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Sunday, November 18, 2018

Think tank calls for sacrifices to reduce reliance on oil

PETALING JAYA: A think tank has called for urgency in instituting measures to reduce Malaysia’s reliance on petroleum revenues amid concerns over bearish crude oil prices.
Crude oil is now averaging at US$66 a barrel. It was US$81 on Oct 16.
Laurence Todd from the Institute for Democracy and Economic Affairs (Ideas), noted that the national budget for 2019 “does not involve big sacrifices” but he told FMT such sacrifices would be needed if the government was to reduce its dependence on oil.
He urged Putrajaya to plot out a clear plan to cut costs and reduce reliance on oil over the next three years.
He recommended a swift transition to a “genuinely open” competition for contract procurement, saying this would reduce hidden costs.
He also called for “a hard-headed review of subsidies” and to maintain only those that could realise long-term economic benefits.
Referring to the government’s proposal to monetise its assets, he called for “real discipline” and a clear definition of what would constitute non-strategic assets. “Does the government need to own hotels, for example?”
He also suggested a voluntary early retirement scheme for civil servants to reduce ongoing costs and a commitment to addressing revenue leaks and illicit trade.
Ramon Navaratnam, who heads the Asli Centre for Public Policy Studies, told FMT he believes contingency measures, such as cutting out low-priority operating programmes and development projects, should be in place to prevent problems down the line.
He said there is no way of predicting how much lower oil prices would drop, but he warned against “pressing panic buttons”, saying the economy had always managed to survive through fluctuating prices of tin, rubber and palm oil as well as petroleum.
He recommended instead the provision of incentives to the private sector so that businesses would help boost the economy. “Work with businesses and not against them,” he said.
He spoke of sectors besides oil and gas that could be expanded to reduce dependence on the two commodities, citing tourism and agriculture as examples.
“Let the private sector take the risks and lead the economy, not the government,” he said.
He repeated his previous calls for adherence to good governance and for the boosting of government reserves as insulation from fluctuating market prices. - FMT

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