KUALA LUMPUR: The structural reform agenda under the New Economic Model (NEM) is timely for Malaysia to remain competitive and achieve its goal of becoming a high income nation, said London School of Economics (LSE) & Political Science economics professor and council member of Malaysia’s National Economic Advisory Council (NEAC), Prof Danny Quah.
“Since the Asian financial crisis in 1997, we have had a malperforming economy and if we fail to carry out the reforms within the next five years (under the NEM) our weakenesses will continue to affect us,” he said in his talk “Malaysia’s New Economic Model: The Next Steps” organised by the LSE Alumni Society of Malaysia on Friday.
The talk was part of a series of public lectures aimed at bringing together leading figures from the worlds of government, business and civil association in Malaysia to discuss and examine the challenges that the latest economic and political development presents.
In the talk, Quah said despite being one of only 13 countries achieving an annual growth over 7% in the last 25 years, Malaysia was yet to fall within the high-income group of countries.
“Without the NEM, we would be overtaken by our competitors, such as Vietnam and Indonesia and Malaysia will fall within the bottom-income group of countries,” he added.
He also applauded the Prime Minister for implementing the NEM, arguing it was a move in the right direction.
“I am impressed with the political leadership, its need for strategic reform initiatives and that change is needed. The Prime Minister is constantly talking about how the market needs to be merit-based and there is more need for transparency.”
Quah joked that the NEM helped “bring Hulu Selangor back to the Federal Government.”
To a question from a participant on the impact of the political problems in Thailand, and its impact on Asean, Quah said: “I hope Thailand will return to political stability soon as it would benefit the whole of Asean.”
Meanwhile Bernama reported that Quah said the NEAC was currently studying cutting the rate of corporate and individual income taxes, and moving towards a broad-based tax system such as goods and services tax (GST). “One of the proposals we are considering is lowering the taxes by one percentage point every year for the next three to five years,” said Quah. “We might begin by replacing the current service tax with GST which will exclude food and basic necessities,” Quah said, according to Bernama.
He said the study on possible tax cuts was done – despite some political opposition amid shrinking government revenue – as it encourages people to save and make investment. “Other countries have discovered that this (tax cut) is the best way,” he said.
Meanwhile, corporate figure Datuk Azman Yahya said the Government understood the structural problem in the economy and was trying to rectify them, the Bernama report said.
The Government has the ability to articulate sensitive issues and they are brave to focus on needs based and not race based.
NEAC Looking At Tax Cuts
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By: Ramjit
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KUALA LUMPUR, May 1 (Bernama) — The National Economic Advisory Council (NEAC) is currently studying cutting the rate of corporate and individual income taxes, and moving towards a broad-based tax system such as goods and services tax (GST).
“One of the proposals we are considering is lowering the taxes by one percentage point every year for the next three to five years,” said NEAC member Prof Danny Quah who is also Head of Economic Department of London School of Economics (LSE).
“We might begin by replacing the current service tax with GST which will exlude food and basic necessities,” he told reporters after a talk at the LSE Alumni Malaysia Public Lecture on Malaysia’s New Economic Model here Friday night.
He said the study on possible tax cuts was done despite some political opposition amid shrinking government revenue as it encourages people to save and make investment.
“Other countries have discovered that this (tax cut) is the best way,” he said.
During his talks, Quah said that although there were pessimists and sceptics on the New Economic Model, the government had a strong will to ensure its materialisation.
“I am impressed to see the government is committed to go forward,” he said, adding that he believed the government would continue the economic reform.
He noted that the government was focusing on the weak and vulnerable and the merit-based reform.
He said the New Economic Model would add value to existing sectors and increase productivity. “We can no longer do this the old way if we want to go forward,” he said.
— BERNAMA