Malaysia premier vows new way of doing business

Asian Economic News, Jan 16, 2004

KUALA LUMPUR, Jan. 13 Kyodo

Malaysian Prime Minister Abdullah Ahmad Badawi on Tuesday outlined his economic vision to the nation, pledging to push fiscal discipline and transparency and reiterating that the Malaysian currency ringgit would remain pegged against the U.S. dollar for the time being.

''In terms of public sector performance, I see two immediate priorities. The first is to maintain strong fiscal discipline and prudence in moving towards a balanced budget,'' he said in his first major policy speech before corporate leaders and scholars. ''Secondly, the public sector must improve the delivery of its services, in order to lower the cost of business and enhance the transparency and integrity of our governance,'' he added.

Abdullah said the government is committed to reducing the budget deficit since going on an expansionary mode to lift the economy, which was hammered during the 1997 financial crisis.

''We have targeted to achieve a balanced budget in the medium term. We must at this juncture prioritize the nation's needs,'' he said.

Malaysia's budget deficit is predicted to be around 4.4% of gross domestic product last year, and there are plans to narrow it to 3.3% this year.

Abdullah has already shown he means business by shelving a multi-billion dollar double-tracking rail project that his predecessor Mahathir Mohamad approved.

''Now that we are out of the woods, the private sector must resume its role as the engine of economic growth. Deficit spending is not meant to be a way of life for us and I am committed to ensuring that the federal government budget deficit will be gradually reduced in the coming years,'' he said.

Abdullah also pledged to be more open with the tendering system for government contracts.

The government tender system was often criticized during Mahathir's administration. Contracts were often given out to an elite group of businessmen in a process shrouded in secrecy.

''Tender processes need to be transparent, with open tendering being the norm. Direct negotiations will be limited to very special cases. In this manner, an open tendering system will help promote efficiency and competition, which would directly lower the cost of doing business,'' Abdullah said.

He also sounded a warning to companies that have long enjoyed special treatment from the government.

''Protected companies or monopolies are rarely ever leaders in innovation and creativity. With this in mind, the government is in the midst of formulating a comprehensive competition policy to ensure a sufficient level of healthy competition across various industries,'' he said.

Abdullah also reaffirmed his commitment to give the agriculture sector a more prominent role to play in the economy by modernizing the techniques and marketing approach.

The government would continue to carve niche sectors such as biotechnology, tourism, Islamic financial services and the information technology sectors in a move to counter the outflow of investment to countries like China that offers cheap labor.

''We can no longer compete purely on labor costs against lower wage-based countries. We find it difficult to match the capabilities of more technologically advanced countries. We have no option but to move up the value chain. We have little choice but to transform again, to become a knowledge-based economy,'' he said.

Meanwhile, Abdullah reaffirmed that the ringgit, which is pegged at 3.80 to the dollar, would stay despite market talks of a review.

''It will remain as it is. I feel the present situation does not warrant in a change of the peg...It provides stability and predictability,'' he told a news conference after the dialogue.

Analysts believed a review was in the offing following the recent plunge of the U.S. dollar.

Standard Chartered Bank in its report this week said the pressure to review is ''at an all time high.'' Its own indicators showed the ringgit has strengthened by 19% to the dollar.

The peg was imposed by Mahathir in 1998 after the Asia financial crisis pushed the ringgit down by more than 30% resulting in the country's worst economic recession in more than a decade.

However, Abdullah, who took over the top job in October, signaled flexibility in floating the ringgit.

''We are not dogmatic about it. We are not saying that it is going to be there forever and ever,'' he said.