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Budget 2001: Worldwide comments
By Kapal Berita

31/10/2000 9:28 pm Tue

Beberapa rencana dikepilkan bersekali dengan mesej ini. Seperti biasa ada yang menyokong dan ada yang mempersoalkan beberapa belanjawan kali ini.

Jika anda membaca nya betul-betul, anda akan dapati belanjawan kali ini cuba untuk memberi nafas kepada ekonomi yang tenat tetapi digambarkan hebat.

1) Nasib MAS dan Proton - dua syarikat nasional negara

2) FDI yang enggan naik. Kemana perginya pelabur?

3) Ekonomi A.S. akan menguncup.

4) Ekspot Eletronik dijangka menurun

5) K-Ekonomi, tidak semudah kata

6) Ekonomi yang "artificial".

Saya menulis kembali komen beberapa analis dalam AFP:

In addition, they said, the market had been artificially supported in the run-up to the budget and investors were now selling "on fact."

the budget proposals appeared to address the micro aspects of the economy rather than macro issues.

"Menurut mereka, pasaran sebenarnya telah sengaja disokong dan ditonjolkan kuat sebelum belanjawan . Kini pelabur telah menjual setelah mengetahui "fakta sebenar"

"Cadangan belanjawan kelihatan mengambil kira soal mikro-ekonomi, sepatutnya ia lebih kepada makro-ekonomi"


Malaysia: 2001 Budget: A Smaller "G"

Anita Chung and Daniel Lian (Singapore)

Malaysian Finance Minister Tun Daim Zainuddin unveiled the budget for 2001 on October 27, 2000. There were no major surprises. The new budget proposed a deficit of RM16.1 billion for the Federal government in 2001, equivalent to 4.9% of GNP. This is the fourth consecutive year of a fiscal deficit since the Asian crisis. However, as the Malaysian economy is recovering quickly, the planned fiscal deficit for 2001 is 10% less than the peak deficit of RM18 billion deficit (5.9% of GNP) projected for 2000.

The Shrinking "G"

A policy shift is under way. The big "G" in the macroeconomic equation, GDP = C + I + G, should shrink as the economy shows a good recovery. However, the proposed RM16 billion deficit means that fiscal policy remains expansionary. Fiscal expenditure (total operating and development expenditure) is expected to rise by 5.2% in 2001, down from double-digit growth in 1999 and 2000. The sources of income that supported economic recovery in the past two years were mainly a strong current account surplus and government spending. It is hoped that a declining role for government is giving way to a greater contribution from the private sector.

Measures like higher tax rebates for low- and middle-income groups and tax exemptions to reduce the cost of doing business have been introduced to revive the private sector consumption and investment. The market-expected tax cut in either individual income or corporate profit has not materialized. We think that the government's decision not to cut taxes is wise. Financing the fiscal deficit will have to come from either domestic or external borrowing. After a fiscal deficit for three consecutive years, the public sector has incurred an increased debt burden, reaching RM184 billion (US$48 billion, 55% of GDP) in 2000 from RM119 billion in 1996. Total interest payments on these debts has swelled to RM9.6 billion (US$2.5 billion) for 2000. Essentially the government cannot afford to cut taxes further in view of the still large fiscal deficit.

Expect Strong Growth in Construction and Tourism

In 2001, we expect growth momentum in the construction sector to pick up. In its last budget, the government projected 5% growth in construction output for 2000. For the first half of 2000, the construction sector lagged the economic recovery, expanding only 1.7% year over year. In aiming to develop world-class infrastructure facilities, the government has budgeted RM4.7 billion for the construction of roads, bridges, railways, ports and three more airports. The real estate industry has also been boosted. EPF contributors are to be allowed to withdraw funds from the EPF to purchase a second home. The government expects that, with these measures, the construction sector will recover to show 5.5% growth in 2001.

The tourism industry was one of the key sectors bringing in foreign exchange and generating economic growth in 1999 and 2000. The government projects that about 10 million tourists will visit Malaysia in 2001, up 18% from the estimated 8.5 million in 2000. Various programs have been implemented to encourage tourism. We believe that a rising number of tourist arrivals should boost the retail sector.

Strengthening the FDI

FDI inflow was very disappointing in the first half of 2000. Approved foreign manufacturing investment fell 74% year over year to RM1.8 billion during the period. Although there was a strong pickup in July and August, FDI approvals still dropped by 15% year over year for the first eight months. To attract more FDI, the government is opening the national airline as well as the national car industry to foreign equity participation. Strategic partners are also being sought in the information and communication technology, energy, ports and the financial sectors as a drive to bringing in more FDI. However, other than continuing the Pre-Packaged Incentives proposed last year, there were no concrete measures to induce FDI inflows.

The 10% exit levy on short-term portfolios was removed. The measure was imposed to stop capital outflow two years ago. Its removal is unlikely to have an impact on inducing FDI or portfolio inflows.

