 billion is for general administration and RM2 billion for contingencies.
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3.0
Public Sector Revenue
3.1
Tax Revenue
The current tax system in Malaysia is called the self-Assessment system (SAS).SAS was implemented in 2004 as a result of a tax reform aimed to streamline the tax-administration system. The self-assessment system requires tax-payers to determine their own tax liabilities and make payments accordingly. The government tax revenue is collected from two sources; namely the tax revenue and the nontax revenue. The tax revenue can be further divided into two categories; direct tax and indirect tax. There are five structures under the direct tax . First is income tax. According to the tax system in Malaysia income tax is defined as “a resident individual is subject to tax on income accruing in or derived from Malaysia and income received in Malaysia from outside Malaysia, while a non-resident individual is subject to tax on income accruing in or derived from Malaysia (Tax system in Malaysia, ASEAN tax system seminar, 2010) Section 4, income tax act 1967 (ITA 1967) classifies income that is subject to gains or profit from a business for whatever period of time carried on, gains or profit from employment dividends interest or discounts, rents, royalties or premiums and pensions, annuities or other periodical payments. Second is corporate income tax. It is defined as; a tax levied on the income of a legal entity. In Malaysia resident companies are subject tax on income accruing in or derived from Malaysia. Taxable incomes include gains from business dividends, interest and rentals, royalties, premiums and other gains and profits. Third is stamp duty. Stamp duty is a tax imposed on legal documents, usually for the transfer of assets or property. The transfer of property is only legal
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once the documents have been stamped. According to the Malaysian definition “stamp duty is imposed on legal, commercial and financial documents that are listed in the first schedule of the stamp Act 1949.documents subject to duties are called instruments” (Inland Revenue Board of Malaysia).The fourth category is estate duty. Estate duty is a tax levied on a person’s assets; it can include cash and non-cash assets. The tax is usually imposed for deceased person’s assets. Finally direct tax also includes Real property gains. It is defined as “a tax imposed on the chargeable gain obtained from the sale of property”. Chargeable gain is a profit that a person receives when he/she sells of a property”. The second tax category is indirect tax. It consists of first Import duties. Import duties are tax’s levied on goods imported into Malaysia. Duties are calculated based on complete shipping value. Duty rates vary between 0% and 50% and it averages 5%.However some goods are exempted from import duties for example electronic products and musical goods. Second is Export duties. Export duties are tax levied on goods exported out of the country. Export duty tax (revenue) was measured in 2010 at a rate of 1.65%.Third section under indirect tax is Excise duty. According to MIDA (Malaysian investment development authority) excise duties are levied on selected products manufactured in Malaysia which namely cigarettes, tobacco products, alcoholic beverages, playing cards, Mahjong tiles and motor vehicles. The last two tax categories under indirect tax are the sales tax and service tax, both of which substantially contribute to the annual tax revenue. In Malaysia sales tax are levied on manufacturers or importers. Licensed manufacturers are supposed to charge 10% sales tax on the value of their manufactured products. Under sales tax certain goods are exempted for example raw materials and machinery used in production. While the service tax is a tax imposed on specific services called taxable services. In Malaysia it is imposed on certain goods such as food, drinks and tobacco as well as professional and consultanc y services.
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The diagram below illustrates the trend in tax revenue collection from the year 1990 to 2013.It can be observed that the tax revenue collection gradually increases every year except for a few years which indicate negative trend. In this report the revenue collection from the years 2008-2012 will be analyzed.
