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Showing posts with label Trade. Show all posts
Showing posts with label Trade. Show all posts

Tuesday, March 5, 2024

We choose our own friends, China remains a key ally

MELBOURNE: As a “fiercely independent” nation, Malaysia will not be dictated to by anyone over its relations with China or any of its important neighbours, says Datuk Seri Anwar Ibrahim.

“While we remain an important friend to the United States, Europe and here in Australia, that should not preclude us from being friendly to one of our important neighbours, specifically China,” the Prime Minister said.

“We are fiercely independent. We do not want to be dictated to by any force.

“If they have problems with China, they should not impose them upon us. We do not have a problem with China,” Anwar said in a joint press conference with Australian Prime Minister Anthony Albanese during his official visit to the country yesterday.

Asked about how Sinophobia manifested itself and its effect on the region, Anwar replied that Malaysia upholds an “open trading policy to encourage investments from foreign countries.”

“They have levied some criticisms against us for giving additional focus to China. Right now, China seems to be the leading investor in Malaysia.

“Cumulatively, it’s still the United States of America,” he added.

On Feb 27, Anwar had decried “China-phobia” among US and Western allies in an interview with the Financial Times in the United States, questioning why Malaysia would “pick a quarrel” with China, its largest trading partner, in response to US criticism of Malaysia’s ties with Beijing.

“Why must I be tied to one interest? I don’t buy into this strong prejudice against China, this China-phobia.”

Calling China an important neighbour, he said Malaysia would give priority to enhancing relations with Beijing in terms of trade, investment and culture.

Anwar, who is in Australia with his wife Datuk Seri Dr Wan Azizah Wan Ismail and several ministers and leaders, will attend two major programmes – the Malaysia-Australia Annual Leaders’ Meeting and the Asean-Australia Special Summit.


Warm welcome: Anwar shaking hands with Albanese at Government House in Melbourne, Victoria. Looking on is Governor of Victoria, Margaret Gardener. — BernamaWarm welcome: Anwar shaking hands with Albanese at Government House in Melbourne, Victoria. Looking on is Governor of Victoria, Margaret Gardener. — Bernama

On the Palestinian-Israeli conflict, Anwar lauded the Syrian government for supporting the call for a ceasefire and enhancing media efforts in Gaza.

“The consensus is in calling for a ceasefire and good humanitarian support, and probably avoiding the contentious issues between Palestine and Israel. At least for now, it is to cease fire and provide humanitarian assistance.”

Albanese also reiterated his call to end civilian suffering through a humanitarian ceasefire, the release of hostages, and a two-state political solution for Palestinians and Israelis to live with security and stability.

On the 10th anniversary of flight MH370, which went missing on March 8, 2014, Anwar said Malaysia would not hesitate to renew the search for the aircraft if there was “compelling evidence.”

“We will be glad to reopen (the search) because I don’t think it’s a technical issue. It is an issue affecting the lives of people, and whatever needs to be done must be done,” he said.

Both Anwar and Albanese also agreed that Malaysia and Australia would like to achieve more growth in trade and economic relations, especially in green energy and education.

“There’s a real potential for further institutional investment from Australia into Malaysia as well, with universities and tertiary education being a real prospect.

“Australia remains an important supplier of LNG to Malaysia. We have so much in common in our economies that is quite complementary,” Albanese said.

He also said Australia was focused on this region despite receiving critical commentary about it sometimes.

“We make no apologies for our focus being on South-East Asia in the Indo-Pacific because this is where our future economic prosperity will be determined.

“We’re living in this region, the fastest-growing region of the world. What that presents is an enormous opportunity for both our nations,” he said.

Anwar replied that Malaysia was committed to facilitating all avenues that both countries could explore – including renewable energy, green technology, digitalisation, food security and education opportunities involving top Australian institutions.

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Saturday, December 16, 2023

Goodbye 2023; Hello 2024

 


2023 will be remembered as a tipping point year when almost all mega-trends of finance, technology, trade, geopolitics, war and climate heating showed signs of acceleration in speed, scale and scope.


You can call this a state of permacrises, a series of cascading shocks that seem to be building up to a bigger shock sometime in the future.

In finance, the year began with the collapse of Silicon Valley Bank on 10 March 2023, followed by Signature Bank. The Fed and FDIC (Federal Deposit Insurance Corporation) acted fast to guarantee all deposits to stop what is now called “Twitter Deposit Runs” against banks. In Switzerland, Credit Suisse was taken over by UBS on 19 March, after the bank lost nearly US$ 75 billion worth of deposits in three months. Swiss financial credibility was hurt when Credit Suisse AT1 (Tier One bonds) bond-holders became outraged that they should suffer write-downs ahead of equity holders.



