KUALA LUMPUR: Prime Minister Najib Tun Razak today unveiled Budget 2011 aimed at drawing in foreign investors who have shunned the country in favour of more dynamic neighbours.
Najib promised major infrastructure projects, financial market liberalisation and pre-election sweeteners on housing and transport in what is likely to be his last budget before polls tipped for next year.
"The 2011 Budget will emphasise efforts to transform the nation into a developed and high-income economy with inclusive and sustainable development," Najib told the Dewan Rakyat (Parliament).
Malaysia is moving to reverse a sharp decline in foreign direct investment, which fell 81% to US$1.4 billion (RM4.3 billion) in 2009 from US$7.3 billion in 2008.
Neighbouring Southeast Asian economies including Singapore, Thailand and Indonesia have outshone Malaysia with much higher inflows.
Najib, who is also finance minister, is attempting to spur employment and economic growth before going to the polls, after being humbled in the 2008 election in which the opposition scored unprecedented gains.
The government had already announced it was again delaying implementation of a controversial goods and services tax which had been due next year, in the face of strong public protest.
The budget also includes a scheme for first-home buyers to have their 10% deposit guaranteed by the government, and a 50% rebate on stamp duty.
A massively unpopular scheduled hike in toll charges for a major highway will also be frozen for the next five years.
New landmark in KL
Malaysia recently announced ambitious plans to double private investment over the next 10 years, and to propel annual growth to an average of 6.0% to meet its goal of achieving developed-nation status by 2020.
Najib said that the growth forecast for 2010 had been raised to 7.0% from 6.0%, well up on the 1.7% contraction of 2009. The economy is expected to grow by 5% to 6% in 2011.
He said that to attract foreign funds, government-linked companies – which have been blamed for suppressing competition -- would divest their holdings in listed companies, increasing "liquidity and trading velocity in the market".
There will be some major share offerings, including a sale of state energy firm Petronas' chemicals arm, which is estimated to be worth US$4.0 billion.
Among the infrastructure projects, a government investment arm is to develop a 100-storey tower to be completed by 2015 at a cost of US$1.6 billion. It will be the tallest in Malaysia, exceeding the landmark Petronas Twin Towers.
Najib's ruling Barisan Nasional lost its two-thirds majority in Parliament and control of five states in a 2008 election. It is now battling to win back the support of minority Chinese and Indian voters who deserted it.
It is also concerned at the prospect of losing its traditional voter base, ethnic Malays who dominate the multicultural population, to the conservative Islamic party PAS, which is part of the opposition alliance.
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