New Straits Times, 5 January 2008
KUALA LUMPUR: The government will have to do a careful study before deciding whether to cut or leave the fuel subsidy at its present level, Second Finance Minister Tan Sri Nor Mohamed Yakcop said.
Global oil prices flirted once again with the US$100 (RM330) per barrel mark this week before falling slightly yesterday.
"At US$100, the total subsidies to oil and gas in Malaysia is RM35 billion. Another RM5 billion is for other subsidies like milk, which brings the total subsidies to RM40 billion per year," said Nor Mohamed.
He added that the amount was the same as that allocated to the country's development expenditure each year under the Ninth Malaysia Plan.
"Although the country's growth rate of 6-6.5 per cent per year is good, we need to move to a higher growth trajectory of 8-9 per cent per year like China and India and we can do it. We have done it in the earlier decade."
It is not known when the government will make a decision on the fuel subsidy but he said it would have nothing to do with timing of the general election.
Meanwhile, the government was maintaining its economic growth forecast for this year at 6.5 per cent, with Nor Mohamed anticipating inflation to remain benign, at 2 to 2.5 per cent, and 2008 budget deficit reduced to 3.1 per cent from 3.2 per cent last year.
"We are aware that the external environment will continue to be challenging, even daunting.
"The US appears to be on the edge of a recession, which spills over into consumer confidence and the credit market. The US subprime (mortgage) crisis is turning into a full-blown financial crisis.
"Although we cannot say that we are isolated or decoupled from whatever happens in the US, we believe that Malaysia is resilient enough to overcome these challenges coming from Western countries, particularly the US."
He said for one thing, growing demand in China, India and other emerging Asian markets would offset a possible slowing economy in the US.
"My feeling is that, irrespective of what happens in the US, the growth momentum of China and India's economies will remain strong.
"That is good for us in terms of tourism and exports of our commodities, where the two countries are becoming more important."
Another factor that will fuel the country's growth this year is the development of the regional corridors.
"This is something that is personal to the prime minister (Datuk Seri Abdullah Ahmad Badawi) himself because he came out with this idea of (developing) regional corridors to make sure that the benefits of growth are enjoyed by everyone. This plan will take off this year."
Meanwhile, he said Malaysia was on track to achieve its six per cent gross domestic product growth target for last year or even surpass it.
"The economy grew at 6.7 per cent in the third quarter (of 2007), which was extremely good, and we expect to continue the momentum in the fourth quarter."
On national carmarker Proton Holdings's future, he said it was likely that a strategic partnership would be established over the next three to five years.
"But whether the strategic partner will be an equity partner or a technical partner (for Proton) will have to be discussed and decided upon. It need not be an equity partner, but a technical partner."
He also explained that talks on a strategic alliance with Germany's Volkswagen AG (VW) and US-based General Motors Corp (GM) were called off because the government "believes that Proton will do better in the next few years than what it has done previously".
Nor Mohamed said: "We felt that it was better for Proton to improve its performance (first) so that it will give new confidence to the potential strategic partner and that strategic partnership can be sealed on a more win-win term.
"At the point of time when the VW deal was put on the table, Proton was in a weak position."
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