KUALA LUMPUR, 7 October 2011 — Malaysian Industrial Development Finance Berhad (“MIDF”) said today that it is optimistic that Budget 2012 will help the country withstand the headwinds caused by a slowdown in external demand. “We are entering the most challenging period since the 2008 Global Financial Crisis, amid high volatilities in the financial asset markets. Budget 2012 is a cornerstone of the stabilisation measures required to sail through the storm”, said Datuk Mohd. Najib Hj. Abdullah, Group Managing Director of MIDF. 

The Government is maintaining a forecast GDP growth for 2012 of between 5-6%. While that may appear optimistic in the face of slowing global demand, it reflects the government’s conviction in the depth and breadth of economic activities in Malaysia. More importantly, the growth forecast is derived assuming an accelerated growth in private sector spending and a more restrained public sector. 

The Federal Government deficit, as a percentage of GDP, is projected to decline further from 5.4% to 4.7%, the lowest since 2007 and the first time in 4 years that the deficit would dip below 5%. That would be an achievement given an expected setback in external demand. While there is a risk of a shortfall in domestic private demand, the government is not abandoning its commitment towards fiscal rationalization. “A textbook counter-cyclical prescription would have the government spend its way out of difficulties. What Budget 2012 reflects is a prudent government not over-reacting to what the financial markets are suggesting. It is still too early and hazy for a pre-emptive fiscal response” said Datuk Mohd Najib. 

MIDF is excited with the prospect of a heightened level of activity in the construction sector next year. The construction sector has been projected to grow 7% in 2012, which if attained, will be the highest growth since 1997. The Budget mentioned the commencement of work on several big-scale projects especially under ETP and RP2 (2^nd Rolling Plan) which are expected to rejuvenate the private sector and catalyze activities in the construction and building material sectors. “Construction is one of the most effective counter-cyclical economic activities due to its high multiplier and spill over effects”, said Datuk Mohd Najib. 

The services sector, given its preponderance in the GDP pie, has been earmarked as the growth driver next year with growth expected to accelerate to 6.5%. MIDF welcomes the move to liberalise 17 services subsectors in phases in 2012 and allow up to 100% foreign equity participation in selected subsectors. “This is a continuation of the strategic move to attract FDI in services, and is expected to help Malaysia climb the competitiveness ladder further”, said Datuk Mohd Najib.

All important services subsectors including “Finance and Insurance” received some form of boost under Budget 2012. However, the “Government services” subsector stood out as a beneficiary of one of the boldest moves by the government in many years. The wide-ranging measures announced to transform further the civil service is unprecedented. Civil service is one of the most important delivery channels in any economy and a more performance-oriented civil service will likely increase the potential growth of the country.

In conclusion, the 2012 Budget can be described as a national unity budget, as much effort has been laid on the table to ensure that the welfare of the rakyat and the well-being of the nation is taken care of.

  
“It is always a challenge to get the buy-in of the masses, but a genuine government of the people will persevere with the initiatives that reflect the ‘People First, Performance Now’ adage.” added Datuk Mohd. Najib. 

   
About MIDF 

MIDF is now a diversified group with substantial investments in the financial services industry. Following its merger with Amanah Capital Partners Berhad in 2003, the acquisition of Utama Merchant Bank Berhad in 2004, and the emergence of MIDF Amanah Investment Bank Berhad, MIDF Group has evolved into a stronger and bigger entity, offering a competitive and diversified range of financial services to include Investment Banking, Development Finance and Asset Management.

MIDF is a subsidiary of Permodalan Nasional Berhad (PNB).

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