In 2008 the Inland Revenue board Malaysia (IRBM) posted record revenue collections compared to previous years. The overall tax collection increased by RM15.948 Billion in 2008 from RM 74.703 Billion collected in 2007.This indicated a 21.35% increase in tax revenue. The increase in tax revenue was due to strong economic performance, favorable business conditions and increasing oil price. The IRBM collected a total of RM 90.65 billion in taxes in 2008.It is worth noting that this was direct and indirect tax collections. The graph below illustrates the IRBM revenue collection from 2004-2008.It can be observed that revenue collection gradually increased every year. Tax revenue collection rose by RM 42 billion from 2004-2008. The tax revenue for 2008 can be broken down into segments. It includes income tax (Company, individuals, petroleum, corporation, organizational, trust bodies and withholding tax)
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and other taxes such as stamp duty, Real property gains tax (RPGT), Labuar offshore business activity tax, and estate duty and business registrations. Furthermore the contributions of the various taxes varied differently. The biggest contributor to the total tax was company tax which contributed RM46.90 Billion/51.74%.Followed by petroleum tax (RM24.19 Billion/26.69%) and then individual tax (RM 14.35 Billion/15.83%).On the other hand the real property gains tax revenue declined by 60% from 2007 to 2008.This was because the real property gains tax (RPGT) was no longer imposed in 2007 however in 2008 the RPGT was imposed once again. The table below shows the revenue collection between 2007 and 2008. Table 1: Collection of Direct Taxes in 2008 and 2007
Source: www.tresury.gov.my In 2009 the total tax revenue received by IRBM was RM88.40 Billion.in comparison to 2008 the revenue decreased by RM2.25 Billion. This was due to the global economic crisis that started at the end of 2008.On the other hand the revenue collection in 2009 exceeded the government estimate of RM78.73 Billion (After tax refund).If the tax revenue is broken into segments, Company tax still accounts for a large portion of the revenue collection (RM 40.27 Billion/ 45.55%) followed by petroleum tax (RM 27.23 Billion) and individual tax of RM 15.57 Billion. However in comparison to 2008 company tax declined substantially by around 6.19% while petroleum tax increased by 4.11% and individual tax increases marginally by 1.79%. Page 11
In the aftermath of the economic crisis naturally the tax revenue collected in 2010 declined. Total gross tax revenue was RM86.50 Billion and this contributed 53.35% to total estimated government revenue. On the other hand the net direct tax revenue (deduct tax refund fund of RM6.96 Billion) exceeded government estimates of RM76.16 Billion).The gross tax collection from 2008-2010 has been steadily declining while the percentage of gross collection in Federal Government revenue has been marginally declining. If we attempt to analyze the revenue collection by components, the company tax revenue was RM 43.80 Billion which accounts for 50.64% of total tax revenue. However it is worth noting that company tax revenue has been declined from 2009 to 2009 and then increased substantially in 2010.Company tax decreased from RM 46.90 Billion to RM 40.27 Billion and then increased to RM43.80 Billion. The petroleum tax revenue which is one of Malaysia’s main export commodities was RM 18.71 Billion. The petroleum tax revenue steadily declined from 2008 to 2010 due to two reasons, first there was a drop in crude oil and natural gas price and second, the tax assessment method for upstream petroleum companies changed. Individual tax revenue collected in 2010 was RM17.80 Billion. Other tax revenue collections were corporate tax (RM 0.38 Billion) and stamp duty (RM 4.20 Billion). The trend of low tax revenue collection changed in 2011.The IRBM posted record tax revenue collections. The tax revenue collected was recorded at RM109.609 Billion, which was the highest in history. The 2011 tax revenue contributed 59.11% of the total estimated federal government revenue. Most of the tax segments recorded an increase in tax revenue compared to 2009 and 2010.The company tax revenue which is still the largest segment by revenue collection was RM 55.08 Billion, it increased from RM43.80 Billion in 2010.Furtheromore the petroleum tax revenue substantially increased from RM 18.71 Billion in 2010 to RM 27.75 Billion in
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2011.The individual tax revenue also increased marginally from RM 17.80 Billion in 2010 to RM 19.38 Billion in 2011.Other tax segments that increased was Stamp duty, withholding tax and real property gains tax. The tax revenue collection in 2012 surprisingly exceeded that tax collection in 2011.Revenue collection was RM 124.7 Billion. This figure exceeded the government revised estimate of RM123.8 Billion. Furthermore from 2011 the tax revenue increased by 13.8%.This high revenue comes at an appropriate time when the government is trying to reduce its fiscal deficits. In conclusion the tax revenue collection (both revenue and non-tax revenue) illustrate a gradual increase over time from 1990 to 2013.Revenue declined from 2008-2010 due to the effects of the financial crisis, however from 2011 it has improved markedl y. 3.2 Non-Tax Revenue
The other tax structure under tax revenue is the Non Tax revenue. It includes fees for issue of licenses and payment, fees for specific services, proceeds from the sale of government assets, rental of government property, bank interest, returns from government investments and fines and forfeitures. 4.0 Public Sector Expenditure 4.1 Federal Government Debt
The federal government debt is defined as the total amount of money that a federal government owes to creditors. Basically, there have two type of federal government debt which is domestic debt and external debt. Indeed, a federal government debt exists as a result of federal government shortfalls, or deficit budgets in which the government's expenses exceed its revenues. However, there is a difference between deficit and debt which deficit does not mean as debt.
