ECONOMIC REPORT The Malaysian government is planning to rely less on oil-related revenue because global crude oil prices and exchange rates are highly volatile, according to the Finance Ministry’s Economic Report 2014/2015.

The report adds that the government has reduced its dependency on oil-related revenue, from 41.3 percent in 2009 to 31.2 percent in 2013 and a forecast of 29.7 percent in 2014.

It is expected to decline further in the coming years. Nevertheless, the implementation of the goods and services tax (GST) is expected to streamline and broaden the government’s tax base.

Furthermore, oil-related revenue began to decline when global oil price moderated from its peak despite a stable production volume of 600,000 barrels per day, the report says.

It is well known that the government is also undertaking subsidy rationalisation initiatives to gradually shift away from blanket subsidies to more targeted programmes with the aim of curbing smuggling activities, avoiding leakages and optimising resources.

In 2013, the government spent more that RM40 billion for various types of subsidies, out of which RM23.5 billion (more than 50 percent) were subsidies on petroleum products.

Recently, the government reduced subsidies for RON95 and diesel that is expected to lead to savings of RM4 billion annually.

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