THE annual national budget is designed, first, to achieve the                                                                                         
economic and social objectives set for the next year and                                                                                              
second, to structure the fiscal instruments and financial                                                                                             
allocations to achieve the goals.                                                                                                                     
                                                                                                                                                      
It is officially announced by the Finance Minister at a                                                                                               
parliamentary session traditionally scheduled for the last                                                                                            
Friday of every October.  The 1995 Budget proposals were                                                                                              
unveiled on Oct 28 this year.                                                                                                                         
                                                                                                                                                      
An annual budgetary exercise is a common management practice                                                                                          
to review, take stock and decide for the future.                                                                                                      
                                                                                                                                                      
At the enterprise level, corporations and organisations map                                                                                           
out the expectations for the next fiscal year and develop a                                                                                           
financial budget which, upon approval, becomes the operating                                                                                          
document to guide subsequent action.                                                                                                                  
                                                                                                                                                      
It provides the parameters for organisational planning,                                                                                               
implementation and control.                                                                                                                           
                                                                                                                                                      
Public reception to the 1995 Budget has been overwhelmingly                                                                                           
favourable and many voices have suggested that this is the                                                                                            
"best budget" to date.                                                                                                                      
                                                                                                                                                      
The common perception among Malaysians is that a good budget                                                                                          
is equated to any reduction or abolition of direct and                                                                                                
indirect taxes. On these counts, the Budget has delivered the                                                                                         
goodies-reduction of the income tax rate for individuals and                                                                                          
enterprises, and the lowering and removal of import duties and                                                                                        
excise taxes on a host of goods. The loss to revenue from                                                                                             
these cutbacks is estimated at RM2 billion.                                                                                                           
                                                                                                                                                      
Of greater significance is the articulated national direction                                                                                         
for the next year. After all, revenue is raised to finance                                                                                            
expenditure that will serve specific goals.                                                                                                           
                                                                                                                                                      
In this respect, the 1995 Budget is very clear. It is                                                                                                 
strategically crafted to achieve four principal objectives: to                                                                                        
sustain strong economic growth, to reduce inflation, to                                                                                               
develop skilled manpower and to build a progressive and                                                                                               
balanced society.                                                                                                                                     
                                                                                                                                                      
These are the issues that should dominate public discussion,                                                                                          
which should not focus just on fiscal measures to raise                                                                                               
revenue and who benefits most from the exercise.                                                                                                      
                                                                                                                                                      
Fiscal measures are structured to encourage personal and                                                                                              
corporate initiatives and action in the context of national                                                                                           
objectives.                                                                                                                                           
                                                                                                                                                      
Our attempt to introduce a payroll tax long ago and the poll                                                                                          
tax legislation introduced recently in the UK looked at                                                                                               
revenue collection ahead of the objectives these measures were                                                                                        
intended to serve.                                                                                                                                    
                                                                                                                                                      
Consequently, they generated considerable resistance and                                                                                              
noncompliance which led to the eventual scrapping of the                                                                                              
proposals.                                                                                                                                            
                                                                                                                                                      
Attempts to introduce new tax initiatives will normally                                                                                               
attract considerable public comment, particularly from those                                                                                          
who are directly affected.                                                                                                                            
                                                                                                                                                      
For the 1995 Budget, no new tax proposals have been made; the                                                                                         
existing tax mechanisms have been fine-tuned to encourage                                                                                             
investments, reduce intention and to build a more wholesome                                                                                           
society. None of the tuning is designed to discourage action                                                                                          
and no one is particularly "hurt" by the Budget.                                                                                            
                                                                                                                                                      
The objective of the 1995 Budget relate to the key concerns of                                                                                        
our national development. As a nation, we need to be more                                                                                             
competitive to attract investments.                                                                                                                   
                                                                                                                                                      
We are no longer a low-production-cost facility and low                                                                                               
corporate income tax rates have to be the substitute to                                                                                               
attract investments.                                                                                                                                  
                                                                                                                                                      
Accordingly, the reduction of the corporate income tax rate to                                                                                        
30 per cent should help strengthen our capacity to continue                                                                                           
and sustain our relatively-high economic growth.                                                                                                      
                                                                                                                                                      
The abolition of income tax on remittances by Malaysian                                                                                               
companies operating overseas also reinforces the potential of                                                                                         
reinvestments in Malaysia.                                                                                                                            
                                                                                                                                                      
