WHAT ABOUT JOB LOSSES AS ECONOMY SHRINKS? Falling oil prices will cushion GST impact - Idris Jala

The current falling global oil prices will help boost the country's economy and cushion the impact of the goods and services tax (GST), which will take effect next year, a minister said today.

Minister in the Prime Minister's Department Datuk Seri Idris Jala said benefits included savings in the form of fuel subsidies, a more competitive export market and checking inflation when the broad-based consumption tax, pegged at 6%, is rolled out on April 1.

"I'm cool when I think about Malaysia going forward, a lot of people panic when they think about it, but I tell you this, what are the implications of lower oil prices? It simply means that there is no subsidy, so if you save the subsidy, you may reduce in some way the revenue from the oil and gas side, but it is zero-downed by the fact that you save on the subsidy," he said.

Fuel subsidies cost Putrajaya around RM24 billion annually, contributing to its budget deficit.

"What it does is that it encourages other sectors to grow, our exports become more competitive. It also ensures inflationary pressures are contained, because we are just going to introduce GST.

"The fact that oil price has come down, it really cushions the impact of GST as it comes through," he said at the 6th annual young corporate Malaysians summit in Kuala Lumpur today.

Global crude oil prices have been on a freefall and yesterday, it slipped to US$69 (RM240) per barrel.

The falling price of the commodity has seen Malaysia axing subsidies for diesel and RON95 petrol beginning December 1, and savings from the move will be used for socio-economic development, Prime Minister Datuk Seri Najib Razak had said previously.

The retail price of the two fuels will be decided by a "managed float". The fuel prices would be determined on a monthly average price, which will be announced at the end of each month for the following month.

World petroleum prices would be monitored daily to obtain the average.

The managed float system was already in use for RON97 petrol and the move to use the same system for RON95 and diesel was made after it proved successful for the higher-grade fuel.

Datuk Seri Idris Jala

Idris, who is the chief executive officer of Putrajaya's efficiency unit Pemandu, said the government knew that it could not be totally dependent on the oil and gas sector, which contributes about 30% of the country's gross domestic product (GDP).

"We knew beforehand that we needed to grow the services sector like tourism and financial sector so that we are not overly dependent on oil and gas," he said, referring to the brainstorming sessions organised by Pemandu for the Economic Transformation Programme (ETP) which had assumed oil prices at US$70 per barrel.

"Even within the oil and gas industry, we want to grow the downstream services of the oil and gas sector."  - TMI