Govt should review budget

KUALA LUMPUR: The government should review the budget given the significant change in oil prices, said CIMB Group Holdings Bhd chairman Datuk Seri Nazir Razak (pix).
"I will certainly support a review of the budget because it's a material number to the budget and within that, announcement of other initiatives to help meet the targets. One of the targets that external observers are watching for is the budget deficit and the target of 3% budget deficit by 2015. So if we are having this weakness in oil price and impact on the current projections of cash flow from oil, then it is good if the government announces what are the other mitigating initiatives," he told reporters at the sidelines of the launch of a special report jointly produced by CIMB and The Economist yesterday.
"I know oil prices are very difficult to forecast but we've got to have one. At the moment, the number in the budget is too high," he added.
On other mitigating initiatives, Nazir said there has to be clarity in terms of where Petronas dividends are going to be and what are the main drivers because the dividends are not just a function of oil price but also a function of the group's capital expenditure (capex) plans.
"The additional capex spent on the floods for instance, that adds to some pressure and you know where the other initiatives are, those are the typical initiatives for the government to raise money. The government can change some of the taxes and duties and so forth," he said.
He said investors understand that whether the fiscal target is met is a function of oil price and the key is what other measures can be taken to mitigate that.
"Malaysia is still fundamentally extremely strong; look at our reserves, look at the fundamentals of the economy. Immediate detailed numbers like the budget deficit and all that, targets may have to change a little bit but at the end of the day, we shouldn't lose focus of the fact that we have a very strong economy with a robust banking system," he said.
He added that the implementation of the Goods and Services Tax (GST) should proceed as all the assumptions on the GST have been built into the budget and the momentum is already there.
Meanwhile at the launch of the special report titled "Re-drawing the ASEAN Map: How companies are crafting new strategies in Southeast Asia", CIMB Asean Research Institute (CARI) chairman, Tan Sri Dr Munir Majid said Asean companies must understand that the Asean Economic Community (AEC) would
materialise this year and that non-Asean companies were already taking a regional approach on how to operate here.
Speaking at a panel discussion during the launch, he said businesses within Asean must develop a strategy based around the region to capitalise on the integrated regional economy.
"Small and medium enterprises (SMEs) represented by the Asean-Business Advisory Council are generally unenthusiastic and unprepared for the AEC. The Asean Business Club, representing the bigger Asean companies, on the other hand, are enthusiastic but unsatisfied because of the barriers," he added.
Ministry of International Trade and Industry secretary-general Datuk Dr Rebecca Sta Maria said there is still room for improvement in terms of overcoming trade barriers.
"While competition is good for consumers and generally good for the economy, there is a need to balance the level between liberalisation and safeguarding some aspects of the economy to provide the necessary support for the SMEs," she said, adding that there is a need for policy coherence across Asean.