Tread carefully to avoid a pitfall

ALTHOUGH Dr Mara Warwick of World Bank had commended Malaysia's quality growth and its ability to achieve a high-income economy, the newly-elected government should remain steadfast with its austerity measures. The journey ahead to bring down the mounting national debt to an acceptable level is not only tough but also tedious.
As a cautious Malaysian citizen, I had expressed my support on the implementation of goods and services tax (GST) on many occasions. GST is not only an effective tax regime, but also a transparent and fair system to collect revenue for the government. The more a person consumes, the more he has to pay. Such a system encourages frugality thus reducing wastage along the way in an effective manner.
Since it is an election pledge to reinstate the sales and services tax (SST) and its implementation will take effect from Sept 1 with a two-month tax holiday, I would caution the new government to tread carefully. Although the government should be able to cope with the shortfall of RM20 billion in reinstating SST over the next couple of years, in the long run the compounded shortfall will only worsen the national debt situation.

I urge the government to revert to GST but rename it as value added tax (VAT) at a lower rate, say 4% instead of 6%, in 2020. We shouldn't rely too much on crude oil, although the prices are on the rise lately. Crude oil is a depleting natural resource and its prices are just too volatile to depend on as a reliable source of income to run a country efficiently.
With other subsidies to roll out in compliance with the election manifesto in the coming weeks, the new government has to find ways to manage its economy efficiently. Our country has been running on a deficit budget for too long. As a small economy, we can't afford to run a deficit budget indefinitely. If we continue to be complacent without a clear action plan to arrest the deficit, it wouldn't be long before we may become another victim of overspending like Greece. After enduring eight years of austerity, Greece's hard times aren't over yet.
I was perturbed by Prime Minister Tun Dr Mahathir Mohamad's proposal to launch a Malaysia-Indonesia car project for the Asean market. Hadn't we learnt a lesson from Proton's failure? The automobile industry is just too competitive and saturated. Even Geely Auto of China had to acquire Volvo in 2010 to enhance its technological knowhow and competitiveness, otherwise it might not survive in the industry.
As a 93-year-old veteran, Mahathir should focus all his efforts to rebuild the country instead of the automobile industry. After all, Geely only acquired 49.9% of Proton's equity, thus the controlling interest is still retained by DRB-Hicom. My family is a proud owner of four Proton cars and we hadn't once felt it wasn't a national car, even though Geely has become a substantial shareholder a year ago. My son just bought a new Proton Saga last month.
May 9 was a historic day for many Malaysians, especially those who had voted in favour of the Pakatan coalition. Until now the euphoric mood in celebrating the May 9 victory hasn't fully subsided as yet. Without the great efforts and sacrifices of all members of the Pakatan coalition led by Tun Mahathir, perhaps we may need to wait for another six decades before we can see a new Malaysia.
Patrick Teh
Ipoh