Malaysia Won't Raise Tax Even as Trade War Halts Fiscal Plan




 

(Bloomberg) -- Malaysia's finance minister said the government won't raise taxes unnecessarily even as the trade war between two of its largest trading partners hampers the state's goal of achieving a balanced budget.

The government will spend within its means and won't add taxes just to fund certain infrastructure projects, Finance Minister Lim Guan Eng said in a Bloomberg Television interview with Haslinda Amin, after announcing the 2020 budget Friday. To raise funds, Malaysia will sell samurai bonds early next year, and continue its pursuit of assets lost in the 1MDB state investment-fund scandal, he said.

The government remains committed to reducing the fiscal deficit in the medium term, and could reach a balanced budget in five years if trade tensions between the U.S. and China are resolved, Lim said.

The government widened its deficit target for 2020 to 3.2% of gross domestic product, from a previous target of 3%, to get the fiscal space it needs to support economic growth. On Friday, Lim announced larger development spending for next year and offered a slew of incentives to win over investors amid the trade war, which he described as a unique opportunity for Malaysia to attract investment.

Special Channel

A special channel aims to make it easier for Chinese investors to enter the Malaysian market starting next year, Lim said in the interview Monday in Kuala Lumpur. He expects foreign-direct investment from China to reach levels of investment from the U.S. and Europe in coming years.

Soon after Prime Minister Mahathir Mohamad returned to power last year, Malaysia halted or canceled major projects and slashed spending to rein in debt. That tone has changed since Lim said in February that he was nearly done cleaning house. The government raised next year's transport allocation by 8.8% to fund a Kuala Lumpur mass rapid transit project and the Pan-Borneo Highway, while allocating 10 billion ringgit ($2.4 billion) to help Malaysians buy homes.

Malaysia will raise funds by selling yen-denominated bonds in the first quarter of next year, with the size to be determined after talks with Japan, Lim said. The government raised 200 billion yen ($1.85 billion) this year at a coupon of 0.53%, lower than the 0.65% he indicated before the sale. Lim said he's open to other types of bonds.

"It's always a pricing issue." he said. "We are willing to consider all issues provided the price is right."

Reparation Payments

Mahathir has made it a mission to bring back money believed to be lost through 1MDB. Lim reiterated that he wants Goldman Sachs Group Inc. to make "reparation payments" amounting to $7.5 billion for the bank's role in arranging bond sales for the troubled state fund. Until then, Malaysia will continue legal proceedings against the U.S. bank and its 17 current and former directors, Lim said.

"I hope they back up their words with deeds," he said, referring to comments from Goldman President and Chief Operating Officer John Waldron, who said last month the bank wants to get the Malaysian people the money they deserve.

"If they want to make Malaysians happy, then back it up with reparation payments," Lim said.

(Updates with details from interview throughout.)

To contact the reporter on this story: Anisah Shukry in Kuala Lumpur at ashukry2@bloomberg.net

To contact the editors responsible for this story: Yudith Ho at yho35@bloomberg.net, ;Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

COMMENTS

More Related News

U.S. weekly jobless claims drift lower; personal income falls in August
U.S. weekly jobless claims drift lower; personal income falls in August
  • US
  • 2020-10-01 12:37:19Z

The number of Americans filing new claims for jobless benefits fell last week but remained at recession levels, while personal income dropped in August, underscoring the need for another government rescue package for businesses and the unemployed. The decline in initial claims reported by the Labor Department on Thursday likely reflected a decision by California to suspend the processing of new applications for two weeks to combat fraud. Economists are warning that the economy and labor market recovery from the COVID-19 slump could sputter without an infusion of new money from the government.

Palantir
Palantir's Crystal Ball Can't Guarantee a Bright Future

(Bloomberg Opinion) -- In a hot market for new technology stocks, it was Palantir Technologies Inc.'s turn in the spotlight on Wednesday. The debut wasn't a complete show-stopper, and that's fine - not everything can, or should, be a market darling. The data-mining company, co-founded by billionaire and Donald Trump supporter Peter Thiel, went public through a direct listing and started trading at $10, above the New York Stock Exchange's $7.25 reference price. A $10 price equates to a market value of about $22 billion on a fully diluted basis, which, while respectable, isn't much higher than its last private fund-raising round in 2015 at $20 billion. Palantir traded as high as $11.42 on...

U.S. private payrolls beat expectations in September
U.S. private payrolls beat expectations in September

U.S. private employers stepped up hiring in September, but diminishing government financial assistance and a resurgence in new COVID-19 cases in some parts of the country could slow the labor market's recovery from the pandemic. "The job market is getting better," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. Private payrolls increased by 749,000 jobs this month after rising 481,000 in August, the ADP National Employment Report showed.

As Brazil
As Brazil's wetlands burned, government did little to help
  • World
  • 2020-09-30 14:12:35Z

After hours navigating Brazil's Pantanal wetlands in search of jaguars earlier this month, Daniel Moura beached his boat to survey the fire damage. "We used to see jaguars here all the time; I once saw 16 jaguars in a single day," Moura, a guide who owns an eco-tourism outfit, said on the riverbank in the Encontro das Aguas state park, which this year saw 84% of its vegetation destroyed. The world's largest tropical wetlands, the Pantanal is popular for viewing the furtive felines, along with caiman, capybara and more.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Latin America