Although prompt action by the Fed and Suisse financial authorities averted global contagion and restored calm to financial markets, the Fed hiked interest rates four times in 2023 to 5.25-5.5% to tackle inflation. This month, gold prices touched a record high of US$2,100 per ounce, signalling anticipated inflation abatement, but escalated geopolitical tensions.




In technology, 2023 marked the seismic arrival of generative artificial intelligence (AI), through the public launch of ChatGPT in November 2022. Commercialized AI is considered the next big thing after the internet, sparking off a US tech stock rally, led by the Magnificent Seven companies in AI-related software and hardware. The rally averted a year of portfolio losses in financial markets hurt by interest rate hikes.

In trade, the latest UNCTAD Global Trade Update found that global trade will shrink by 5% to US$ 30.7 trillion in 2023, with trade in goods declining by nearly US$2 trillion, whereas trade in services would expand by US$500 billion. The outlook for 2024 is pessimistic because trade issues are now geopolitical, rather than purely market-driven. Global supply chains are either decoupling or de-risking to avoid possible sanctions which have been imposed for geopolitical reasons.




Geopolitics dominated headlines in 2023, as diplomacy played second fiddle to the militarization or weaponization of everything.

The biggest risk faced by businesses today is national security risk, in case companies or financial institutions are caught in geopolitical tit-for-tat arising from binary differences in values. Where national security is concerned, the business must bear all the costs of supply chain restructuring with no questions asked, or face possible existential shutdowns.

War broke out in Gaza/Israel In October with a scale of civilian slaughter more horrific and intense than the Ukraine war, which began in February 2022. The latest war count to June 2023 by The Armed Conflict Survey 2023 (1 May 2022–30 June 2023), showed global fatalities and events increasing horrendously by 14% and 28% respectively.



The authoritative Stockholm International Peace and Research Institute (SIPRI) reported that 56 countries were involved in armed conflict in 2022, 5 more than in 2021. Three (Ukraine, Myanmar and Nigeria) involved 10,000 or more estimated deaths, with 16 cases involving 1000–9999 deaths. Expect more conflicts when natural disasters hurt food, water and energy supplies.




As 100,000 or so delegates leave the United Arab Emirates at the end of the COP28 this month, the UN painted an upbeat tone that the Conference marked the “beginning of the end” of the fossil-fuel era.  Scientists confirm that we have already passed the point of being able to limit carbon emissions for the average global temperature to remain below 1.5 degrees Celsius above pre-industrial levels.   Most studies show that if most governments fail to meet their current commitments to NetZero, the planet will be struggling with temperatures above 2 degrees Celsius, meaning more natural disasters, rising seas and/or migration/conflicts.  Every three weeks, the US has experienced at least one natural disaster costing more than $1 billion in damages.  

As one cynic said, natural disasters are where the rich just pay in money, but the poor pay in their lives.

Putting all these mega-trend micro-disasters together suggests that a mega-system disaster may be on the cards. Historically, these seismic-scale disturbances are settled through a massive recession, like the 1930s Great Depression, or wars, which wipe out debt and make everyone poorer.

So far, the world has neglected to address these looming issues by either denying or postponement - printing more money and incurring more debt. Painkillers do not fix structural imbalances.

As my favourite poet TS Eliot said, the world ends not with a bang, but with a whimper. The world is in permacrises, with no one fully in charge. Democratic governance is in flux when no one can agree on the problems, let alone the solutions.

2024 will see some decisive but messy elections, especially in the US where both Presidential candidates may either be impeached or convicted by then. This cannot auger well for everyone, because 2023 marks the turning point when the US lost the respect of the Global South over its catastrophic handling of Ukraine and Gaza, both of which will be fought to the last Ukrainian or Palestinian. The morality of allowing other people to fight and die for one’s benefit shows not hypocrisy but hegemonic-scale cowardice.

The bottom line is that there is no shortage of technology or money to deal with the global existential threats of climate change and social imbalances. We cannot align policy intent (what politicians say they will do) with the reality that current policies are not delivering.

If man-made or natural calamities are looming, do we mitigate or adapt? On a single planet, we can run but not hide. So each of us must decide to do what we can, rather than relying on politicians to fix themselves, let alone our problems.

There is a wise saying about Christmas charity: give with warm hands. Do that now, or we will be giving with boiled hands or none at all.

Best wishes for 2024.

Andrew Sheng, Asia News Network



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Wednesday, May 24, 2023

The Bankrupting of America

 




 

US debt ceiling impasse and a default’s impact on Malaysia remains a concern

 

US debt issue may affect global demand


PETALING JAYA: With the United States currently being embroiled in a debate as to whether it should raise its debt ceiling before the June 1 deadline, concerns over the impact on Malaysia of the world’s largest economy defaulting on its borrowings were understandably raised among certain quarters.

