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Contents

1.0 INTRODUCTION ............................................................................................................................ 2
1.1 BUDGET ...................................................................................................................................... 2
1.2 BUDGET POLICY ....................................................................................................................... 3

2.0 BUDGET TRENDS .......................................................................................................................... 4
2.1 PUBLIC SECTOR SPENDING ................................................................................................... 5
2.2 DEVELOPMENT SPENDING .................................................................................................... 6

3.0 PUBLIC SECTOR REVENUE ........................................................................................................ 8
3.1 TAX REVENUE ........................................................................................................................... 8
3.2 NON-TAX REVENUE ............................................................................................................... 13

4.0 PUBLIC SECTOR EXPENDITURE .............................................................................................. 13
4.1 FEDERAL GOVERNMENT DEBT .......................................................................................... 13
4.2 TRENDS OF FEDERAL GOVERNMENT DEBT .................................................................... 14
4.3 LOAN RESOURCE .................................................................................................................... 17
4.4 NATION DEBT .......................................................................................................................... 19

5.0 PUBLIC SECTOR AND PRIVATIZATION ................................................................................. 21







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1.0 Introduction
Government budget is a legal government document where stated the estimation of
revenue and expenses for a financial year that is often passed by the legislature, approved by the
chief executive. Malaysia yearly budget is usually presented by our nation Finance Minister on
the month of October. It is an economic and finance planning which describe the nation
economic position on the particular year and economic prospect for the following year.
Beside describe issues and challenges faced and steps taken by government to overcome
the issues, budget also describe resources nation revenue which the revenue spent for
maintenance and development purpose with the sources of financing which includes taxes and
loan within and outside the country.
Budget speech and annual economic report are complete documents which explain the
economic and finance data for that particular year and projection for coming year.
1.1 Budget
Budget is a statement of revenue and government expenditure a particular year. Revenue
and expenses are two basic elements in government budget. Revenues are obtained from taxes in
the case of the government and government expenses are included government consumption,
government investment expenditure and transfer payment. There are three type of government
budget such as balanced budget, surplus budget and deficit budget.
Balance budget is when government revenue equal to government expenditure. This
situation normally does not exist. Surplus budget is when anticipated revenue exceeds
expenditure. This situation normally happen when government reduces the expenses, increases
the tax or both. Deficit budget is anticipated expenditure greater than revenue. This situation
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normally happen when government increase the expenses or reduce the taxes or implement both
together. Deficit will financed by loan from financial institution.
1.2 Budget Policy
Budget is an annual planning which important to create economic growth and income
distribution in steady financial framework. There are objective and the importance of budget
policy presented in every year such as toward efficient economic management, controlling
expenditure, economic growth, the price stability and controlling inflation. Generally, objective
of annual budget is leads to stability and growth in economic and finance of nation.
The aim of efficient economic management is to achieve the development goal. The
important role of economic management to ensure financial position and balance of payment is
steady. Private sector and non-government association have to play role as engine of role and
government has to play role as supporter by providing good facilities in order to achieve good
economic growth.
Expenditure controlled is the main important target in budget policy. It stated that
development expenditure and maintenance expenditure are increase rapidly which unable
accommodated by revenue collected. There are many steps taken in order to reduce the
government expenditure since year 1980. Besides that, there are step taken to absorb bank excess
liquidity and stem consumer consumption expenditure.
Price stability and inflation control are important goal in annual budget. Stable economic
condition will lead to an increase in domestic demand which cause an increase in income and
accent price increase and increase forecast inflation. The effort to stem inflation is taken by
controlling price level in order to form price stability in market and encourage saving to attract
money available in the market.
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Taxation and public expenditure are two element used in fiscal policy. The aim of fiscal
policy implementation in budget is to achieve economic growth or remain the growth, increase
production capacity; controlling price level and inflation pressure and ensure equitable
distribution. Fiscal policy is implemented by restructuring tax system, update the existing tax
incentive and erect capital market.
2.0 Budget Trends
Public sector spending in Malaysia includes spending of federal government; state
government and. Public sector spending can be divided into two groups which are operating
expenditure and development expenditure. Operating expenditure consists of service goods
expenditure and transfer payments. The development expenditure is for model goods.
The total expenditure of government
Tahun Jumlah perbelanjaan (RM million)
2009 206, 582
2010 204, 415
2011 229, 010
2012 249, 549
2013 244, 127
Source : www.treasury.gov.my
The table 1.1 shows the total public sector expenditure of Malaysia from 2009-2013. From
the table we can see that the total expenditure of the government in public sector decreased
by 1.04% from year 2009 to 2010. The expenditure shows an increasing trend from the year
2010 to 2012. The increase is about 22.07 %. By the year 2013, the total public sector
expenditure decreased about 2.17%. Government allocated a amount of RM 264.2 billion for
the expenditure in public sector for the current year, 2014.
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2.1 Public Sector Spending
Operating expenditure is the expenditure of the Government or government recurrent
expenditure for management and administration. This includes expenses for salaries
(emoluments) civil servants, debt service, pensions and benefits, subsidies to producers and
consumers, and grants and transfers to the State Government and statutory bodies. Government
expenditure does not depend on the level of national income. While national income increased or
decreased, government expenditure remains the same.