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In Malaysia, the Minister of Finance will present the annual budget in parliament in a particular date to explain annual economics report and the allocation funds for public sector expenditure and the expected revenue for next year. The annual budget presentation in Malaysia frequently tabled at the end of the year. Indeed, if the deficit budget was implemented, one of the financing resources that federal government will be loan. Therefore, the loans have been created the federal government debt. 4.2
Trends of Federal Government Debt
In the early 90's, the economy of Malaysia is booming with sustainable economic growth. In the same time, the trend of federal government debt declined from the early 90's at a level of around 80% relative to GDP until the lowest in 1997 at 32%. Meanwhile, the federal government debt as a percent of GDP, also known as debt-to-GDP ratio, is the amount of national debt a country has in percentage of its Gross Domestic Product. It is one of the key indicators that used to measure the ability of payback of a country. The graph below show the overall trends of federal government debt in a certain period.
90 80 70 60
P D 50 G f o t 40 n e c r e 30 P 20 10 0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Year
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Based on the graph above, we found that the federal government debt to GDP was decreasing significantly started from the year 1990 until year 1997. However, the debt was slightly increased after year 1997. This is because the Southeast Asian economic crisis was happening at year 1997. The Southeast Asian economic crisis in 1997 induced the government debt increased consistently since the government had to implement the deficit budget to boost the domestic economic downturn. Therefore, the federal government debt turn back from as low as 32 % (1997) to the level of around 53% in 2009. In addition, the most significant changes of federal government debt to GDP was year 2009 which the changes of around 29.48% from year 2008 to year 2009. This is due to the global financial crisis happened in year 2008. Basically, the federal government will borrow the domestic loan compare to external loan. In additional, both of the domestic debt and external or foreign debt also exists short-term debt and medium and long-term debt. Generally, the short term debt is defined as the debt which had one year period and the medium and long-term debt is involve more than one year. The table 2.1 below shows the total of federal government debt for a certain latest years.