This is all the more relevant when one considers the fact that the United States is Malaysia’s third-largest trading partner, with World’s Top Exports reporting that Singapore, China, the United States, Japan and Hong Kong contributing to more than half of Malaysia’s export revenue – 51.8% to be exact – in 2022.

The website also revealed that the United States accounted for US$38bil (RM173.5bil) or 10.8% of Malaysia’s export income in 2021, again behind only Singapore at 15% and China 13.6%.

Thus, it is not difficult to understand the oft-used adage, “When the US sneezes, the world catches a cold”, including of course, Malaysia.

Chief economist for HSBC Global Research Frederic Neumann had remarked on Monday that should the debt ceiling issue be drawn out of proportion, it could lead to a depression of US growth, and adversely impact Malaysian exports stateside, possibly even reducing global demand because of an increase in financial uncertainty.

The current debt ceiling is known to be at US$31.4 trillion (RM143.4 trillion), and reports from yesterday indicated that a resolution could be imminent.

Shedding more light on the matter, Centre for Market Education chief executive Dr Carmelo Ferlito said the debt ceiling can be raised again, but only if it can be voted through the House of Representatives, which has a Republican majority.

“The Republicans are trying to use the deadline to pressure President Joe Biden to agree to spending cuts.

“On April 26, the House approved a bill to raise the debt limit by US$1.5 trillion (RM6.85 trillion), but only on the condition that spending would be cut to 2022 levels and then capped at 1% growth per year,” he told StarBiz.

A simple analogy to illustrate the ceiling standoff is the case of a parent providing a teenage child with a credit card.

If the teenager exceeds the spending limit, and asks the parent for an extension of credit, it is only natural for the parent to go over the spending habits of the child before deciding to provide more credit, which has to be repaid.

If the ceiling is not raised and the US officially defaults, Ferlito said the consequences for other economies – including Malaysia – should be looked at more in the light of a general financial turmoil that the default could cause rather than the more immediate link with American bonds that firms or governments may have. 

“We do not see direct repercussions on Malaysia; rather, we foresee indirect effects in case of (a US) default, coming from a global financial turmoil,

He explained: “We do not see direct repercussions on Malaysia; rather, we foresee indirect effects in case of (a US) default, coming from a global financial turmoil.

“If there is a default, which is doubtful, there will be a financial shock and the entity of such a shock will determine how much it would impact Malaysia.”

He elaborated that a potential default and its effect on an exporting country like Malaysia can be seen as two separate phenomena, a sovereign debt default; and the business relationship between private entities.

Ferlito added: “Even if the US defaults, private companies can still transact independently from the scale of the mutual business relationship. What we have to fear more are the indirect consequences.”

Economists at Coface Services South Asia-Pacific Pte Ltd, Bernard Aw and Eve Barre, believe a breach in the debt ceiling would result in outlay cuts currently funded with borrowing while the US dollar would weaken, elevating yields.

“Such a default would also have an impact on global financial markets, which rely on the dollar as the world’s primary reserve currency and as a safe asset.

“For Asian exporters, a weakening of the dollar against their currencies would dampen their competitiveness, including for Malaysia as the United States represents its third-largest export market up to 2022,” they told StarBiz.

Although acknowledging that a negative impact on the US economy from reducing public spending would depend on the extent of those cuts, they pointed out that if an agreement leads to deep spending decreases, economic growth for the United States could be slower than the already sluggish 1.2% that Coface is forecasting for 2023.

Aw and Barre opined: “This would have a direct impact on Malaysia by reducing US demand for Malaysian goods but also on foreign investment.

“In 2021, the United States was the first source of foreign direct investment flows to Malaysia, accounting for roughly a third of the total.”

On the flipside, they projected that sharp cuts in US public spending are unlikely to be approved by the Senate, as it is controlled by the Democrats.

Meanwhile, approaching the problem from an investment perspective, chief investment officer for Tradeview Capital, Nixon Wong, echoed the economic view that a US default would have global ripple effects, including on the FBM KLCI.

“A default on US federal debt would disrupt imports of electronics and manufactured goods from Chinese factories to the United States, resulting in slower growth of orders in the entire supply chain that includes Malaysia.

“Reduced spending in the United States would lead to slower aggregate demand and import growth globally,” he said.

The effect could likely be seen on export-oriented companies on the local bourse, he said, including manufacturers of electrical and electronic and rubber products, as well as in the producers of metal, optical and scientific equipment.

He added that although Malaysia’s trade volume with the United States may be smaller compared to China, the repercussions from reduced US spending would still impact Malaysia’s exports, whether directly or indirectly.

History has shown that American political leaders have always managed to raise the debt limit before it becomes a crisis, and it is likely that this pattern will continue, Wong said.

