KUALA LUMPUR, Oct 26 — Putrajaya could have raised the revenue needed to address the economic slowdown if it had included an agenda to divest government-linked corporations in Budget 2016, said an economist critical of government dominance in the private sector.
According to Asian Development Bank’s Jayant Menon, existing circumstances such as the plunge in government income due to falling oil and commodity prices made conditions “ripe” for Putrajaya to undertake radical reforms in the economy.
“One such reform would have been the acceleration of the divestment programme for GLCs, which would have provided a much needed windfall to depleted government coffers, while at the same time provided a timely boost to improving the domestic investment climate.
“Instead, the government appears to be viewing GLCs as being part of the solution rather than being part of the problem,” he told Malay Mail Online.
Menon added that allowing GLCs to continue dominating the private sector would also hamper the government’s bid to stimulate private investment and mitigate the effects of a global economic slowdown.
In the budget themed “Prosper the people” tabled last Friday, Putrajaya said it wants private investment and demand to drive economic growth, expecting corporations to provide RM218.6 billion for the purpose.
“The government forecast of 7.1 per cent growth in private investment seems unrealistic in the current environment, where GLCs continue to crowd-out private investment,” Menon said.
He further described the budget as one designed to boost voter support through populist programmes that are introduced under the guise of addressing threats resulting from the coming slowdown.
Menon previously expressed disapproval over the GLCs’ stranglehold on the local economy, which he said crowded out private investment and stifled innovation.
The dominance of state-linked firms is evident in their steady rise in worth, with the top 20 GLCs tripling their market value to RM431.1 billion in the last decade.
The Budget 2016 tabled last week is the 19th consecutive deficit budget from Putrajaya, with a total RM267.2 billion allocated compared with the revised RM260.7 billion in 2015