(AFP) Malaysia's 28 percent corporate tax rate may be lowered in the 2002 budget to be unveiled in October, Prime Minister Dr Mahathir Mohamad said today.

"We have studied the possibility (of a corporate tax reduction). We must also consider our needs in terms of the revenue to be raised from taxpayers," the premier was quoted as saying by Bernama news agency.

Mahathir, who is acting finance minister following the unexplained resignation of Daim Zainuddin on June 1, earlier chaired a pre-budget dialogue with 50 government and non-government agencies.

The premier said next year's budget would focus on ways to diversify sources of economic growth, strengthening the financial sector and improving the country's competitiveness.

He said the budget would also provide incentives to attract new foreign investment into the country amid the US slowdown, including possible lower taxes to promote trade and commerce.

Increase investment

Mahathir said over the weekend that the 2002 budget would also focus on efforts to increase local investment by developing various manufacturing sectors.

Malaysia can no longer rely on foreign investment to pump prime the economy since foreigners are seeking out cheaper countries such as China, he said.

Mahathir has refused to say whether he would deliver the 2002 budget in parliament in October or whether a new finance minister will be in place by then.

The government in March revised downwards its economic growth forecast this year to between five and six percent, from seven percent previously.

Most analysts predict the economy will grow by less than half the 8.5 percent rate of last year.