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Friday, 04 November, 2016 11:20:38 PM                      Advertise With Us!              


Mini Budget Speech by Datuk Seri Najib Tun Razak

Mr. Speaker Sir, I beg to move the Bill intituled “An Act to apply a sum from the Consolidated Fund for additional expenditure for the service of the year 2009 and to appropriate that sum for certain purposes for that year” to be read a second time.

2. This Additional Operating Allocation for the year 2009 is tabled in accordance with Article 100 and 101 of the Federal Constitution, for the approval of expenses not provided for or not fully provided for in 2009 Budget, which was approved by this august House.

3. The impact of the current global economic crisis, which originated from the sub-prime financial turmoil in the United States (US) in mid-2007, has since widened and deepened.

After almost two years into the global financial crisis, we are yet to see signs of stability in the financial sector or recovery in the advanced economies. In fact, more than half the major world economies, in particular the US, the Euro area and Japan, are in recession and experiencing the worst economic contraction since the Great Depression of the 1930s.

4. Although developed countries have announced large economic stimulus packages exceeding US$3 trillion, including substantial amounts to bail out their financial institutions and large corporations, these measures have yet to restore consumer and investor confidence. The latest statistics indicate that the unemployment rate in the US is at 8.1%, the highest since 1983.

5. These negative developments have already impacted our economy in the fourth quarter of 2008. Exports and industrial output have deteriorated and investments declined. Consumer sentiment has also been adversely affected. As a result, Gross Domestic Product (GDP) growth was significantly lower at 0.1%, compared with an average of 6.3% in the first 9 months of the year. The decline was mainly due to the contraction in export value of 13.4%. The fall in exports has adversely affected economic growth, particularly the manufacturing sector, which contracted 8.8%.

6. The global economic environment in 2009 is expected to be more difficult. The US, the world’s largest economy and trading nation, is expected to contract by 1.6%, while the United Kingdom 2.8%, and Japan 2.6%.

In the region, South Korea, Taiwan and Singapore will also experience recession, with growth contracting 2%, 4% and 4.9%, respectively in 2009. In fact, Singapore’s Minister Mentor envisaged that Singapore’s economy might contract 10% this year.

Although China and India are expected to record positive growth of 6.7% and 5.1% respectively, the growth is significantly lower than in previous years. Following these developments, the International Monetary Fund in January 2009 again revised downwards the world economic growth forecast from 2.2% to 0.5% for 2009.

Since then, efforts to revive the financial sector in the developed countries have yet to succeed. Therefore, it is highly likely that the global economy would get worse before it gets better.

7. The Malaysian economy has achieved strong growth in the past, due largely to our success in increasing our international trade, which now accounts for almost 200% of GDP, among the highest in the world. Economic growth was also supported by large foreign direct investment (FDI) inflows as well as a robust capital market.

Nevertheless, in the current global economic recession, Malaysia has to accept the fact that, as a highly open economy, it is likely to be impacted through the following four factors:

First: Exports will decline in line with deteriorating world demand. For instance, in January 2009, exports declined 27.8%;

Second: Commodity exports, in particular, crude oil and gas as well as palm oil have experienced sharp decline in prices;

Third: Decline in FDI in line with the global recession. Our FDI inflows is expected to be half of that in 2008, declining to RM26 billion compared with RM51 billion; and,

Fourth: The global meltdown in equity markets has led to a significant decline in Bursa Malaysia. The poor performance of Bursa Malaysia has also adversely impacted investor and consumer sentiment as well as the services sector, which normally is a high-growth sector.

8. Given these factors and in the context of the sharp deterioration in the global economy, Malaysia now faces an extremely challenging economic environment. This necessitated a review of the GDP growth forecast for 2009.

However, the Government is confident that the original 2009 Budget with an allocation of RM206 billion as well as the First Stimulus Package of RM7 billion and the Second Stimulus Package will contribute towards mitigating the impact of the global contraction on the domestic economy. Taking into account these measures, GDP growth is expected to be in the range of –1% to 1% for 2009. Without these efforts, the economy faces the prospect of a deep recession.

