Strong domestic economy will cushion volatility, says Najib

KUALA LUMPUR, Oct 3 — The government’s continuing quest to build up a strong domestic economy is crucial to ensuring sustainable growth and cushioning the nation against downside risks due to the volatile global economy, Prime Minister Datuk Seri Najib Razak said today.

He said that creating a stronger domestic economy and consolidating subsidies are among pivotal thrusts of the government as evidenced by proposals made in the 2013 Budget.

“There is always a downside risk of the external environment to the local economy for which pro-active steps should be taken to address them.

“It is not within our control. The external global economy is beyond us, you’re absolutely right and we have to take that into account,” Najib (picture), who is also finance minister, said when asked on the downside risks of the external environment on the country’s economy despite having good economic growth numbers, increased foreign direct investments (FDIs) and ringgit appreciation.

“We are trying to develop, first of all, a very strong domestic economy that will persevere and the engine of growth will come from the domestic economy,” he said during a pre-recording of the CNBC Conversation programme here today anchored by renowned anchor Martin Soong.

“That is why we have done everything that is possible to encourage business and facilitate domestic investments in this country,” Najib said.

Getting a fresh mandate from the upcoming general election is crucial to ensure continuity of the Economic Transformation Programme (ETP) and Malaysia achieving its high-income nation status, he said.

The prime minister said the next five years would be very crucial for his government in delivering these promises.

Through implementation of projects under the ETP, Malaysia would be able to reduce the country’s dependency on resources like oil as the major source of revenue while developing other sectors that can generate new revenues, he said.

Besides diversifying the income stream for the country, Najib said that it was important to rationalise subsidies and deliver targeted subsidies to certain groups.

He said that it would not be right to raise prices of subsidised items just after getting a mandate for the next five years as the people might question the government’s sincerity.

Measures to lower subsidies and raise prices for subsidised goods were the correct steps to take which should be beneficial to the people in the long run.

“The key is targeted subsidies.

“There’s a lot of leakages out of the system and you’ve got to plug these holes. You need to tell people what is good for them (and) what is good for the country, is by focusing on targeted subsidies,” he said when asked whether reducing subsidies and the implementation of Goods and Services Tax (GST) are among the first agenda on the table once his government wins the election.

Najib also pointed out the importance of having free trade agreements on the back of global uncertainties and strengthening trade relations between Asean countries and East Asian countries to build a strong domestic economy.

“We know that the engine of growth will come from the domestic economy in the short-term but we see Asean and East Asia as very important markets for us, both in terms of exports as well as sources of FDI.

“Making Asean and East Asia more regionally integrated will be the key,” said Najib.

Asked on the real risks Malaysia might face in participating in the Trans-Pacific Partnership (TPP), the prime minister said: “Again, there is a need to strike a right balance between what would be considered as acceptable.

“The message I’ve relayed to the United States and the US Secretary of State Hillary Clinton in Vladivostok was (that) we have to come down from our rather lofty positions and become more practical because if we get 70 per cent of what we want, it’s better than no deal at all,” he added.

The TPP is a free trade agreement initiative involving nine countries comprising Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.

So far, 14 rounds of negotiations have been held.

The 30-minute recording will air at 12pm on Saturday. — Bernama