Originally Posted by day_dreamer
We need to learn "No Pain, No Gain"
No pain, no gain? Full blast austerity measures?
From my experience dealing with the PIIGS in Europe, I don't see any reason why Msia would need a "full blast austerity measure".
We still have a relatively low debt to GDP, our budget deficit is not crazily excessive (relative to other countries), we are still running a current account surplus, and we can still borrow from the markets at an attractive rate. Mind you, Msia’s CDS is trading tighter than South Korea, Indonesia Thailand, France, Spain, Italy, etc.
What we do need are some appropriate structural reforms that will cut waste and make our country more competitive; all these can be done without a full blast austerity measures that will cause recession/demand contraction.
A few things that come to mind are:
1. Cut subsidies and wasteful tax incentive, subsidies were c.4% of GDP in 2011 (while 2011 deficit was about 5.5% of GDP)
2. Broaden the tax base: taxes revenue in Msia is extremely low at 16% of GDP in 2011, more targeted tax reform should help boost government revenue and reduce deficits
3. More targeted and efficient spending
4. Market reforms to encourage competition and do away with "national champion" programs such as TNB, Telekom, Proton" that hinder entrepreneurship