9. The programmes and projects under the First Economic Stimulus Package totalling RM7 billion are being actively implemented. To date, RM6.5 billion has been channelled to various ministries and agencies.

A total of RM1 billion has been spent on projects, including 6,267 projects under Program Penyenggaraan Infrastruktur Awam (PIA) and Projek Infrastruktur Asas (PIAS) by the Implementation and Coordination Unit (ICU), 2,118 projects by Ministry of Rural and Regional Development, 1,594 projects by Ministry of Education and 1,322 projects by Ministry of Health.

It is expected that by June 2009, RM5.2 billion worth of contracts would have been awarded and implemented to meet the target of the First Stimulus Package. As announced, implementation of the First Stimulus Package will be closely monitored by a special unit, namely the Project Management Unit (PMU), Ministry of Finance, which will report directly to the Minister of Finance.

With the setting up of this Unit, the Government will ensure that the targets of the First Stimulus Package will be achieved. This Unit will also monitor the Second Stimulus Package, together with ICU and relevant agencies.

10. The Government will continue to implement appropriate measures to strengthen the confidence of the rakyat and ease the burden, particularly of the vulnerable groups.

I am confident that together, we will be able to face this difficult and challenging environment, just as we have successfully overcome several crises in the past. The Government will continue to ensure that priority is given to protecting the welfare of the rakyat and that none are marginalised.

11. In view of the deteriorating global economy, the Second Stimulus Package is significantly larger and more comprehensive, encompassing various economic sectors and target groups. This includes workers, consumers, investors, small and medium businesses, exporters and unemployed graduates.

In addition, the measures outlined in the Stimulus Package not only focus on stimulating the economy in the short-term but also on building the long-term capacity of the economy. This will ensure that Malaysia is well prepared to immediately seize the opportunities when the global economy recovers.

12. I would like to record our highest appreciation to YAB Prime Minister as the Chairman of the National Economic Council for his invaluable inputs and guidance on addressing various issues during these difficult times.

The thrusts of the Stimulus Package are as follows:

First: Reducing Unemployment and Increasing Employment Opportunities;

Second: Easing the Burden of the Rakyat, in particular, the Vulnerable Groups;

Third: Assisting the Private Sector in Facing the Crisis; amd,

Fourth: Building Capacity for the Future.

13. I am pleased to announce that the Government will implement a Stimulus Package totalling RM60 billion. The package will be implemented over two years, 2009 and 2010. Of this amount, RM15 billion is fiscal injection, RM25 billion Guarantee Funds, RM10 billion equity investments, RM7 billion private finance initiative (PFI) and off-budget projects, as well as RM3 billion in tax incentives.

This RM60 billion accounts for almost 9% of the GDP. The implementation of such a large stimulus package is unprecedented in the nation’s economic history.

14. We have faced several crises before, including in 1969, 1972, 1986 and 1997. We have successfully overcome every single crisis, with the economy emerging ever stronger.

Today, we face a global economic environment, which is more severe than in any other previous crises. However, with our experience in overcoming several crises before and with the undivided support of the rakyat, I am confident we will together overcome these increasingly difficult times.

15. The RM60 billion is allocated to the four Thrusts, as follows: RM2 billion for Thrust One; RM10 billion for Thrust Two; RM29 billion for Thrust Three; and RM19 billion for Thrust Four;

16. Of the RM15 billion fiscal injection, RM10 billion is allocated for 2009 and RM5 billion for 2010. The RM10 billion for 2009 consists of RM5 billion for operating expenditure and RM5 billion for development expenditure.

The higher expenditure will increase the Federal Government budget deficit from 4.8% to 7.6% this year. The Government is confident that the nation’s fiscal policy continues to have the flexibility and capacity to accommodate the higher deficit, as this increase is temporary. The Government’s ability to ensure fiscal sustainability is clearly reflected in our success in reducing the deficit from 5.3% in 2002 to 3.2% in 2007.

In fact, when Malaysia experienced economic contraction in 1982, we had incurred a deficit of 16.6%, following increased expenditure, particularly for infrastructure projects. These measures increased the growth potential of the nation and enabled us to achieve high economic growth of 9% in the early 1990s. The Government will ensure its fiscal position returns to a sustainable level in the coming years.









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