Oxford Analytica (OA), in its 2006 Report on Fiscal Policy Transparency, rates Malaysia's overall compliance with this standard as "Compliance in Progress." This overall assessment is unchanged from 2005. In recent years, Malaysia has made several strides in its efforts to comply with international fiscal transparency standards. For instance, in 2006, the administration of Prime Minister Abdullah Badawi began the restructuring of the historically opaque domestic corporate sector by launching three manuals setting out guidelines for the transformation of government-linked companies. Also in 2006, to tackle corruption and further promote fiscal transparency, the Malaysian government launched the National Integrity Index, opened the Anti-Corruption Agency Academy and hosted the Organization of Islamic Countries inaugural corruption and integrity forum. The Malaysian Constitution sets Malaysia's main government sectors apart from the private sector and includes a clear breakdown of legislative and executive powers between the federation and the states. Also, Malaysia has established clear mechanisms for the coordination and management of budgetary activities. Article 99-101 of the Constitution sets out the basic framework for budgetary activities. The OA Report states that Malaysia is committed to the public availability of fiscal information. The government is required to do so under Malaysian laws and regulations. For example, Section 16(1) of the Financial Procedures Act (1957) requires the Federal Financial Authority to prepare a publicly available annual accounts statement immediately after the closing of accounts of that particular year. Malaysia also subscribes to the IMF Special Data Dissemination Standard, and as such meets the SDDS specifications for the coverage, periodicity, and timeliness of fiscal data and for the monthly dissemination of advance release calendars.
General Overview
According to the 2006 Report on Fiscal Policy Transparency by Oxford Analytica (OA) Malaysia is rated "Compliance in Progress" regarding fiscal policy transparency. This overall assessment is unchanged from 2005. Regarding the clarity of roles, responsibilities and objectives, the OA report notes that the Malaysian Constitution sets main government sectors apart from the private sector and includes a clear breakdown of legislative and executive powers between the federation and the states.
The OA report also observes that Malaysia has established clear mechanisms for the coordination and management of budgetary activities. Article 99-101 of the Constitution sets out the basic framework for budgetary activities. Specifically, the Ministry of Finance - Kementerian Kewangan Malaysia (KKM) - has overall responsibility for coordination and management of budgetary and extra-budgetary activities. The Treasury is responsible for the annual budget, and a Macroeconomic Inter-Agency Planning Group, an inter-departmental committee, meets regularly to coordinate fiscal policy responses across agencies. Article 94 of the Constitution mandates that all taxes be levied under the auspices of federal tax laws and regulations, which, according to the OA report, are easily accessible and understandable. Plus, the Inland Revenue Board (IRB) administers these direct tax laws. Comprehensive information about the tax system (i.e. changes to tax rates, regime and administration) is published in the Economic Report and on the websites of the Treasury and the Malaysian Industrial Development Authority (MIDA). This information is also included in the annual budget speech
The OA report states that the Malaysian government is committed to the public availability of fiscal information. The government is required to do so under Malaysian laws and regulations. For example, Section 16(1) of the Financial Procedures Act (1957) requires the Federal Financial Authority to prepare a publicly available annual accounts statement immediately after the closing of accounts of that particular year. In recent years, Malaysia has made several strides in its efforts to converge with international fiscal transparency standards. For instance, in 2006, the administration of Prime Minister Abdullah Badawi began the restructuring of the historically opaque domestic corporate sector by launching three manuals setting out guidelines for the transformation of government-linked companies. Also in 2006, to tackle corruption and further promote fiscal transparency, the Malaysian government launched the National Integrity Index, opened the Anti-Corruption Agency Academy and hosted the Organization of Islamic Countries (OIC) inaugural corruption and integrity forum. These two key challenges had been noted in the 2005 OA Report.
According to the OA report, Malaysia also subscribes to the IMF Special Data Dissemination Standard (SDDS), and as such meets the SDDS specifications for the coverage, periodicity, and timeliness of fiscal data and for the monthly dissemination of advance release calendars. Some sources of publicly available information include: 1) the Central Bank's Monthly Statistical Bulletin, which disseminates data on central government operations; 2) the Treasury's Quarterly Updates, which disseminate data on central government operations (i.e. revenue, expenditure and deficit accounts); and 3) the MoF's annual Economic Report, which accompanies the budget speech and reports, amongst other data, "federal government revenue and the consolidated financial position of state governments" (OA 2006, p. 282).