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Table 2.1 Total of Federal Government Debt 2008 – 2013 Central Government Debt
Unit Description
2008
2009
2010
2011
2012
2013
Current liabilities, total
RM million
306,437
362,386
407,101
456,128
501,617
539,858
Short-term debt
RM million
4,320
4,320
4,320
4,320
4,320
4,320
Medium and long-term debt
RM million
302,117
358,066
402,781
451,808
497,297
535,538
Domestic debt
RM million
286,121
348,600
390,356
438,025
484,769
523,095
Short-term debt
RM million
4,320
4,320
4,320
4,320
4,320
4,320
Medium and long-term debt
RM million
281,801
344,280
386,036
433,705
480,449
518,775
Foreign debt
RM million
20,316
13,787
16,746
18,105
16,848
16,763
Short-term debt
RM million
0
0
0
0
0
0
Medium and long-term debt
RM million
20,316
13,787
16,746
18,105
16,848
16,763
USD
RM million
12,726
7,072
10,156
11,157
10,782
11,120
Yen
RM million
7,070
6,586
6,500
6,874
6,013
5,193
Other
RM million
520
129
90
74
52
450
RM million
69,236
84,315
96,907
117,108
143,109
156,808
Foreign debt by currency
Debt guaranteed by Federal Government
(Source: Bank Negara Malaysia)
According to the table, the total of federal government debt from year 2008 to year 2013 shows a positive increasing trend. The total debt for year 2008 is RM 306,437 million and increased to RM 539,858 million in year 2013. Generally, up to fourth quarter of year 2013, the federal government debt in total has reached around RM 540 billion or approximately 54.8% of nominal GDP. With the constants trend of short-term debt, we found that the increasing of total federal government debt is due to loan of medium and long-term debt. Besides that, we also found that the domestic debt which is primarily denominated in ringgit, accounts for over 90% of total debt for every years. The ratio of foreign holdings of federal government debt has been Page 16
rising steadily since 2005, but it is still at a fairly low level. Meanwhile the federal government external debt will not significantly affect the whole econom y of Malaysia. According to the Malaysia Economic Report 2013/2014, the government will ensure that the debt level remains sustainable through sound macroeconomic policies, prudent debt management strategies as well as strict adherence to fiscal rules and regulation. Although the debt level has remained high, especially since the 2008 global financial crisis, debt servicing capacity is within the prudent limits. In additional, the second thrust of 2014 Malaysia Budget presentation is to strengthen the fiscal management. To enhance the budget management, the Government established the Fiscal Policy Committee (FPC). Meanwhile, the role of Fiscal Policy Committee (FPC) is to strengthen the Government’s financial position, ensure fiscal sustainability and long-term macroeconomic stability with the aim of achieving a balanced budget by 2020. Besides that, the Government will also ensure that Federal debt level will remain low and not exceed the debt ceiling of 55% of GDP as mentioned in Budget 2013. 4.3
Loan Resource
Loan resources differ according to the types of internal and external loan. Internal loan resources normally get by issue government bonds or securities or borrow from others loan resources in country. The federal government can get loan by issued government securities, treasury bills or investment certificates. Government security is an agreement contract between government and borrowers. It is a long-term loan with maturity period more than one year. Government securities issued with face value and interest is paid for every securities holder. For Malaysia, the main loan resource is Employees Provident Fund (EPF) who contributes almost 51% of national debt. Treasury bills are short-term loan with maturity period less than
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one year. Treasury bills are issued by Malaysia's Central Bank. It is issued with discount price on its face value and Malaysia's Central Bank will pay at face value price when it reached mature period. Commercial bank is the biggest loan resources for government treasury bills. Investment certificate is release purposely for financial institutions such as Bank Islam Malaysia Berhad, Bank Muamalat Malaysia Berhad, Syarikat Takaful Malaysia Berhad and Lembaga Tabung Haji. It is sells on face value and dividend is paid on mature period which is one year or more than one year. Besides that, internal loan resources can also get by borrow from commercial banks, EPF, and others domestic borrowings.
Source: Economic Report 2013/2014
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From the Economic Report 2013/2014, we can see that loan from treasury bills is almost the same for 2009 to 2013 which is RM4320million. While for the investment certificates, it is increasing sharply from 2009 to 2013, which is increase about 185% from RM56000million to RM159500million. Government securities also increase from RM242270million in 2009 to RM294931million in 2013. Domestic borrowings increase from 2009 to 2011 but started to drop from RM45992million in 2011 to RM44799million in 2012 until RM44100 in 2013. External loan resources usually come from external market loans. Loan is collected by selling government securities in the international financial markets such as Tokyo, London and New York. Syndicated loan from international market especially from develope d country such as United States, Japan and Germany is also a kind of loan resources. A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial banks or investment banks known as arrangers. External loan resources can also be get through external project loan. External project loan is a loan given purposely to support particular development projects that require large amount of expenditures. Asia Development Bank and World Bank are the two main resources for external project loan. 4.4
Nation Debt
National debt is the sum of public sector’s external debt (included of federal external debt and NFPEs) and private sector’s external debt. Non-Financial Public Enterprises (NFPEs) are resident non-financial corporations or quasi corporations that are government owned or controlled. In Malaysia, external debt is a part of the total debt that is owed to creditors outside the country. Federal external debt is either long-term or medium-term funds borrowed from foreign lenders. This can include private sources, other countries, and the International Monetary Fund (IMF). External debt is created by fulfilling public sector funding included federal
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government, development agencies, and also Non-Financial Public Enterprises (NFPEs). A big portion of national debt was purposed for public sector funding, including federal government and NFPEs who always took away big percentage from national debt. Private sector funding had also increase the external debt. Increasing in private sector funding reflects the increasing of development projects launched by private sector. Dependency on external funding had worsened Malaysia’s national debt. Until 3rd quarter of 2013, Malaysia’s national debt had reached RM306632million.