Source : www.treasury.gov.my
Table 1.1 shows the governments operating expenditure from the year 2009 to 2013. The
total operating expenditure increased rapidly from year 2009 to 2013, although the expenditure
experiences fall in the year 2009 to 2010 and 2012 to 2013. Based on the table 1.1, the
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government spent more on emoluments compared to the other criteria. The trend of expenditure
on emoluments shows increase from year 2009 to 2013 with a increasing percentage of 37%.
While, the expenditure on refunds and write-offs are the lowest among other expenditure. It
shows an increasing trend from the year 2009 to 2012 and fall slightly from the year 2012 to
2013. The 2014 Budget will allocate a total of RM264.2 billion to implement programmes and
projects for the well-being of the rakyat and national development. Of this amount, RM217.7
billion is for Operating Expenditure while RM46.5 billion for Development Expenditure.
Under operating expenditure, RM63.6 billion is allocated for emoluments and RM36.6
billion for supplies and services. Meanwhile, RM114.5 billion is allocated for fixed charges and
grants, while RM1.4 billion is for the purchase of assets. The remaining RM1.5 billion is for
other expenditures.
2.2 Development Spending
Development expenses are expenses incurred to promote economic growth and social
development. Development expenses include expenses to build schools, airports, and
infrastructure. Typically, the level of government expenditure depends on the economic situation.
When the economy goes into recession, the government will increase the amount of development
expenditure to boost economic growth.
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Source : www.treasury.gov.my
Based on table 1.2, the total development expenditure increased from the year 2009 to
2010 by 6.61% but it show a constantly decreasing trend from the year 2010 to 2013. The
percentage in decrease from 2010 to 2013 is 20%. From the table above, we can conclude that
expenditure for economic services are higher than other service sectors.
In the budget allocation of 2014, government allocated a sum of RM46.5 billion for development
expenditure. From the Development Expenditure of RM46.5 billion, a sum of RM29 billion is
allocated to the economic sector. A sum of RM10.5 billion is allocated to the social sector for
education and training, health, welfare, housing and community development. In addition,
RM3.9 billion is allocated for the security sector. The balance of RM1.1 billion is for general
administration and RM2 billion for contingencies.