“While there are debates and partisan divisions in Congress, it is expected that Republicans will seek spending cuts before supporting the raising of the debt ceiling.

“After all, the main agenda is to prevent a catastrophic event or severe fallout in the United States and global financial markets,” he observed. 

By KEITH HIEW

Source link

 

US President Joe Biden touted that the debt-ceiling deal will help the US avoid economic collapse, but experts warn that the US debt-ceiling crisis is a systemic problem that will erupt periodically, and that rising US debt is severely undercutting the credit of US assets and status of the US dollar.
 
 
 

 US urged against passing risks to world amid growing chance of a US default

A Chinese official on Tuesday warned of the significant spillover effect of US domestic policies and urged Washington to avoid passing on domestic risks to the rest of the world just to protect its own interests. The comment came after US leaders failed to reach a deal on the debt ceiling issue, with the deadline to avert the first-ever default approaching rapidly.

 

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Global de-dollarisation fast underway; US Printed More Money in One Month Than in Two Centuries, US$ is fast becoming Banana Currency

Sunday, April 9, 2023

'Dedollarisation' is feasible

 

CLICK TO ENLARGE

 “This is all part of a broader discussion of possibilities for reducing the use of the dollar. This discussion is not new and has happened in the past but it appears to be more serious now and the actual changes are taking place,” - Prof Geoffrey William

Of late, the hot topic that is rapidly gaining pace is many countries, including Malaysia, are mulling the idea of reducing their trade dependency on the US dollar.

Prime Minister Datuk Seri Anwar Ibrahim has also lent heavy support to the thought of reducing Malaysia’s dependency on the greenback in terms of attracting foreign direct investments into the country, as well as in bilateral trades not involving the United States.

This came as Anwar announced on Tuesday that investments worth about RM170bil by China-based companies would be kicking off next month.

The prime minister has also last week proposed the setting up of an Asian Monetary Fund (AMF), stressing the need to lower reliance on the greenback as well as the US-backed International Monetary Fund (IMF), an idea that he himself reported has been well received by Chinese President Xi Jinping, who is open to discussing its implementation.

According to Geoffrey Williams, economics professor at Malaysia University of Science and Technology (MUST), what Anwar was saying is in line with a growing group of international leaders seriously questioning the role of the dollar and the US/European Union systems, hence the prime minister’s comment is a change of tone with possible action points.

“This is all part of a broader discussion of possibilities for reducing the use of the dollar. This discussion is not new and has happened in the past but it appears to be more serious now and the actual changes are taking place,” Williams told StarBiz.

He concurred with Anwar’s view that bilateral trade between two nations could use the currencies of the countries involved instead of the dollar, calling it “feasible” and is in fact growing in popularity.

“Most commodities are priced and traded in dollars but direct sale of oil between Russia and China as well as India is circumventing that arrangement.

“There is an increasing probability this will extend to more countries and more commodities,” Williams said.

Some parties have even suggested that Anwar may not be taking any sides in the global balance of power between China and the United States, despite his preference for dollar independence.

However, uneasiness remains on the geopolitical implications of the suggested move and how it will affect relationships between countries such as Malaysia and the United States as well as its allies.

While acknowledging such concerns, Williams said: “At the moment, many countries are understandably questioning whether the dollar dominance is beneficial to them and if better exchange arrangements could be found.”

Meanwhile, economist and chief executive at Centre for Market Education, Dr Carmelo Ferlito, said that while countries can ponder over better options in a multipolar world, alternatives need to be weighed in with painstaking care.

Ferlito said the appearance of the euro in 1999 was met with a warm welcome since it forced the dollar to face a competitor characterised by stronger monetary discipline, and that the emergence of something new in the East, if properly conceived, could strengthen the path towards monetary stability.

However, he added: “If global currency competition were to move in the right direction, the path will remain incomplete without an actual competition between currencies within countries.

“A competition that enables individuals to choose the currency to be used for their daily transactions, favouring the emergence of a virtuous competition among currencies toward stability.

“Our point is thus that the new and vibrant developments in the international monetary scene can be a source of benefit – rather than spawn geopolitical tension – only if accompanied by a true opening of national economies to competition among available currencies. 

A novel Asean or BRICS (Brazil, Russia, India, China and South Africa) currency could become a strong alternative

“In this way, a novel Asean or BRICS (Brazil, Russia, India, China and South Africa) currency could become a strong alternative not as the result of a political will of power but simply as a consequence of market competition.”

On the setting up of an AMF, MUST’s Williams said such an idea is definitely attainable but would require participation across many Asian countries, especially to provide the finance and to agree to the terms on which access to that finance is made available.

As such, he remarked that it is not just a financial matter but also a geopolitical one.

