Budget 2012 Reveals Malaysia’s Structural Problems


The public sector budget defines the role of government. Citizens have to decide how big they want their government to be for it to articulate sufficiently well what it must do for the people. This, in essence, is what a budget is all about.

Heavy handed or the “invisible hand”?

The main economic purpose of government is to ensure the delivery of public goods –these being goods that would not be equitably accessible if left to the free market to supply. Believers in the free market prefer to leave the economy to Adam Smith’s “invisible hand” and let the economy make its own supply-and-demand adjustments. Others think that policy instruments need to be wielded if a nation’s social goals are to be achieved.

Malaysia’s budget — a quarter of the GDP

Today, just as it was 40 years ago, Malaysia’s public budget is roughly a quarter of the nation’s gross domestic product (GDP).

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