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3.0 Public Sector Revenue
3.1 Tax Revenue
The current tax system in Malaysia is called the self-Assessment system (SAS).SAS was
implemented in 2004 as a result of a tax reform aimed to streamline the tax-administration
system. The self-assessment system requires tax-payers to determine their own tax liabilities and
make payments accordingly.
The government tax revenue is collected from two sources; namely the tax revenue and the non-
tax revenue. The tax revenue can be further divided into two categories; direct tax and indirect
tax. There are five structures under the direct tax.
First is income tax. According to the tax system in Malaysia income tax is defined as a
resident individual is subject to tax on income accruing in or derived from Malaysia and income
received in Malaysia from outside Malaysia, while a non-resident individual is subject to tax on
income accruing in or derived from Malaysia (Tax system in Malaysia, ASEAN tax system
seminar, 2010)
Section 4, income tax act 1967 (ITA 1967) classifies income that is subject to gains or profit
from a business for whatever period of time carried on, gains or profit from employment
dividends interest or discounts, rents, royalties or premiums and pensions, annuities or other
periodical payments.
Second is corporate income tax. It is defined as; a tax levied on the income of a legal
entity. In Malaysia resident companies are subject tax on income accruing in or derived from
Malaysia. Taxable incomes include gains from business dividends, interest and rentals, royalties,
premiums and other gains and profits. Third is stamp duty. Stamp duty is a tax imposed on legal
documents, usually for the transfer of assets or property. The transfer of property is only legal
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once the documents have been stamped. According to the Malaysian definition stamp duty is
imposed on legal, commercial and financial documents that are listed in the first schedule of the
stamp Act 1949.documents subject to duties are called instruments (Inland Revenue Board of
Malaysia).The fourth category is estate duty. Estate duty is a tax levied on a persons assets; it
can include cash and non-cash assets. The tax is usually imposed for deceased persons assets.
Finally direct tax also includes Real property gains. It is defined as a tax imposed on the
chargeable gain obtained from the sale of property. Chargeable gain is a profit that a person
receives when he/she sells of a property. The second tax category is indirect tax. It consists of
first Import duties. Import duties are taxs levied on goods imported into Malaysia. Duties are
calculated based on complete shipping value. Duty rates vary between 0% and 50% and it
averages 5%.However some goods are exempted from import duties for example electronic
products and musical goods. Second is Export duties. Export duties are tax levied on goods
exported out of the country. Export duty tax (revenue) was measured in 2010 at a rate of
1.65%.Third section under indirect tax is Excise duty. According to MIDA (Malaysian
investment development authority) excise duties are levied on selected products manufactured in
Malaysia which namely cigarettes, tobacco products, alcoholic beverages, playing cards,
Mahjong tiles and motor vehicles. The last two tax categories under indirect tax are the sales tax
and service tax, both of which substantially contribute to the annual tax revenue. In Malaysia
sales tax are levied on manufacturers or importers. Licensed manufacturers are supposed to
charge 10% sales tax on the value of their manufactured products. Under sales tax certain goods
are exempted for example raw materials and machinery used in production. While the service tax
is a tax imposed on specific services called taxable services. In Malaysia it is imposed on certain
goods such as food, drinks and tobacco as well as professional and consultancy services.
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The diagram below illustrates the trend in tax revenue collection from the year 1990 to
2013.It can be observed that the tax revenue collection gradually increases every year except for
a few years which indicate negative trend. In this report the revenue collection from the years
2008-2012 will be analyzed.


In 2008 the Inland Revenue board Malaysia (IRBM) posted record revenue collections
compared to previous years. The overall tax collection increased by RM15.948 Billion in 2008
from RM 74.703 Billion collected in 2007.This indicated a 21.35% increase in tax revenue. The
increase in tax revenue was due to strong economic performance, favorable business conditions
and increasing oil price.
The IRBM collected a total of RM 90.65 billion in taxes in 2008.It is worth noting that
this was direct and indirect tax collections. The graph below illustrates the IRBM revenue
collection from 2004-2008.It can be observed that revenue collection gradually increased every
year. Tax revenue collection rose by RM 42 billion from 2004-2008.
The tax revenue for 2008 can be broken down into segments. It includes income tax
(Company, individuals, petroleum, corporation, organizational, trust bodies and withholding tax)
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and other taxes such as stamp duty, Real property gains tax (RPGT), Labuar offshore business
activity tax, and estate duty and business registrations. Furthermore the contributions of the
various taxes varied differently. The biggest contributor to the total tax was company tax which
contributed RM46.90 Billion/51.74%.Followed by petroleum tax (RM24.19 Billion/26.69%) and
then individual tax (RM 14.35 Billion/15.83%).On the other hand the real property gains tax
revenue declined by 60% from 2007 to 2008.This was because the real property gains tax (RPGT)
was no longer imposed in 2007 however in 2008 the RPGT was imposed once again. The table
below shows the revenue collection between 2007 and 2008.
Table 1: Collection of Direct Taxes in 2008 and 2007