“The main issue is who will fund the AMF and what will be the contribution rates for each member.

“It is likely that most will come from China, unless Japan and South Korea joins in. Otherwise most Asian countries are too small to contribute much.

“Ultimately, this will be driven by economic cost-benefit considerations and whether non-aligned countries like Malaysia can maintain good relationships with all parties without using the dollar,” he noted.

On the other hand, the move to bilateral currencies for trade and investment between two countries, while feasible, would be more at risk to exchange fluctuations and liquidity issues, Williams said, adding that this could be improved by a switch to multiple currency options.

Of note, and on something that has not been touched by Anwar, the economics professor said the dollar still provides stable, reliable and secure financial systems such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

“Cybersecurity is essential and the questions of geopolitical stability also arise but these may not be solved by breaking up international systems into smaller regional systems,” he said.

There certainly has been an influx of recent activities geared towards reducing the use of the dollar in international trade, such as the discussions between Brazil and Argentina to create a common currency or Saudi Arabia declaring its openness to trade in other currencies other than the greenback for the first time in 48 years.

But the fact that the International Monetary Fund data shows central banks worldwide are still holding about 60% of their foreign exchange reserves in dollars as at the fourth quarter of 2022 literally means it is extremely unlikely the currency would be losing its status as the global reserve unit anytime soon. 

Source link

 

Crisis jolts Wall Street bankers

 

Crisis jolts Wall Street bankers already resigned to tough ...

 https://www.thesundaily.my/business/crisis-jolts-wall-street-bankers-already-resigned-to-tough-job-market-LK10837950

 

UPDATE 1-Crisis jolts Wall Street bankers already ...

 

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Saturday, February 25, 2023

Malaysian Budget 2023 revised up to RM388.1bil, GDP to grow 4.5% in 2023 from the expanded 8.7% in 2022

Budget 2023 revised up to RM388.1bil, GDP growth at 4.5%

KUALA LUMPUR: Budget 2023 is revised upward to RM386.1 billion, making it the largest allocation in Malaysia’s history, as the government continues to provide support to steer the economy, according to the Ministry of Finance (MoF).

The budget allocation is an upward revision from the RM372.3 billion budget tabled by the previous government in October 2022, which could not be passed before Parliament was dissolved.

In its Updates on Economic & Fiscal Outlook and Revenue Estimates 2023 report released today, the ministry said of the amount, 74.8 per cent will be utilised for operating expenditure while the remaining 25.2 per cent is for development expenditure.

A substantial allocation of 23.5 per cent will be provided for emoluments, subsidies and social assistance (15.2 per cent), economic (14.3 per cent), debt service charges (11.9 per cent), supplies and services (8.3 per cent), retirement charges (8.0 per cent), social (6.9 per cent), security (3.0 per cent), grants and transfers to state governments (2.1 per cent), general administration (1.0 per cent) and others (5.8 per cent).

MoF said funding for Budget 2023 will be sourced from income tax totalling 39.9 per cent of the total allocation, borrowings and use of government’s assets (24.5 per cent), non-tax revenue (19 per cent), indirect tax (14 per cent) and other direct tax (2.6 per cent).

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim said Budget 2023 will focus on addressing the high cost of living, further strengthening the social safety net and enhancing the micro, small and medium enterprises (MSMEs) eco-system.

He said the government will also examine ways and means to reduce market disruptions as well as streamline business processes through the adoption of high technology and digitalisation.

"The government is committed to protecting the livelihood of the rakyat, upholding integrity, enhancing a caring and compassionate society, as well as improving the effectiveness of public and private sector delivery systems.

"These commitments can be achieved through a methodical approach focused on the aspect of thought, spirituality and infrastructure, which is centred on the framework of Malaysia Madani that focuses on shaping the future of the nation and realising its full potential,” he said.

Malaysia Madani framework is supported by six core values -- sustainability, prosperity, innovation, respect, trust, and lastly, care and compassion.

After Anwar was sworn in, the Dewan Rakyat had, on Dec 20, 2022, passed a RM163.7 billion temporary operating budget to allow the government to spend a portion of the total estimated expenses during the months prior to the retabling and passing of the Supply Bill for 2023.

The amount includes RM107.7 billion, which is from the Consolidated Fund, to pay for emoluments and aid for the first six months of 2023, and RM55.96 billion from the Development Fund to fund the ongoing development projects.

Moderate 2023 GDP Growth

Anwar said Malaysia’s gross domestic product (GDP) is poised to record a growth of approximately 4.5 per cent in 2023, backed by the nation’s sound macroeconomic fundamentals, robust domestic demand coupled with the effective implementation of the 12th Malaysia Plan (12MP).

With the transition to the endemic phase and the reopening of international borders, Malaysia has seen an increase in tourist arrivals as well as trade and business activities, contributing towards a steady recovery, especially in the services sector, he said.

