KUALA LUMPUR -- Prime Minister Mahathir Mohamad on Wednesday cast doubt on the future of big infrastructure projects as his new government focuses on cutting down debt that has emerged to be much higher than the previous administration claimed.
One of the first measures announced is that cabinet ministers will take a 10% pay cut, while some government agencies will either be shut down or consolidated. Pending detailed investigations, Mahathir estimates Malaysia's national debt at 1 trillion ringgit ($252 billion) or about 65% of gross domestic product, much higher than the 50.8% at the end of 2017, as claimed by the previous government.
According to official data, Malaysia's debt in 2017 reached 686.8 billion ringgit, excluding the 238 billion ringgit debt guaranteed by the federal government. The country has a self-imposed threshold of 55% debt-to-GDP ratio. Local investors, mainly state funds, hold 70.5% of total debt.
"We are concerned about the country's financial problem," said Mahathir after holding the first cabinet meeting.
Newly appointed Minister of Finance Lim Guan Eng said Tuesday there were "certain red files that were only accessible to certain parties" and even top treasury and staff of the auditor general office had no access to them, suggesting that the true figures were shrouded by the lack of transparency in the government of Najib Razak who was the former prime minister.
Moody's Investors Service, which rates Malaysia's long-term foreign currency debt at 'A-' wrote in a Tuesday report that it viewed the government's move to eradicate the 6% goods and services tax by June 1 as "credit negative" in the absence of mitigating fiscal measures. The rating agency noted that revenue has fallen as a share of GDP in the past five years to 16.7% at end-2017, significantly lower than the median of 33.8% for A-rated sovereigns.
As an immediate austerity measure, the government will trim its administration, shutting down agencies created partly to advise the previous government.
"We don't need their intelligence. I think we are quite intelligent ourselves," said Mahathir.
He had said there were about 17,000 staff at these agencies with political connections. Some include the powerful Land Public Transport Commission or SPAD, whose chairman was Isa Abdul Samad. Isa was arrested in August 2017 and remanded for five days about two controversial hotel purchases by an agency under his purview. Isa was a confidant of Najib, who is now under investigation by the Mahathir government for corruption and embezzlement of state funds.
Mahathir said Wednesday his government will study and determine if there is a need for some infrastructure projects committed to by Najib's administration. These include the Kuala Lumpur-Singapore high speed rail and the East Coast Rail Link being built by Chinese contractors. These projects could be scrapped or re-negotiated to reduce the fiscal burden, Mahathir said.
Meanwhile, the government has no intention to acquire national carmaker Proton from DRB-Hicom. Proton was founded in 1983 by Mahathir during his first stint as prime minister, and is now 49.9% owned by China's Zhejiang Geely Holding Group, following a bailout initiated by Najib.