Source: www.tresury.gov.my

In 2009 the total tax revenue received by IRBM was RM88.40 Billion.in comparison to
2008 the revenue decreased by RM2.25 Billion. This was due to the global economic crisis that
started at the end of 2008.On the other hand the revenue collection in 2009 exceeded the
government estimate of RM78.73 Billion (After tax refund).If the tax revenue is broken into
segments, Company tax still accounts for a large portion of the revenue collection (RM 40.27
Billion/ 45.55%) followed by petroleum tax (RM 27.23 Billion) and individual tax of RM 15.57
Billion. However in comparison to 2008 company tax declined substantially by around 6.19%
while petroleum tax increased by 4.11% and individual tax increases marginally by 1.79%.
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In the aftermath of the economic crisis naturally the tax revenue collected in 2010 declined. Total
gross tax revenue was RM86.50 Billion and this contributed 53.35% to total estimated
government revenue. On the other hand the net direct tax revenue (deduct tax refund fund of
RM6.96 Billion) exceeded government estimates of RM76.16 Billion).The gross tax collection
from 2008-2010 has been steadily declining while the percentage of gross collection in Federal
Government revenue has been marginally declining. If we attempt to analyze the revenue
collection by components, the company tax revenue was RM 43.80 Billion which accounts for
50.64% of total tax revenue. However it is worth noting that company tax revenue has been
declined from 2009 to 2009 and then increased substantially in 2010.Company tax decreased
from RM 46.90 Billion to RM 40.27 Billion and then increased to RM43.80 Billion.
The petroleum tax revenue which is one of Malaysias main export commodities was RM
18.71 Billion. The petroleum tax revenue steadily declined from 2008 to 2010 due to two reasons,
first there was a drop in crude oil and natural gas price and second, the tax assessment method
for upstream petroleum companies changed. Individual tax revenue collected in 2010 was
RM17.80 Billion. Other tax revenue collections were corporate tax (RM 0.38 Billion) and stamp
duty (RM 4.20 Billion).
The trend of low tax revenue collection changed in 2011.The IRBM posted record tax revenue
collections. The tax revenue collected was recorded at RM109.609 Billion, which was the
highest in history. The 2011 tax revenue contributed 59.11% of the total estimated federal
government revenue. Most of the tax segments recorded an increase in tax revenue compared to
2009 and 2010.The company tax revenue which is still the largest segment by revenue collection
was RM 55.08 Billion, it increased from RM43.80 Billion in 2010.Furtheromore the petroleum
tax revenue substantially increased from RM 18.71 Billion in 2010 to RM 27.75 Billion in
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2011.The individual tax revenue also increased marginally from RM 17.80 Billion in 2010 to
RM 19.38 Billion in 2011.Other tax segments that increased was Stamp duty, withholding tax
and real property gains tax.
The tax revenue collection in 2012 surprisingly exceeded that tax collection in
2011.Revenue collection was RM 124.7 Billion. This figure exceeded the government revised
estimate of RM123.8 Billion. Furthermore from 2011 the tax revenue increased by 13.8%.This
high revenue comes at an appropriate time when the government is trying to reduce its fiscal
deficits.
In conclusion the tax revenue collection (both revenue and non-tax revenue) illustrate a gradual
increase over time from 1990 to 2013.Revenue declined from 2008-2010 due to the effects of the
financial crisis, however from 2011 it has improved markedly.
3.2 Non-Tax Revenue
The other tax structure under tax revenue is the Non Tax revenue. It includes fees for
issue of licenses and payment, fees for specific services, proceeds from the sale of government
assets, rental of government property, bank interest, returns from government investments and
fines and forfeitures.
4.0 Public Sector Expenditure
4.1 Federal Government Debt
The federal government debt is defined as the total amount of money that a federal
government owes to creditors. Basically, there have two type of federal government debt which
is domestic debt and external debt. Indeed, a federal government debt exists as a result of federal
government shortfalls, or deficit budgets in which the government's expenses exceed its revenues.
However, there is a difference between deficit and debt which deficit does not mean as debt.
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In Malaysia, the Minister of Finance will present the annual budget in parliament in a
particular date to explain annual economics report and the allocation funds for public sector
expenditure and the expected revenue for next year. The annual budget presentation in Malaysia
frequently tabled at the end of the year. Indeed, if the deficit budget was implemented, one of the
financing resources that federal government will be loan. Therefore, the loans have been created
the federal government debt.
4.2 Trends of Federal Government Debt
In the early 90's, the economy of Malaysia is booming with sustainable economic growth.
In the same time, the trend of federal government debt declined from the early 90's at a level of
around 80% relative to GDP until the lowest in 1997 at 32%. Meanwhile, the federal government
debt as a percent of GDP, also known as debt-to-GDP ratio, is the amount of national debt a
country has in percentage of its Gross Domestic Product. It is one of the key indicators that used
to measure the ability of payback of a country. The graph below show the overall trends of
federal government debt in a certain period.