"2023 is expected to be a challenging year. The government will continue to be vigilant of economic headwinds as well as any potential geopolitical conflict in order to devise the appropriate strategies and actions,” the Prime Minister said.

The report indicated that the services sector will continue to steer growth in 2023, expanding by 5.3 per cent on the back of better domestic demand buoyed by wholesale and retail trade, transportation and storage, information and communication, food and beverages and accommodation, and finance and insurance subsectors.

Anwar also said the government remains steadfast in balancing the need to safeguard the well-being of the rakyat and the nation while ensuring a sound and sustainable fiscal position.

This is crucial in maintaining the high standing of the country's sovereign ratings and to ensure the country’s premier position as an investor- and business-friendly country, especially in creating and attracting high value-added investments to achieve quality and inclusive growth, he said.

MoF said the acceleration of infrastructure projects with high multiplier effects, robust growth in private investment and continuous external demand particularly among major trading partners will further support the economy.

It also said the contribution of the tourism-related sector is expected to improve following an increase in tourist arrivals.

"Looking ahead, efforts will be intensified to position Malaysia as a major investment destination. Various measures will be implemented to uplift and enhance the economic potential for Malaysia to become more competitive, sustainable and inclusive,” it said.

It added that the government will continue to provide counter-cyclical policy support as well as expedite structural reforms to strengthen the country's growth prospects and resilience.

As for trade, the total trade is expected to expand further to RM2.887 trillion in 2023, with an estimated surplus of RM264.33 billion.

Strict Fiscal Discipline

Anwar said the government will prioritise strengthening the governance ecosystem at all levels to increase public trust in government institutions.

This initiative will focus on transparency, integrity and efficiency, particularly in government procurement, good governance, and the developmental role of government-linked companies (GLCs) and parliamentary institutions, he said.

He also said various initiatives have been identified to address issues related to public finances, including exploring new sources of sustainable revenue and minimising leakages.

"In achieving these initiatives, the government will prioritise on public expenditure review while ensuring debt sustainability and enhancing public spending efficiency in the long run.

"These measures will improve the nation's fiscal flexibility, allowing the government to implement counter-cyclical measures and maintain our economic resilience,” he said.

According to MoF, the fiscal deficit is expected to consolidate further to 5.0 per cent of GDP, to -RM93.94 billion from -RM99.48 billion in 2022.

Stellar 2022 Performance

Despite the softened global growth and escalating inflationary pressure, the Malaysian economy has performed better-than-expected in 2022, spearheaded by strong domestic demand and higher export performance in the aftermath of the COVID-19 pandemic.

Anwar said the country’s economic growth outperformed regional and global trends, rebounding to the pre-crisis level of 8.7 per cent, thanks to the swift policy responses and strong economic fundamentals.

MoF said in the report that growth in 2022 was anchored by the services sector, which grew by 10.9 per cent and contributed 58.2 per cent share to the GDP, mainly supported by the wholesale and retail trade, transportation and storage, as well as real estate and business services sub-sectors.

It said the manufacturing sector grew by 8.1 per cent with 24.2 per cent contribution to the GDP, while agriculture (0.1 per cent/6.6 per cent), mining (3.4 per cent/6.4 per cent), and construction (5.0 per cent/3.5 per cent).

The growth was also attributed to robust external demand, especially among Malaysia’s major trading partners, which resulted in a 27.8 per cent increment to RM2.848 trillion total trade last year. Similarly, the trade surplus expanded by 0.6 per cent to RM255.1 billion. - Bernama
 
 

Restoring confidence Largest one in M’sian history heralds overhaul of country’s finances

Prime Minister Datuk Seri Anwar Ibrahim has unveiled a Rm388bil Budget, the largest in Malaysian history, and one that is inclusive and holistic as well. His approach to dishing out goodies is novel, taking care of priority areas while also setting the country up for a financial overhaul.

Budget 2023 will be based on three thrusts, that is spurring the economy, reforming institutions to ensure investor confidence and ensuring social justice to balance inequality. Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim

PETALING JAYA: Budget 2023, unlike many earlier ones, is not one that is a continuation of promises laid out in larger umbrella plans like the Malaysia Plans.

Instead, it is a unique creation under Prime Minister Datuk Seri Anwar Ibrahim’s Malaysia Madani concept, which is a manifestation of the more inclusive approach promoted by the unity government.

The Rm388.1bil budget is the largest in Malaysian history, with Rm97bil being earmarked for development expenditure, also the highest allocation yet.

While the government has been drumming home a message about the mounting debts of the Federal Government, why did it propose such a huge spending Bill?

