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Malaysia Bolsters Spending in 2011 Budget
Source: http://www.thejakartapost.com/
Source Date: Friday, October 15, 2010
Country: Malaysia
Created: Oct 18, 2010

Malaysia's government bolstered spending in its 2011 annual budget and unveiled a raft of mega projects including a 100-storey skyscraper to woo foreign investment as it forecast economic growth to moderate after a sharp expansion this year.

Prime Minister Najib Razak on Friday unveiled a record 212 billion ringgit ($69 billion) of spending in the budget, up nearly 3 percent over 2010, as he sought to kick-start plans to turn Malaysia into a developed nation by 2020.

The government raised its economic growth forecast this year to 7 percent from 5-6 percent but expects growth to ease to 5-6 percent in 2011 amid global economic uncertainties.

To spur private investment, Najib said the government will step up partnerships with the private sector in infrastructure and invest in projects including a 40 billion ringgit ($13 billion) mass rail transit network for its largest city Kuala Lumpur and a 100-storey tower - the highest in Malaysia.

"I present a budget that lays the foundation for Malaysia to become an advanced nation. The 2011 Budget is formulated with firm determination to bring significant changes to the nation's development and the well-being of the people," he said.

The projects are part of a new 10-year blueprint, dubbed the Economic Transformation Program, that aims to make Malaysia a high-income nation. The government has said it will need to lure $444 billion of investments but some analysts have warned the plans are unrealistic.

Najib said private investment in 2010 is expected to total 86 billion ringgit ($28 billion).

The 2011 budget envisages a 7 percent rise in operating expenditure to about 163 billion ringgit ($53 billion) while development spending - which includes poverty reduction programs, educational training, health care and housing - will fall by 9 percent to 49 billion ringgit ($16 billion).

He said federal government revenue is estimated to grow 2.3 percent to 165.8 billion ringgit ($54 billion) in 2011. This will mitigate the spending hike and narrow the government's budget deficit to 5.4 percent of gross domestic product from 5.6 percent this year, he said.

Some economists said the 2011 budget addresses key issues such as falling investment and an underskilled work force that have dragged on Malaysia's growth.

"The key message is that the private sector has to be harnessed back to drive growth due to the government's fiscal limits," said Lee Heng Guie, economist with CIMB Investment Bank.

But opposition politician Tony Pua criticized the government for fiscal indiscipline. He said the government promised to trim its operating spending in 2010 but instead it increased by 10 percent.

The government has overshot spending annually since 2000, he said. He also slammed the government for raising its operating spending, rather than focusing on development spending.

To promote Malaysia as a shopping haven in Asia, Najib said import duties up to 30 percent on some 300 goods ranging from handbags and shoes to curtains and perfumes will be abolished from next year.

Najib also handed out goodies to civil servants, giving them a 500 ringgit ($162 million) special allowance. He said toll charges on the major North-South Highway will be frozen for the next five years. First-time homeowners will get a 50 percent discount on stamp duties for houses below 350,000 ringgit ($113,636).

Najib, who took office in April 2009, has pledged to reform the economy but faces enormous political challenges from power brokers within and outside his party, which fears a voter backlash ahead of general elections due in 2013.

The government earlier this week postponed plans to implement a 4 percent goods and services tax by 2011 amid public protests.

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