0
10
20
30
40
50
60
70
80
90
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
P
e
r
c
e
n
t

o
f

G
D
P

Year
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Based on the graph above, we found that the federal government debt to GDP was decreasing
significantly started from the year 1990 until year 1997. However, the debt was slightly
increased after year 1997. This is because the Southeast Asian economic crisis was happening at
year 1997. The Southeast Asian economic crisis in 1997 induced the government debt increased
consistently since the government had to implement the deficit budget to boost the domestic
economic downturn. Therefore, the federal government debt turn back from as low as 32 %
(1997) to the level of around 53% in 2009. In addition, the most significant changes of federal
government debt to GDP was year 2009 which the changes of around 29.48% from year 2008 to
year 2009. This is due to the global financial crisis happened in year 2008.
Basically, the federal government will borrow the domestic loan compare to external loan.
In additional, both of the domestic debt and external or foreign debt also exists short-term debt
and medium and long-term debt. Generally, the short term debt is defined as the debt which had
one year period and the medium and long-term debt is involve more than one year. The table 2.1
below shows the total of federal government debt for a certain latest years.









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Table 2.1 Total of Federal Government Debt 2008 2013
Central Government Debt
Unit
Description 2008 2009 2010 2011 2012 2013
Current liabilities, total RM million 306,437 362,386 407,101 456,128 501,617 539,858
Short-term debt RM million 4,320 4,320 4,320 4,320 4,320 4,320
Medium and long-term debt RM million 302,117 358,066 402,781 451,808 497,297 535,538

Domestic debt RM million 286,121 348,600 390,356 438,025 484,769 523,095
Short-term debt RM million 4,320 4,320 4,320 4,320 4,320 4,320
Medium and long-term debt RM million 281,801 344,280 386,036 433,705 480,449 518,775

Foreign debt RM million 20,316 13,787 16,746 18,105 16,848 16,763
Short-term debt RM million 0 0 0 0 0 0
Medium and long-term debt RM million 20,316 13,787 16,746 18,105 16,848 16,763