The second national concern is that our economic prosperity is                                                                                        
not nullified by inflation. In many developing countries,                                                                                             
notably in South America, three-digit inflation creates                                                                                               
considerable currency instability and real income is                                                                                                  
proportionately diminished.                                                                                                                           
                                                                                                                                                      
Nearer home, the incredible two digit economic growth taking                                                                                          
place in China is now accompanied by rising inflation.                                                                                                
                                                                                                                                                      
Our own inflation rate at around four per cent is modest by                                                                                           
comparison, but with rapid economic growth, prices of goods                                                                                           
and services will be under siege.                                                                                                                     
                                                                                                                                                      
All it takes is for one item in a chain to suffer a shortage                                                                                          
(real or engineered) and a spiralling effect will be set in                                                                                           
motion.                                                                                                                                               
                                                                                                                                                      
Our political leadership has proclaimed a war on inflation and                                                                                        
the chicken price issue is a case in point.                                                                                                           
                                                                                                                                                      
The removal and reduction of import duties on some 2,600 items                                                                                        
of foodstuff and consumable goods will increase supply and                                                                                            
stabilise price.                                                                                                                                      
                                                                                                                                                      
In the longer term, this fiscal action should also help                                                                                               
strengthen our own productive capacity to be more competitive                                                                                         
and less dependent on government protection.                                                                                                          
                                                                                                                                                      
For a relatively small nation, our ranking at No. 17 for                                                                                              
competitiveness and at No. 19 as a trading nation is good, but                                                                                        
the drive to be a net exporter rather than a net importer is a                                                                                        
critical step in achieving a more durable economic foundation                                                                                         
for the nation.                                                                                                                                       
                                                                                                                                                      
We are a caring and progressive society. The challenges of                                                                                            
Vision 2020 serves to ensure that Malaysian society will be                                                                                           
more humane towards the less fortunate and that there is equal                                                                                        
opportunity to knowledge for all.                                                                                                                     
                                                                                                                                                      
The fiscal mechanisms have recognised this as more tax relief                                                                                         
are given to the disabled and libraries are encouraged to be                                                                                          
set up by tax exempt donations of individuals and                                                                                                     
corporations.                                                                                                                                         
                                                                                                                                                      
A wholesome society has a place for the arts, and the music                                                                                           
industry, in particular, is a beneficiary with the reduction                                                                                          
of import duty on pianos, and tax exemptions on studio                                                                                                
equipment and accessories should encourage the development of                                                                                         
musical talent.                                                                                                                                       
                                                                                                                                                      
Perhaps the most significant contribution of the 1995 Budget                                                                                          
is the unequalled emphasis and priority accorded to human                                                                                             
resource development.                                                                                                                                 
                                                                                                                                                      
A country can draw on two categories of resources that can                                                                                            
contribute to economic prosperity.                                                                                                                    
                                                                                                                                                      
Many developing countries have concentrated far too long on                                                                                           
exploiting natural resources.                                                                                                                         
                                                                                                                                                      
The prosperous newly industrialised economies, with little                                                                                            
natural resource, focused instead on developing the competence                                                                                        
and potential of human effort.                                                                                                                        
                                                                                                                                                      
The success stories of Japan, South Korea, Taiwan, Hong Kong                                                                                          
and Singapore have clearly shown that human resource                                                                                                  
development does pay.                                                                                                                                 
                                                                                                                                                      
Vision 2020 seeks to develop a technological society and we                                                                                           
are very conscious that the only real limit to fulfilment is                                                                                          
the human resource development gap.                                                                                                                   
                                                                                                                                                      
Compared with the NIEs, our commitment to studies in science,                                                                                         
mathematics and industrial and vocational disciplines is                                                                                              
relatively on the low side.                                                                                                                           
                                                                                                                                                      
The budget allocation of RM10.031 billion or 20.6 per cent of                                                                                         
allocations is the highest ever for education and training,                                                                                           
and much of the new funds is expected to flow into                                                                                                    
vocationally-oriented programmes.                                                                                                                     
                                                                                                                                                      
As the euphoria of a good budget fades the hard work of                                                                                               
pursuing our national objectives of growth without rising                                                                                             
inflation, human resource development, and a caring and                                                                                               
progressive society has to continue unabated.                                                                                                         
                                                                                                                                                      
The 1995 Budget is only a management tool, man-made but with a                                                                                        
clarity of purpose. It should help the nation take another                                                                                            
confident step towards fulfilling the challenge of Vision                                                                                             
2020.