Embracing the New Economy

Year 2001 is the first year of the Eighth Malaysia Plan. As a move to speeding up the transition from a production-based to a knowledge-based economy, the government is diverting additional resources to information, communication technology and education. The most dramatic expenditure shift is in education. The share of development expenditure on education is to rise by 52% from 15.6% in 2000 to 22.1% in 2001. Measures to upgrade human resources include promoting computer literacy in schools and retraining workers. Human capital is an important factor in the long-term productivity gain. An emphasis on education shows that the government is keen in building a New Malaysia, as the title of the budget speech suggested.

Evidently the FDI-MNC-led export growth strategy is to continue in 2001. However, the government is trying to steer away from this obsolete growth model by promoting entrepreneurship. A RM500 million Venture Capital Fund is to be set up to develop a venture capital industry. Of course, such measures are not going to be sufficient to change everything overnight. Malaysia still seems to have a long way to go to fully tap the potential of the New Economy.

Our GDP Forecast of 6.5% in 2001 Is Unchanged

A sharp slowdown in US GDP growth in 3Q00 suggests a soft landing for the US economy. Slower growth in the US, as well as in the other major economies, is expected to reduce demand for Malaysian exports, undermining the country's export-led growth economic recovery. We believe that the government has adopted the right strategy of aiming to strengthen domestic demand in this global economic environment. The new budget is based on the assumption that Malaysia will grow by 7% and world GDP will expand by 4.2%. Our global economics team has a more pessimistic forecast of 3.9% global GDP growth. The new budget does not cause us to change our view on the Malaysian economy. We are maintaining our GDP forecast of 6.5% for 2001.
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Asia Watch: Malaysian shares fall as budget disappoints investors

By Joe Leahy in Hong Kong

Published: October 30 2000 12:36GMT | Last Updated: October 30 2000

Shares in Kuala Lumpur fell on Monday after tax cuts in the government's 2001 budget fell short of investors' expectations.

The composite index closed down 16.77 points, or 2.12 per cent, at 774.31. This was down 7.14 per cent from 833.89 points at the start of the year.

Investors complained that the budget, unveiled on Friday, lacked key corporate and income tax cuts, which they had hoped would be granted to listed companies.

The budget does set aside 4.73bn ringgit for infrastructure projects and scraps a 10 per cent levy on the repatriation of profits by foreign portfolio funds. However, foreign investors must have held their investments for more than a year to qualify for the exemption. The levy dates from Malaysia's capital controls, imposed during the Asian financial crisis of 1998. Under the controls, Malaysia's currency, the ringgit, has been pegged at an exchange rate of 3.8 to the US dollar.

In a further blow to some key shares, the government imposed higher duties on tobacco and alcohol products.

Carlsberg Brewery Malaysia was down 0.40 ringgit, or 3.41 per cent, at 11.3, while Guinness Malaysia slipped 0.04 ringgit, or 1.1 per cent, to 3.46.

Having fallen on Friday, British American Tobacco closed up 1 ringgit, or 2.72 per cent, at 37.75.

Arnold Lim, head of research at ING Barings in Kuala Lumpur, said investors had been overly optimistic in their hopes of tax cuts.

The budget's key commitments to increased spending are directed at civil servants and pensioners, education and health, as well as the rural population .

"The government is trying to shore up their support base through this budget," said Mr Lim.

The budget comes at the time of a mixed outlook for the Kuala Lumpur Stock Exchange, which has been one of the region's better performers this year.

Malaysia's status as a net oil exporter, as well as its capital controls, have helped cushionthe recent share price volatility, resulting from the high global oil prices and instability in regional currencies. Malaysia has also enjoyed a trade-driven economic recovery, led by the electronics sector, which accounts for 42 per cent of total exports.

The country's GDP is expected to grow by 8.0 per cent this year and 6.5 per cent in 2001, compared with 5.8 per cent last year, according to Salomon Smith Barney.

An expected slowdown in global electronics demand should damp Malaysia's economic growth next year, although the impact of this on Malaysian shares is difficult to forecast because few of the country's electronics companies are listed, said Han Ong, regional strategist at Salomon Smith Barney.

He said any fall in electronics exports, however, could lower domestic liquidity, which mighthurt investment in shares.

FTimes : Malaysia strives for investors

From The Financial Times, UK
30th October 2000

Malaysia strives for investors

By Sheila McNulty in Singapore

Malaysia has proposed opening two of its prized national companies to outsiders in a budget that analysts said marked a big shift in policy to win back foreign investors.

Daim Zainuddin, finance minister, proposed on Friday that Malaysia permit foreigners to buy equity stakes in Proton, the national carmaker, and Malaysia Airlines, the national carrier.

Analysts say both companies were hit hard by the crisis and have yet to return to their former standing. Malaysia will also seek investors in the information, communications, technology, energy, ports and financial sectors, Mr Daim said. "We must acknowledge that, in a borderless world, large conglomerates have greater choices in their investment decisions, while countries are keenly competing to attract FDI," Mr Daim said, referring to foreign direct investment.

He also announced plans to waive the current 10 per cent exit tax on stock market profits for investments that have been in the country more than a year. The control was part of a package imposed by the government in 1998 to limit the outflow of funds during the economic crisis. The authorities have been gradually easing the controls as the economy has recovered.