Source: Economic Report 2013/2014
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From the external debt part from Economic Report 2013/2014, seems like United States is Malaysia’s only external market loans resources since there are no statistic numbers for Japan and United Kingdom. Loans from US had increased from 2009 to 2011 but then decreased from 2011 to 2013 which is RM10403million to RM9882million. While for the external project loans, it began to decline and it reached RM6571million in 2013.From Budget 2014, we can clearly see that borrowings made up 14.5% which is about RM38011million from the RM262151million of total revenue of Malaysia 5.0
Public Sector and Privatization
Privatization is the opening up of an industry that has been reserved for the public sector to the private sector including governmental functions like revenue collection and law enforcement. Privatization can be explained by transfer of ownership from the public to private sector, transfer of management of an enterprise from the public to private sector and withdrawal of state from an industry or sector partially or fully. The aim of privatization is to achieve higher micro-economic efficiency and foster economic growth, as well as reduce public sector borrowing requirement through the elimination of unnecessary subsidies. Reasons for privatization include reducing the burden on government; strengthen competition, to improve public finances, to find infrastructure growth, accountability to shareholders, to reduce unnecessary interference and more disciplined labor force. Privatization in Malaysia The wave of privatization in Malaysia began in 1983, when Prime Minister Mahathir Mohamad publicity government's intention to initiate the privatization policy. This was followed by the publication of Privatization Guidelines by the Economic Planning Unit (EPU) of the
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Prime Minister's Department in 1985. These guidelines are the official document on privatization. In February 1991, the Privatization Master Plan (PMP) has been announced. This plan set out the country's privatization policies. Privatization continues to be an important part of the overall strategy of economic development. During the Seventh Malaysia Plan period, the privatization programme contributed towards the growth and development of the economy, in line with the private sector-led growth strategy and the Malaysia Incorporated Policy. At the same time, the programme contributed towards promoting bumiputera participation in business and commerce. In implementing this programme, emphasis was placed on expanding capacities to develop the necessary infrastructure required to effectively promote the development of industries and services and provide better comfort and access to users. In formulating its privatization policy, the government aimed to achieve the following objectives such as to relieve the financial and administrative burden of the government, to improve efficiency and increase productivity, to facilitate economic growth, to reduce the size and presence of the public sector in the economy and to assist in meeting the national development policy targets The privatization program continued during the Eighth Malaysia Plan as it has contributed to increasing the efficiency and productivity of the privatized entities and, consequently, to benefit the public and spur economic development. Emphasis will be given to projects that have a viable high multiplier effect and at the same time, meet social objectives. Steps will be taken to strengthen and streamline the implementation process as well as the regulatory framework, to ensure the effectiveness of the privatization program. In the Ninth Malaysia Plan, the Government and the private sector need to work closely together to ensure continued economic growth. The implementation of the privatization program
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over the past two decades has provided a solid foundation for cooperation between the Government and the private sector. The privatization program also contributed to the increase in private sector participation in the economy and in turn makes the private sector the engine of growth of the economy. However, there are some aspects of the privatization program will be streamlined and improved to make it more effective. In the Tenth Malaysia Plan, new wave of privatization with 52 projects worth at about 62.7 billion. Company under the Ministry of Finance Inc such as Percetakan Nasional Bhd, CTRM Aero composites, Nine Bio Sdn. Bhd will be privatized. Under the budget 2014, the government will continue to provide a conductive environment to attract more domestic and foreign investment. The government’s efforts have led to an increase in privatization investment. For example, the share of private investment to GDP has grown from 12.4% in 2010 to 16.7% currently (Budget 2014). Private investment is expected to increase further to RM189 billion or 17.9% of GDP, particularly in oil and gas, textile industry, transport equipment and real estate development.
