KL unveils $23.99 billion budget to spur growth

KL unveils $23.99 billion budget to spur growth

KUALA LUMPUR (AFP): Malaysia announced yesterday measures to lure high-technology industries and curb imports of intermediate goods in its 1997 budget, which was aimed at coping with lower economic growth.

Deputy Prime Minister Anwar Ibrahim said 1997's budget of 59.982 billion ringgit (US$23.99 billion) would be 1.2 percent lower than the 1996 allocation.

With revenue estimated at 60.778 billion ringgit, it would be Malaysia's fifth surplus budget.

A total of 17.269 billion ringgit of budget spending would be channeled to development and the rest for operating expenditure next year, Anwar said.

Anwar, who is also finance minister, said the budget was aimed at strengthening the foundation of the economy and ensuring the well being of Malaysians.

"The budget strategy is to ensure a "sustained economic growth in the medium and long term," Anwar told parliament.

Economic growth is expected to slow sharply to 8.2 percent this year from 9.5 percent last year. Gross domestic product growth is projected to slow further to 8.0 percent next year.

To underscore Malaysia's intense efforts to develop an information-technology hub, dubbed as a multi-media super corridor, Anwar announced a 100 percent import tax exemption on multimedia equipment.

Multi-media corridor companies would also enjoy a 10-year pioneer status allowing them an income tax holiday to encourage their development in the technology hub, Anwar said.

To curb credit spending, Anwar said a service tax of 50 ringgit per year would be imposed on credit cards. There are now about two million credit cards in circulation in the country.

"Smart cards and credit cards are extensively used. But it should not lead to indebtedness," Anwar said.

Anwar did not announce any cuts in personal or corporate taxes.

To correct Malaysia's wide current account deficit, Anwar announced specific measures to curb imports of intermediate goods and promote the tourism and shipping sectors.

Exports of professional services, including financial, engineering, legal and accounting services would be exempted from services tax.

Import duty and sales tax would be imposed on intermediate goods like spares and consumables used in manufacturing, such as screws and bolts, filters, valves, gaskets, refractory bricks, grinding stones, sandpaper and catalysts.

Such taxes would also be imposed on certain hotel and equipment such as crockery, cutlery, linen and covers.

A five percent import duty currently imposed on components in the assembly industry would be reduced gradually.

The minister also announced a one-month bonus for the country's more than 800,000 civil servants that would cost the government a pay-out of one billion ringgit this year.

Malaysia is forecast to have a 1996 current account deficit of 14.771 billion ringgit (5.9 billion dollars) compared to 18.69 billion ringgit last year. 1997's deficit is expected to improve to 11.497 billion ringgit.