Malaysia unveils spending plans ahead of polls

Associated Press
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Malaysian Prime Minister and Finance Minister Najib Razak, center, holding a briefcase as he leaves from Finance Ministry office in Putrajaya, Malaysia, Friday, Sept. 28, 2012, to Parliament House to unveil the Malaysia's 2013 budget. (AP Photo/Lai Seng Sin)

KUALA LUMPUR, Malaysia (AP) — Malaysia's government plans to splash out $252 billion ringgit ($82.1 billion) next year with cash handouts and affordable housing along with income tax cuts, seeking to shore up support as elections loom.

Prime Minister Najib Razak said Friday the budget will bolster quality of life and ensure economic growth of 4.5 percent to 5.5 percent in 2013. Growth is expected at 4.5 percent to 5 percent this year.

He pledged to spend prudently to narrow the country's growing debt and fiscal deficit. Taking a swipe at Anwar Ibrahim's opposition alliance, he accused them of "promising the moon and the heavens just to gain power."

"This government has never promised the moon, the stars or the galaxy," Najib, wearing a lime green traditional costume, told Parliament.

The 2013 national budget targets lower-income workers with a 1 percentage point tax cut for individuals earning up to 50,000 ringgit ($16,312) a year. Some 4.3 million poor households will get 500 ringgit ($163) each while poor single individuals will receive 250 ringgit ($82) — costing the government a total of 3 billion ringgit ($979 million).

The ruling National Front coalition, which has led Malaysia since independence from Britain in 1957, is striving to claw back support after its worst electoral performance in 2008. It lost more than a third of seats in Parliament to Anwar's alliance amid allegations of corruption and racial discrimination.

Although the National Front is expected to win in polls that must be held by June, the coalition's performance must improve to obtain a strong mandate to rule.

The government earlier this year spent billions on raising government salaries and giving cash to the poor. But Standard and Poor's and Fitch Ratings recently warned of credit ratings downgrade if Malaysia fails to tighten its public finances.

Najib said about 80 percent of the budget will be used for operating expenditures with the rest for development — including infrastructure development, poverty reduction programs, educational training, health care and housing.

He said government revenue will rise 0.7 percent to 208.6 billion ringgit ($68.1 billion), helping to narrow the budget deficit to 4 percent of gross domestic product from 4.5 percent this year. He said the government is committed to cutting this to 3 percent by 2015.

He said plans to implement an unpopular goods and services tax crucial to strengthen public finances would be done in an orderly manner, but didn't give any timeline.

In its economic report released together with the budget, the government said it plans to cut fuel and other subsidies to 37.6 billion ringgit ($12.3 billion) in 2013, down 13.4 percent from this year.

In a reaction to public grumbling over fast-rising house prices, Najib said the government will raise the property gains tax by 5 percent to curb speculation. He said 1.9 billion ringgit ($620 million) has also been allocated to build 123,000 affordable homes next year.

New clinics will be built for the poor, and every school child will receive 100 ringgit ($33) and book vouchers, he said. Some 1.3 million civil servants — a core voter group — will receive a total 1.5 month bonus this year, he said.

Opposition lawmaker Tony Pua said the 2013 budget displays a lack of political will to undertake reforms needed to tackle government debt. He said it was also worrying that development spending crucial to economic growth was declining.