POSITIVE MOVE: Govt has shifted up gears in effort to reform public finance, says MIDF
THE goods and services tax (GST) will strengthen the government's revenue base, enhance its credit profile and earn it stronger regard by international rating agencies, said Malaysian Industrial Development Finance Bhd (MIDF).
It will also result in stronger fundamentals for the ringgit, it said.
"It is a fiscal revolution for the betterment of the public sector. The rakyat should close ranks, be objective and adopt a level-headed approach in reacting to this government initiative," said Zulkifli Hamzah, the head of research at MIDF Amanah Investment Bank Bhd.
The government, he said, appears to have shifted up the gears in its effort to reform public finance.
Total subsidies have been budgeted at only RM39.4 billion next year, a significant 15.6 per cent drop compared with the estimated RM46.7 billion to be incurred this year.
It is reflective of the government's conscientious move towards economic pricing of scarce resources, specifically non-renewable energy, Zulkifli said.
This is another positive move that will reinforce the confidence of global investors in Malaysia.
"The government has grit its teeth and tightened its resolve to address the distortive effect of subsidies," he said.
Zulkifli said the projected deficit of 3.5 per cent of gross domestic product in 2013 will be the lowest in seven years and reflects the government's commitment to improve its fiscal position.
"Although public finance reform is already one of the six Strategic Reform Initiatives announced by the government in 2011, the 2014 Budget will be remembered for the proposals to concretely implement the core reforms."
On the efforts to create an enabling environment and ecosystem for entrepreneurship to flourish, he said MIDF welcomes the various incentives for the small and medium enterprises (SMEs).
"The focus to sharpen the productivity and innovativeness of SMEs jives with the new thrusts to be injected into Malaysia's services sector."
The Services Sector Blueprint, to be unveiled next year, is something to look forward to as the bulk of national output is now intangible services, Zulkifli said.
"What the government has proposed in tye 2014 Budget is to create a holistic framework for the development and growth of the sector, taking the cue from what has been achieved with the financial services sector," he added.