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Reference Bajet . Retrieved from http://www.treasury.gov.my/ Bank Negara Malaysia. (2014, April 30). Central Government Debt . Retrieved from Economic and Financial Data for Malaysia. Chamhuri Siwar, Suratman Kastin, & Norshamliza Chamhuri 2005, Ekonomi Malaysia, Edisi keenam, Longman.P.Jaya. International Monetary Fund. (2011). General government gross debt (Percent of GDP). Retrieved from World Economic Outlook Database. Ministry of Finance Malaysia. (2013). Public Sector Finance. Retrieved from. Economic Report 2013/2014. Unit, E. P. (2010). Rancangan malaysia kesepuluh (rmke-10). Economic Planning Unit .
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Appendix 1 Hutang luar negeri yang belum dijelaskan / External debt outstanding Hutang jangka sederhana dan panjang1 / Medium and long-term Hutang jangka pendek2 / Short-term debt2 khir tempoh
debt1
Jumlah
Nisbah
Kerajaan Persekutuan /
khidmat
Federal Government Sektor
bayaran6 (%)
Jumlah
Nisbah
PABK3 swasta4
Jumlah
Sektor
Sektor bukan
perbankan5
bank6
Banking
Non-bank
sector 5
sector 6
Jumlah
khidmat bayaran7 (%)
End period External
debt
service
ratio6
External debt Private
Total
Total
Total
service ratio7
NFPEs3
Total sector 4
(%)
2010
2011
2012
2013
(%)
1Q
219,191
8.1
147,129
12,737
0.4
72,259
62,133
72,061
64,061
8,001
2Q
222,158
7.2
149,919
17,092
0.0
72,342
60,485
72,239
64,610
7,629
3Q
227,414
8.6
146,689
16,364
0.2
71,536
58,788
80,726
70,639
10,087
4Q
227,072
6.7
147,653
16,746
0.1
70,383
60,524
79,420
67,982
11,438
1Q
233,476
10.1
142,352
15,935
0.3
65,015
61,402
91,124
78,905
12,220
2Q
241,533
8.4
149,265
16,167
0.0
67,373
65,726
92,267
81,070
11,197
3Q
263,283
12.4
157,898
18,089
2.8
70,457
69,352
105,385
93,317
12,068
4Q
257,364
10.3
153,611
18,105
0.0
69,647
65,859
103,753
92,302
11,451
1Q
249,377
8.4
148,320
16,863
0.2
67,357
64,101
101,057
90,002
11,055
2Q
270,447
12.2
160,316
17,911
0.2
69,405
73,000
110,131
98,938
11,193
3Q
259,648
10.0
159,127
17,252
0.1
67,571
74,304
100,521
88,767
11,755
4Q
252,752
9.8
159,788
16,848
0.2
66,034
76,906
92,964
80,488
12,475
1Q
264,437
10.4
163,195
16,142
0.3
65,619
81,434
101,243
89,118
12,125
2Q
284,683
11.1
170,256
16,453
0.2
65,766
88,036
114,428
101,954
12,474
3Q
306,632
10.4
186,330
16,929
0.1
75,906
93,494
120,302
106,866
13,436
Source: Treasury and Bank Negara Malaysia
Page 25
Appendix 2
Source: www.treasury.gov.my
Page 26