Foreign debt by currency
USD RM million 12,726 7,072 10,156 11,157 10,782 11,120
Yen RM million 7,070 6,586 6,500 6,874 6,013 5,193
Other RM million 520 129 90 74 52 450
Debt guaranteed by Federal Government RM million 69,236 84,315 96,907 117,108 143,109 156,808
(Source: Bank Negara Malaysia)
According to the table, the total of federal government debt from year 2008 to year 2013
shows a positive increasing trend. The total debt for year 2008 is RM 306,437 million and
increased to RM 539,858 million in year 2013. Generally, up to fourth quarter of year 2013, the
federal government debt in total has reached around RM 540 billion or approximately 54.8% of
nominal GDP. With the constants trend of short-term debt, we found that the increasing of total
federal government debt is due to loan of medium and long-term debt. Besides that, we also
found that the domestic debt which is primarily denominated in ringgit, accounts for over 90% of
total debt for every years. The ratio of foreign holdings of federal government debt has been
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rising steadily since 2005, but it is still at a fairly low level. Meanwhile the federal government
external debt will not significantly affect the whole economy of Malaysia.
According to the Malaysia Economic Report 2013/2014, the government will ensure that
the debt level remains sustainable through sound macroeconomic policies, prudent debt
management strategies as well as strict adherence to fiscal rules and regulation. Although the
debt level has remained high, especially since the 2008 global financial crisis, debt servicing
capacity is within the prudent limits.
In additional, the second thrust of 2014 Malaysia Budget presentation is to strengthen the
fiscal management. To enhance the budget management, the Government established the Fiscal
Policy Committee (FPC). Meanwhile, the role of Fiscal Policy Committee (FPC) is to strengthen
the Governments financial position, ensure fiscal sustainability and long-term macroeconomic
stability with the aim of achieving a balanced budget by 2020. Besides that, the Government will
also ensure that Federal debt level will remain low and not exceed the debt ceiling of 55% of
GDP as mentioned in Budget 2013.
4.3 Loan Resource
Loan resources differ according to the types of internal and external loan. Internal loan
resources normally get by issue government bonds or securities or borrow from others loan
resources in country. The federal government can get loan by issued government securities,
treasury bills or investment certificates. Government security is an agreement contract between
government and borrowers. It is a long-term loan with maturity period more than one year.
Government securities issued with face value and interest is paid for every securities holder.
For Malaysia, the main loan resource is Employees Provident Fund (EPF) who contributes
almost 51% of national debt. Treasury bills are short-term loan with maturity period less than
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one year. Treasury bills are issued by Malaysia's Central Bank. It is issued with discount price on
its face value and Malaysia's Central Bank will pay at face value price when it reached mature
period. Commercial bank is the biggest loan resources for government treasury bills. Investment
certificate is release purposely for financial institutions such as Bank Islam Malaysia Berhad,
Bank Muamalat Malaysia Berhad, Syarikat Takaful Malaysia Berhad and Lembaga Tabung Haji.
It is sells on face value and dividend is paid on mature period which is one year or more than one
year. Besides that, internal loan resources can also get by borrow from commercial banks, EPF,
and others domestic borrowings.

Source: Economic Report 2013/2014
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From the Economic Report 2013/2014, we can see that loan from treasury bills is almost
the same for 2009 to 2013 which is RM4320million. While for the investment certificates, it is
increasing sharply from 2009 to 2013, which is increase about 185% from RM56000million to
RM159500million. Government securities also increase from RM242270million in 2009 to
RM294931million in 2013. Domestic borrowings increase from 2009 to 2011 but started to drop
from RM45992million in 2011 to RM44799million in 2012 until RM44100 in 2013.
External loan resources usually come from external market loans. Loan is collected by
selling government securities in the international financial markets such as Tokyo, London and
New York. Syndicated loan from international market especially from developed country such as
United States, Japan and Germany is also a kind of loan resources. A syndicated loan is one that
is provided by a group of lenders and is structured, arranged, and administered by one or several
commercial banks or investment banks known as arrangers. External loan resources can also be
get through external project loan. External project loan is a loan given purposely to support
particular development projects that require large amount of expenditures. Asia Development
Bank and World Bank are the two main resources for external project loan.
4.4 Nation Debt
National debt is the sum of public sectors external debt (included of federal external debt
and NFPEs) and private sectors external debt. Non-Financial Public Enterprises (NFPEs) are
resident non-financial corporations or quasi corporations that are government owned or
controlled. In Malaysia, external debt is a part of the total debt that is owed to creditors outside
the country. Federal external debt is either long-term or medium-term funds borrowed from
foreign lenders. This can include private sources, other countries, and the International Monetary
Fund (IMF). External debt is created by fulfilling public sector funding included federal
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government, development agencies, and also Non-Financial Public Enterprises (NFPEs). A big
portion of national debt was purposed for public sector funding, including federal government
and NFPEs who always took away big percentage from national debt. Private sector funding had
also increase the external debt. Increasing in private sector funding reflects the increasing of
development projects launched by private sector. Dependency on external funding had worsened
Malaysias national debt. Until 3rd quarter of 2013, Malaysias national debt had reached
RM306632million.