Analysts said Mr Daim's proposals would go a long way towards addressing concerns about whether Malaysia can attract pre-crisis levels of FDI, bringing with it the outside expertise needed to maintain economic competitiveness. That, in turn, should boost portfolio investment that also has yet to fully recover.

In a further attempt to address concerns about Malaysia's long-term competitiveness, Mr Daim announced incentives to encourage skilled Malaysians to return, including tax exemptions on income remitted from abroad and the prompt provision of permanent resident status for the spouses and children of Malaysian citizens.

The government is also planning to acquire stakes in foreign technology companies, while offering tax deductions and special funding to encourage the venture capital industry.

In recognition, however, that such measures will take time to filter through the economy, Mr Daim said next year the government would register a budget deficit of 4.9 per cent of gross national product as it continued to stimulate the economy. Much of its spending will go toward infrastructure as it tries to meet the official economic growth forecast of 7 per cent in 2001, down from 7.5 per cent projected for this year.

The economy grew 5.8 per cent year-on-year in 1999.

Malaysia Stocks-End down on initial budget woes


30 Oct 2000 17:37 (GMT +08:00)

(Snapshot 5:05 p.m./0905 GMT)

Item Last Change Pct
KLCI <.KLSE> 774.31 -16.77 -2.12
2nd Board <.KLSB> 167.25 -3.13 -1.84
Nov futures <0#KLI:> 770.0 -11.9 -

(Oct 30)

KLCI ends down on knee-jerk reaction to 2001 federal budget which did not meet investor expectations of cuts in corporate and personal income taxes.

The market ignored strong gains seen on the Dow Jones Industrial Average <.DJI> on Friday, with investors choosing instead to lock in profits following a strong run-up to the budget.

The lifting of a 10 percent exit levy on repatriation of profits of portfolio funds held for one-year led to foreign funds cashing out of mainly index-linked heavyweights.

A technical chartist sees strong support for the KLCI at 766 points, and dealers said the market's uptrend prior to the budget is still intact if that level is not breached this week. "It is a normal reaction. Some of the budget measures cannot be quantified immediately, especially the ones aimed at building human capital," said Scott Lim, a fund manager with CMS Dresdner Asset Management.

Losses at three of the country's top four capitalised stocks, Malayan Banking , Telekom Malaysia and Petronas Gas , drag the index down by 7.4 points.

Construction stocks, Gamuda Bhd , Road Builder Bhd and IJM Corp , all succumb to broader falls on overall market.

Carlsberg Brewery Malaysia and Guinness Anchor Bhd shed 3.4 percent and 1.14 percent respectively as investors show displeasure at sales tax hike on alcohol products.

Tobacco firm British American Tobacco reverses earlier losses, ending the day up 1.00 ringgit to 37.75 ringgit, despite a hike in tobacco sales tax. afp/article.html?

Monday, October 30 7:30 PM SGT

Malaysian shares end 2.1 percent lower


Malaysian share prices tumbled 2.1 percent Monday as investors sold on disappointment the 2001 budget lacked sufficient incentives, dealers said.

The Kuala Lumpur Stock Exchange composite index fell 16.77 points to finish at 774.31, off an earlier low of 767.31.

Dealers said the market reacted negatively after the budget failed to deliver a widely expected cut in corporate and income taxes, and a total removal of the 10 percent exit levy on stock market profits.

The levy was lifted only for profits repatriated after a year.

In addition, they said, the market had been artificially supported in the run-up to the budget and investors were now selling "on fact."

The government Friday unveiled a 91.05 billion ringgit (23.9 billion dollar) budget designed to broaden economic recovery, and boost private sector growth and the information economy.

An overall deficit of 16.14 billion, or 4.9 percent of gross national product, is expected -- the country's fourth deficit budget in a row.

"There were so many expectations built into the budget (and now the market is down) because of disappointment," said a research manager with a foreign brokerage.

One senior analyst at another brokerage said the budget was "people friendly but not so friendly for the corporate sector" except for the information technology and food production industries.

Sarawak Securities research chief Loke Chee Kien said the budget proposals appeared to address the micro aspects of the economy rather than macro issues.

"Instead of giving out the gains directly like tax cuts, they are making people work for it. It is sort of a double benefit strategy for the long term," he said, referring to tax exemptions for books and computer purchases, and health check-ups.

Another dealer said there was selling pressure on tobacco and liquor counters after the budget raised sales tax on each to 25 and 20 percent respectively, from 15 percent each.

Volume was 164.973 million shares worth some 376.724 million ringgit (99 million dollars). Losers outnumbered gainers 556 to 69.

Dealers said British American Tobacco rebounded from earlier losses on late institutional support to close up 1.00 ringgit at 37.75. But JT International eased 0.04 to 3.72.

Among liquor stocks, Guinness Anchor fell 0.04 to 3.46 while Carlsberg Brewery shed 0.40 to 11.30.

Maybank lost 0.40 to close at 15.50, national power giant Tenaga Nasional was flat at 12.80, Telekom Malaysia slipped 0.50 to 12.20 while casino operator Genting dipped 0.20 to 10.10.