Finance Ministry must not be seen as slothful and intellectually irresponsible in refusing to present an updated version of Budget 2000 in Parliament on Feb. 25 which takes account of developments in the past four months


Media Statement
by Lim Kit Siang
 

(Petaling Jaya, Friday): Finance Minister Tun Daim Zainuddin said in Lembah Bujang, Sungai Petani yesterday that  the content of the budget for the year 2000 to be retabled on Feb 25 will  be similar to the one tabled in Parliament on October 29 last year.

He said: "There is no change and neither is there anything that's shocking. It's the same budget and the content is similar to the one presented earlier.  The only shock this time is that it is a similar budget."

The budget for year 2000 was first tabled on Oct 29 but before it could be  approved, Parliament was dissolved on Nov 11 for the 10th general election.

Daimís statement is most disappointing and I call on the Finance Ministry not to be seen as slothful and intellectually irresponsible in refusing to present an updated version of Budget 2000 in Parliament on Feb. 25 which takes account of developments in the past four months - which exceeds the time-span of a quarterly of three months.

The government would have  committed new expenditures in the last four months, especially after the new Cabinet had been formed and held its first meeting on December 15, 1999, which would require parliamentary approval and would in the past be presented to Parliament as the first supplementary supply and development estimates to the 2000 Budget in the March or April  meeting of the Dewan Rakyat in  the following year.

However, as the 2,000 Budget had been delayed and will only be re-tabled in Parliament on February 25, 2000, and the Parliamentary meeting would extend into April,  there should be an updated version of Budget 2000 which would incorporate the new expenditures decided by the new Cabinet - such as the revival of the Bakun dam project - which  in the past would go into the first supplementary supply  bill the following year.

I will not be surprised if the new Cabinet, in the flush of victory at retaining two-thirds parliamentary majority, would have committed the government in vast expenditures in its first two months in office which should  be reflected in the updated version of 2000 Budget to be presented to Parliament on February 25.

This is because Parliament and the nation are entitled to know what were  the new expenditures outside the proposed  2000 Budget which had been decided by the new Cabinet in its first two months in office.

Otherwise, the great interest in the 2000 Budget to be presented by Daim on February 25 would be over what had been decided in the previous two months by the new Cabinet but not incorporated in the budget - rather than what is in the budget.

There are other reasons why Daim should present an updated version of 2000 Budget and not be a parrot of himself on February 25 to table word for word, proposal for proposal, the 2000 Budget of October 29, as there had been momentous developments with far-reaching repercussions on the countryís economic future, particularly in the region as well as globally.

Firstly, the Finance Minister should present the governmentís latest forecast of  Malaysia's gross domestic product  or GDP both  for 1999 and  2000. On Oct. 29, the government's GDP forecast for 2000 is 5% and  4.3% in 1999.

Two days ago, Deputy Finance Minister, Shafie Mohd Salleh said  the government now expected the 2000  gross domestic product to expand by more than five percent.

A day earlier, the Malaysian Institute of Economic Research, or MIER projected Malaysia's GDP to expand 6% in 2000,  from an estimated 4.8% rise in 1999 while American-based Chase Manhattan Bank forecast a 6% GDP growth for Malaysia this year and 6.7%  in year 2001.

Secondly, the presentation of an updated 2000 Budget would be the proper occasion for a review of various outstanding issues in the Malaysian economy, whether on the issue of capital controls,  the 17-month-long controversy over the RM16 billion  CLOB impasse over Malaysian shares formerly traded in Singapore and held by 172,000 individuals or whether Malaysia has undertaken economic and corporate reforms to ensure that the countryís economic recovery is sustainable.
 
MIER executive director Mohamed Ariff told Dow Jones Newswires in an interview on Tuesday (8th February 2000) had called for the lifting of capital controls introduced in September 1998 and proposed that the ringgit be floated against a basket of currencies and the replacement of the  current 10% exit levy with a capital gains tax that doesn't discriminate between foreign and local short-term capital.

Mohamed said that the quick return of short-term capital to Malaysia's stock market could trigger another market crash if left unchecked, and capital controls which have  outlived their purpose won't be able to cushion that fall.

He expressed his great unease at  the rapid flow of foreign short-term capital into the country as "What moves in will move out and destabilize the whole system".

Mohamad said  that foreign fund managers are now being enticed to invest in the country by the same capital controls that were meant to allow Malaysia's economic planners to pump more liquidity into the  recession-hit economy without undermining the stability of the currency.

The exchange controls, which peg the Malaysian currency at RM3.80 to the dollar, are attractive to foreign investors because they shelter them from the volatility in regional markets.

Moreover, the widely-held perception that the ringgit is undervalued and that the government  will have to adjust it is encouraging more investors to enter the stock market now on expectations of reaping additional foreign exchange gains.

Other reasons given by Mohamad why there should be a review and lifting of capital controls are:
 

 
The  Finance Minister and Members of Parliament would be failing in their duties if they do not make use of the budget debate later this month to address such a crucial issue for the Malaysian economy.

Regional and international developments in the past four months are also compelling reasons for an updated 2000 Budget, such as  the three recent international meetings on globalisation  including the violence-marred talks in Seattle WTO and World European Forum (WEF) in Davos and the nine-day UNCTAD X beginning in Bangkok tomorrow over the role of the World Trade Organisation and United Nations Conference on Trade and Development in the global search for a new vision and definition of globalisaton with a human face.

(11/2/2000)


*Lim Kit Siang - DAP National Chairman