Source: Economic Report 2013/2014
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From the external debt part from Economic Report 2013/2014, seems like United States
is Malaysias only external market loans resources since there are no statistic numbers for Japan
and United Kingdom. Loans from US had increased from 2009 to 2011 but then decreased from
2011 to 2013 which is RM10403million to RM9882million. While for the external project loans,
it began to decline and it reached RM6571million in 2013.From Budget 2014, we can clearly see
that borrowings made up 14.5% which is about RM38011million from the RM262151million of
total revenue of Malaysia
5.0 Public Sector and Privatization
Privatization is the opening up of an industry that has been reserved for the public sector
to the private sector including governmental functions like revenue collection and law
enforcement. Privatization can be explained by transfer of ownership from the public to private
sector, transfer of management of an enterprise from the public to private sector and withdrawal
of state from an industry or sector partially or fully.
The aim of privatization is to achieve higher micro-economic efficiency and foster economic
growth, as well as reduce public sector borrowing requirement through the elimination of
unnecessary subsidies. Reasons for privatization include reducing the burden on government;
strengthen competition, to improve public finances, to find infrastructure growth, accountability
to shareholders, to reduce unnecessary interference and more disciplined labor force.
Privatization in Malaysia
The wave of privatization in Malaysia began in 1983, when Prime Minister Mahathir
Mohamad publicity government's intention to initiate the privatization policy. This was followed
by the publication of Privatization Guidelines by the Economic Planning Unit (EPU) of the
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Prime Minister's Department in 1985. These guidelines are the official document on privatization.
In February 1991, the Privatization Master Plan (PMP) has been announced.
This plan set out the country's privatization policies. Privatization continues to be an
important part of the overall strategy of economic development. During the Seventh Malaysia
Plan period, the privatization programme contributed towards the growth and development of the
economy, in line with the private sector-led growth strategy and the Malaysia Incorporated
Policy. At the same time, the programme contributed towards promoting bumiputera
participation in business and commerce. In implementing this programme, emphasis was placed
on expanding capacities to develop the necessary infrastructure required to effectively promote
the development of industries and services and provide better comfort and access to users. In
formulating its privatization policy, the government aimed to achieve the following objectives
such as to relieve the financial and administrative burden of the government, to improve
efficiency and increase productivity, to facilitate economic growth, to reduce the size and
presence of the public sector in the economy and to assist in meeting the national development
policy targets
The privatization program continued during the Eighth Malaysia Plan as it has
contributed to increasing the efficiency and productivity of the privatized entities and,
consequently, to benefit the public and spur economic development. Emphasis will be given to
projects that have a viable high multiplier effect and at the same time, meet social objectives.
Steps will be taken to strengthen and streamline the implementation process as well as the
regulatory framework, to ensure the effectiveness of the privatization program.
In the Ninth Malaysia Plan, the Government and the private sector need to work closely
together to ensure continued economic growth. The implementation of the privatization program
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over the past two decades has provided a solid foundation for cooperation between the
Government and the private sector. The privatization program also contributed to the increase in
private sector participation in the economy and in turn makes the private sector the engine of
growth of the economy. However, there are some aspects of the privatization program will be
streamlined and improved to make it more effective.
In the Tenth Malaysia Plan, new wave of privatization with 52 projects worth at about
62.7 billion. Company under the Ministry of Finance Inc such as Percetakan Nasional Bhd,
CTRM Aero composites, Nine Bio Sdn. Bhd will be privatized. Under the budget 2014, the
government will continue to provide a conductive environment to attract more domestic and
foreign investment. The governments efforts have led to an increase in privatization investment.
For example, the share of private investment to GDP has grown from 12.4% in 2010 to 16.7%
currently (Budget 2014). Private investment is expected to increase further to RM189 billion or
17.9% of GDP, particularly in oil and gas, textile industry, transport equipment and real estate
development.