The answer lies in government taxes, which rose strongly last year to Rm294.4bil due to much stronger economic growth than forecast. With the economy clocking an 8.7% growth rate, tax collection will mirror the performance.

Still, there will be a relatively high deficit in the budget at 5% of GDP. This, however, will be less than an earlier estimate of 5.5%.

The plan is to bring it down to 3.2% by 2025. That debt reduction schedule is going in the right direction.

Higher tax revenues are only part of the cash-raising proposals. Asking the well-heeled populace to foot their fair share of tax revenue is a good step.

High-income earners are not going to make too much of a fuss about paying their fair share in raising government finances. It was also good that vape and e-liquids be subjected to tax.

It is a huge grey area that has flourished without government control. The best thing now is to tax such products as they are substitutes for cigarettes and basically perform the same function.

Then there is the tax on sale of shares in unlisted companies. This is basically a capital gains tax on unlisted companies that sell their business for a profit. This will also be an equitable approach.

It is not an inheritance tax, but just a case of the government taking a slice for enabling companies to sell their assets at a profit. Maybe it is a different approach from the prosperity tax (or windfall tax), but in an era of high indebtedness by countries and greater calls for progressive taxes, such a tax was inevitable.

The tax on luxury goods will have to be balanced against the need to maintain tourism receipts. Will this put off potential tourists given that Malaysia is one of the cheapest destinations for luxury goods? The devil will be in the details. Budget 2023 also reflects a different approach to addressing the issues of the past.

The usual ministries received an allocation bump and for good reason, but with a twist. Healthcare got a raise but there is acknowledgement that fixing the bottlenecks will use “the whole of nation” approach with spare beds and doctors from university and army hospitals, along with private hospitals, being utilised.

The move to tackle the problem of the hardcore poor is to be applauded. The call to alleviate the scourge of poverty within a year is formidable, but for Malaysia, which is on the cusp of high-income nation status, having 130,000 people on the wrong side of the poverty line is a shame.

Fixing the amenities at schools fast is also an urgent need, thus the increased allocation for the Education Ministry.

Defence too got higher allocations, as these are the basic foundations of any country.

The caring side of the budget was shown when it looked to help micro, small and medium enterprise sectors. These small companies employ a lot of people, and for them to get a tax deduction will go some way towards helping to shore up their finances.

The overall tone of Budget 2023 was appropriate.

It showed care and compassion for a large cross section of Malaysians. It is surely the start of an overhaul of the country’s finances as we head towards a national revitalisation over the next few years

By the Star Malaysia25 Feb 2023By JAGDEV SINGH SIDHU jagdev@thestar.com.my 

 

