Malaysian manufacturers today called for corporate tax to be cut four percent to 24 percent in this year's budget to increase the country's competetiveness with its neighbours.

The Federation of Malaysian Manufacturers (FMM) also proposed that the maximum rate for personal income tax be brought down from 28 to 24 percent to bring it in line with the corporate rates.

In a memorandum to the finance ministry, the FMM said the corporate tax cut would "further enhance the dynamism of the private sector in providing the main stimulus for growth."

Similarly, the tax cut for individuals would "enhance work effort and provide greater incentives for professional and knowledge workers," it was quoted by Bernama news agency as saying during a pre-budget dialogue.

In the 2002 budget, the government cut the tax rate for individuals from 29 to 28 percent but this had only marginal benefits, it said.

The FMM also proposed that the corporate tax for high value-added industries be slashed to 10 percent to attract foreign and domestic investments.

September budget

Prime Minister Dr Mahathir Mohamad, who is also finance minister, said Friday that the budget to be unveiled in parliament on Sept 20 would focus on measures to raise the private sector's role in stimulating the economy.

"Their investment rate has decreased sharply by 39 percent in 2001 compared with 1997... if this trend continues, the medium-term economic growth potential will be affected," he was quoted as saying by Bernama .

"The private sector should rebuild confidence and capability towards increasing competitiveness, efficiency, creativity and productivity," he said.

Mahathir said the country had to diversify its sources of economic growth with more focus on developing the agriculture and services sectors.

Malaysia, which has rebounded from a recession in 1998, escaped another recession last year with the economy expanding by an anaemic 0.4 percent. The government has forecast a 3.5 percent growth this year.