Former finance minister Tengku Razaleigh Hamzah claimed that should his
idea of setting up a sovereign wealth fund to manage oil and gas revenue
in 1980s been accepted, Malaysia might be a wealthier nation now.
“Back then, the concept of a sovereign wealth fund never really existed. Had we pursued that idea then, we would have been one of the first countries in the world to have created a sovereign wealth fund.
“We
might even have been wealthier as a nation considering the bull market
in both bonds and equities for a good part of the past 30 years,” he
said in his keynote speech for the National Economic Outlook Conference
organised by the Malaysian Institute of Economic Research today.
The Gua Musang MP pointed out that the Norgesbank Investment Management (NBIM), which was set up only in 1997 to manage Norway’s government pension fund and its oil profits, has become a model for others to follow as it is subject to high governance and disclosure standards, with reporting requirements to Norway’s parliament.
“The idea of a sovereign wealth fund still appeals to me just as it did back in the 1980s.
“This sovereign wealth fund must be professionally managed and committed to performance, governance and transparency standards that would give the public greater confidence in the government’s effort to save for our future generations,” he said.
Earlier on, Razaleigh, who is also the founding chairperson of Petronas, had revealed that the national oil producer had planned to establish a National Petroleum Heritage Fund.
In his speech entitled ‘Pragmatism in the Face of Present Economic Outlook’, Razaleigh proposed to apply a higher road tax for bigger cars to facilitate the gradual removal of petrol subsidies.
“That means for many of us in this room, myself included, we should pay higher road taxation to proxy subsidy removal for our bigger cars. At the appropriate times, the petrol subsidies themselves should gradually be removed,” he said.
‘Removal of petrol subsidy imperative
He stressed that the removal of petrol subsidy is imperative as it is a drag on government finances and an impediment to proper resource allocation.
On
public housing, he suggested that the government, instead of building
affordable homes for the middle-income class under the 1Malaysia Housing
Programme (PR1MA), should construct more low-cost homes on a scale that
is larger than what it has pursued in the past.
“Increasing home ownership among the lower income level groups via housing finance availability creates a favourable wealth effect as we’ve seen in public housing programmes in other countries.
“As we all know, it also creates considerable knock-on effects on domestic demand. We should consider launching large low-cost housing schemes supported by the availability of finance,” he explained.
The Umno veteran also warned that Malaysia’s household debt-to-GDP ratio, which stands at 77 percent in 2011, would turn out to be an economic threat should the global interest rates increase.
“Some people say that a mid-70 percent household debt-to-GDP ratio is all right - I must add that this comes with a disclaimer.
“So long as global interest rates stay low, it’s fine. If we see an uptick in rates... We need to be sensitive to the accompanying cutback in general consumption that would drag domestic demand.
“In Malaysia specifically, it would add more strain on public finances to keep growth steady,” he added.
“Back then, the concept of a sovereign wealth fund never really existed. Had we pursued that idea then, we would have been one of the first countries in the world to have created a sovereign wealth fund.
“We
might even have been wealthier as a nation considering the bull market
in both bonds and equities for a good part of the past 30 years,” he
said in his keynote speech for the National Economic Outlook Conference
organised by the Malaysian Institute of Economic Research today.The Gua Musang MP pointed out that the Norgesbank Investment Management (NBIM), which was set up only in 1997 to manage Norway’s government pension fund and its oil profits, has become a model for others to follow as it is subject to high governance and disclosure standards, with reporting requirements to Norway’s parliament.
“The idea of a sovereign wealth fund still appeals to me just as it did back in the 1980s.
“This sovereign wealth fund must be professionally managed and committed to performance, governance and transparency standards that would give the public greater confidence in the government’s effort to save for our future generations,” he said.
Earlier on, Razaleigh, who is also the founding chairperson of Petronas, had revealed that the national oil producer had planned to establish a National Petroleum Heritage Fund.
In his speech entitled ‘Pragmatism in the Face of Present Economic Outlook’, Razaleigh proposed to apply a higher road tax for bigger cars to facilitate the gradual removal of petrol subsidies.
“That means for many of us in this room, myself included, we should pay higher road taxation to proxy subsidy removal for our bigger cars. At the appropriate times, the petrol subsidies themselves should gradually be removed,” he said.
‘Removal of petrol subsidy imperative
He stressed that the removal of petrol subsidy is imperative as it is a drag on government finances and an impediment to proper resource allocation.
On
public housing, he suggested that the government, instead of building
affordable homes for the middle-income class under the 1Malaysia Housing
Programme (PR1MA), should construct more low-cost homes on a scale that
is larger than what it has pursued in the past.“Increasing home ownership among the lower income level groups via housing finance availability creates a favourable wealth effect as we’ve seen in public housing programmes in other countries.
“As we all know, it also creates considerable knock-on effects on domestic demand. We should consider launching large low-cost housing schemes supported by the availability of finance,” he explained.
The Umno veteran also warned that Malaysia’s household debt-to-GDP ratio, which stands at 77 percent in 2011, would turn out to be an economic threat should the global interest rates increase.
“Some people say that a mid-70 percent household debt-to-GDP ratio is all right - I must add that this comes with a disclaimer.
“So long as global interest rates stay low, it’s fine. If we see an uptick in rates... We need to be sensitive to the accompanying cutback in general consumption that would drag domestic demand.
“In Malaysia specifically, it would add more strain on public finances to keep growth steady,” he added.
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