Highlights of Budget 2023/Belanjawan 2023


1. Bankrupts with debts of less than RM50,000 who fulfil certain requirements will be released from bankruptcy on March 1. This is expected to benefit 130,000 people.
2. The government will amend the Insolvency Act 1967 to release bankrupts automatically.
3. Bank Negara will allow consumers to freeze their accounts should they detect any suspicious activities.
4. RM10 million to support the National Scam Response Centre.
5. A special task force to reform government agencies, known as STAR, will be set up. It will be led by the chief secretary to the government.
6. Malaysian Road Records Information System (Marris) allocations increased to RM5.2 billion.
7. RM50 million to install lampposts in accident-prone areas.
8. Government will use district engineers to speed up the repairing of federal roads.
9. RM2.7 billion to repair and upgrade federal roads.
10. RM1.2 billion to repair 400 dilapidated clinics and 380 dilapidated schools.
11. The government plans to table amendments to the Whistleblowers Act to better protect whistleblowers.
12. The government plans to table the Government Procurement Act.
13. Government procurement must be transparent. RM22 billion worth of contracts linked to flood mitigation projects and the Jana Wibawa project were awarded via direct negotiation.
14. Private sector to establish a “Madani wakaf” involving assets worth more than RM1 billion.
15. The government will increase the availability of Islamic financing.
16. The government will also support the plans for the private sector to develop a port in Pulau Carey.
17. The government will support the development of the Sanglang port in Perlis.
18. Putrajaya to expand Subang and Penang airports to attract investments. This is more economical than the proposed construction of a RM7 billion airport in Kulim, says the prime minister.
19. The Tun Razak Exchange will become the country’s international financial hub.
20. Bank Pembangunan Malaysia Berhad to provide RM6 billion in strategic funding to encourage automation.
21. Tax incentives for aerospace industry will be extended to Dec 31, 2025.
22. Tax incentives for manufacturers to move operations to Malaysia will be extended to 2024.
23. The government will introduce a New Industry Master Plan 2030. This will include the restructuring of investment incentives.
24. The government will give incentives to local councils that make it easier for businesses to be set up.
25. Government proposes extending the Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) incentives until Dec 31, 2025.
26. Bank Negara to provide RM2 billion in loans to support green technology startups and help SMEs embrace low-carbon practices.
27. RM50 million to increase the number of wildlife rangers to 1,500 people.
28. RM38 million allocated to protect endangered wildlife including tigers and elephants.
29. The government will increase allocations given to states to preserve forests from RM70 million a year to RM150 million a year.
30. RM50 million for the armed forces, fire and rescue department, and Rela to prepare for natural disasters.
31. RM150 million for Nadma to prepare for natural disasters.
32. Six flood mitigation projects will be re-tendered.
33. Anwar gave the example of flood mitigation projects. He said the government could have saved RM2 billion for the projects awarded by the previous government.
34. High impact projects must be awarded via tenders to ensure the government enjoys the best value and savings.
35. Bank Negara to provide nearly RM10 billion in loans for SMEs.
36. Government to waive driving test fees for taxi, bus, e-hailing and B2 motorcycle licenses.
37. Syarikat Jaminan Pembiayaan Perniagaan will provide RM20 billion in loans to SMEs in high value sectors.
38. RM1.7 billion in loan facilities under Bank Negara, BSN and TEKUN.
39. Government agencies to provide RM40 billion in loan facilities for MSMEs.
40. RM176 million to upgrade business premises and facilities under Mara, DBKL, PUNB and UDA.
41. RM50 million to build and upgrade 3,000 stalls and kiosks nationwide
42. Income tax for micro SMEs reduced from 17% to 15% for the first RM150,000.
43. The government will incentivise self declaration for income tax arrears beginning June 1.
44. Half of revenue from excise duties collected under the Generational Endgame (GEG) law will be channelled to the health ministry.
45. Putrajaya to introduce excise duties on vape and e-cigarette liquids containing nicotine.
46. The government will study the possibility of introducing a capital gains tax from 2024.
47. The government will introduce wealth tax. Luxury watches and goods will be taxed.
48. The government will maintain electricity subsidies for all domestic users and SMEs.
49. Lower income Amanah Saham Bumiputera (ASB) contributors will be given more dividends.
50. The government will table a Fiscal Responsibility Act in Parliament this year to ensure better management of the economy in the future.
51. Government aims to reduce fiscal deficit to 5% this year, compared to 5.6% in 2022.
52. Government aims to collect RM291.5 billion in revenue, a decrease compared to RM294.4 billion in 2022.

Budget 2023 highlights

Budget 2023; Highlights from updates on economic & fiscal outlook
and revenue estimates 2023

GDP to grow 4.5% in 2023 

 

PETALING JAYA: The Malaysian economy is projected to grow by 4.5% in 2023, even as the World Bank warned about the global economy being “perilously close” to falling into recession this year.

In the first section of the 2023 Economic Report, the Finance Ministry said all economic sectors are expected to remain in the positive growth trajectory in 2023, driven by the services and manufacturing sectors.

Other sectors, namely agriculture, mining and construction - which remained below pre-pandemic levels as of 2022 - are also expected to grow further in line with the improvement in economic activities.

“However, downside risks such as prolonged geopolitical conflict, climate-related disasters and persistently high inflation are expected to further hamper the global economic growth, hence, affecting Malaysia's performance.

Overall, the nation’s gross domestic product (GDP) is forecast to grow approximately 4.5% in 2023,” the ministry said.

Earlier this month, Bank Negara said the economy could grow by 4% to 5% this year. In 2022, the GDP expanded by 8.7% - the strongest growth since 2000.

The growth in 2023 would be mainly supported by steady domestic demand primarily private expenditure as well as initiatives under Budget 2023 and development expenditure under the 12th Malaysia Plan 2021-2025.

“However, a slowdown in external demand is expected to moderate exports growth, particularly in the electrical and electronic products and major commodities,” the Finance Ministry said.

The ministry projects the local services sector’s GDP to expand by 5.3% in 2023, down from a growth of 10.9% last year.

Manufacturing growth was forecast at 3.9% this year, as compared to 8.1% in 2022.

It is noteworthy that last year’s strong growth rate was largely attributed to the low-base effect as the economy was still impacted by Covid-19-related restrictions in 2021.

The mining sector is also forecast to record a slower growth next year by 1.2%, as compared to 3.4% in 2022.

However, the agriculture and construction sectors are projected to witness stronger growth rates, at 1.1% and 6.1% respectively.

In 2022, the agriculture sector’s GDP grew by a mere 0.1% and the construction sector expanded by 5%.

Commenting on the global growth, the Finance Ministry said the world economy is expected to further soften in 2023 at 2.9%.

The global economy would be weighed down by persistent pressures such as inflation, tightening global financial conditions and economic deceleration among major economies. 

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Budget 2023: An inspiring budget for all - New Straits Times

 

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