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Reference
Bajet. Retrieved from http://www.treasury.gov.my/
Bank Negara Malaysia. (2014, April 30). Central Government Debt. Retrieved from Economic and Financial Data
for Malaysia.
Chamhuri Siwar, Suratman Kastin, & Norshamliza Chamhuri 2005, Ekonomi Malaysia, Edisi keenam,
Longman.P.Jaya.
International Monetary Fund. (2011). General government gross debt (Percent of GDP). Retrieved from World
Economic Outlook Database.
Ministry of Finance Malaysia. (2013). Public Sector Finance. Retrieved from. Economic Report 2013/2014.
Unit, E. P. (2010). Rancangan malaysia kesepuluh (rmke-10). Economic Planning Unit.





















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Appendix 1
khir tempoh
Hutang luar negeri yang belum dijelaskan / External debt outstanding
Jumlah
Nisbah
khidmat
bayaran
6
(%)
Hutang jangka sederhana dan panjang
1
/ Medium and long-term
debt
1

Hutang jangka pendek
2
/

Short-term debt
2

Jumlah
Kerajaan Persekutuan /
Federal Government
PABK
3

Sektor
swasta
4

Jumlah
Sektor
perbankan
5

Sektor bukan
bank
6

End period
Jumlah
Nisbah
khidmat
bayaran
7
(%)
Total
External debt
service ratio
6
(%)
Total Total
External debt
service ratio
7
(%)
NFPEs
3

Private
sector
4

Total
Banking
sector
5

Non-bank
sector
6




2010 1Q 219,191 8.1 147,129 12,737 0.4 72,259 62,133 72,061 64,061 8,001
2Q 222,158 7.2 149,919 17,092 0.0 72,342 60,485 72,239 64,610 7,629
3Q 227,414 8.6 146,689 16,364 0.2 71,536 58,788 80,726 70,639 10,087
4Q 227,072 6.7 147,653 16,746 0.1 70,383 60,524 79,420 67,982 11,438



2011 1Q 233,476 10.1 142,352 15,935 0.3 65,015 61,402 91,124 78,905 12,220
2Q 241,533 8.4 149,265 16,167 0.0 67,373 65,726 92,267 81,070 11,197
3Q 263,283 12.4 157,898 18,089 2.8 70,457 69,352 105,385 93,317 12,068
4Q 257,364 10.3 153,611 18,105 0.0 69,647 65,859 103,753 92,302 11,451



2012 1Q

249,377 8.4 148,320 16,863 0.2 67,357 64,101 101,057 90,002 11,055
2Q

270,447 12.2 160,316 17,911 0.2 69,405 73,000 110,131 98,938 11,193
3Q

259,648 10.0 159,127 17,252 0.1 67,571 74,304 100,521 88,767 11,755
4Q

252,752 9.8 159,788 16,848 0.2 66,034 76,906 92,964 80,488 12,475
2013 1Q

264,437 10.4 163,195 16,142 0.3 65,619 81,434 101,243 89,118 12,125
2Q

284,683 11.1 170,256 16,453 0.2 65,766 88,036 114,428 101,954 12,474
3Q

306,632 10.4 186,330 16,929 0.1 75,906 93,494 120,302 106,866 13,436
Source: Treasury and Bank Negara Malaysia

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Appendix 2

Source: www.treasury.gov.my