According to the OA report, Malaysia has established open mechanisms for the preparation, execution and reporting of budgetary activities. Article 99-101 of the Constitution sets out the basic framework for budgetary activities. The Ministry of Finance - Kementerian Kewangan Malaysia (KKM) - has overall responsibility for coordination and management of budgetary and extra-budgetary activities. The Treasury is responsible for the annual budget, and a Macroeconomic Inter-Agency Planning Group, an inter-departmental committee, meets regularly to coordinate fiscal policy responses across agencies.
Regarding independent assurances of integrity, the OA report observes that the Financial Procedures Act (1957) and the Companies Act (1965) require Malaysian authorities to compile and ensure the integrity of central government and general government data (including that of the non-financial public sector). As a result, according to the OA report, fiscal data in Malaysia meet the IMF's SDDS, and all information pertaining to the methodology and sources of data is provided in the Public Accounts Statement of the Federal Government.
In its 2006 Article IV Consultations with Malaysia, the IMF lauded the advancements recorded in GLC reform, and encouraged the continuation of this effort, noting that "the GLCs' transformation program is a critical component of reducing the role of government in decision making" in the private sector (IMF 2006, p. 2). Furthermore, the IMF recommended that Khazanah Nasional Berhad, the government's asset manager and main investment house, should publish its audited accounts. The GLC reform process is overseen by the Putrajaya Committee on GLC High Performance (PCG), which is within Khazanah Nasional Berhad. The IMF also recommended that Malaysian authorities improve consolidated public sector statistics.
In its 2006 Report on Fiscal Policy Transparency in Malaysia, Oxford Analytica rates Malaysia's compliance with this principle as "Enacted." The Malaysian Constitution clearly sets Malaysia's main government sectors apart from the private sector. The Constitution also includes a clear breakdown of legislative and executive powers between the federation and the states, and also sets out the organization of the judiciary and the responsibilities of the Supreme Court. Specifically, Section V of the Constitution outlines the division of power and relations between the federal government and the states. The Central Bank Act establishes the Bank Negara Malaysia (BNM), and gives the BNM a high degree of autonomy. According to the OA report, the BNM has improved its fiscal transparency regime by expanding its communications with the MoF, specifically concerning its relationship in policy and technical areas. While in the early 1980s Malaysia promoted the 'Malaysia Inc' model of the public sector directly acquiring equity in the private sector (i.e. companies and commercial banks) as a means of shifting from an agrarian resource-based economy to a diversified industrial one, since 2004, Malaysian authorities have made a concerted effort to reverse the Malaysia Inc model by slowly unraveling the strong relations between the government and the private sector.
Furthermore, according to the OA report, Malaysia has established clear mechanisms for the coordination and management of budgetary activities. Article 99-101 of the Constitution sets out the basic framework for budgetary activities. The Constitution is supplemented by Section 6 of the Financial Procedures Act (1957), Sections 2 and 3 of the Development Fund Act (1966), and Treasury Instructions governing the planning, programming, execution and reporting of the budget. Specifically, the Ministry of Finance - Kementerian Kewangan Malaysia (KKM) - has overall responsibility for coordination and management of budgetary and extra-budgetary activities. The Treasury is responsible for the annual budget, and a Macroeconomic Inter-Agency Planning Group, an inter-departmental committee, meets regularly to coordinate fiscal policy responses across agencies.
Article 94 of the Constitution mandates that all taxes be levied under the auspices of federal tax laws and regulations, which, according to the OA report, are easily accessible and understandable. Plus, the Inland Revenue Board (IRB) administers these direct tax laws. Comprehensive information about the tax system (i.e. changes to tax rates, regime and administration) is published in the Economic Report and on the websites of the Treasury and the Malaysian Industrial Development Authority (MIDA). This information is also included in the annual budget speech. The Public Officers (Conduct and Discipline) Regulations of 1993 details ethical standards of behavior for public servants. Additional provisions are stipulated in the Prevention of Corruption Act (1957), the Anti-Corruption Act (1997), and service circulars issued by the Public Service Department.
In its 2006 Report on Fiscal Policy Transparency in Malaysia, Oxford Analytica rates Malaysia's compliance with this principle as "Compliance in Progress." The OA Report states that the Malaysian government is clearly committed to ensure public availability of fiscal information. The government is required to do so under clear Malaysian laws and regulations. For example, Section 16(1) of the Financial Procedures Act (1957) requires the Federal Financial Authority to prepare an annual accounts statement immediately after the closing of accounts of that particular year, and this statement is subsequently made publicly available. According to the OA Report, Malaysia subscribes to the IMF Special Data Dissemination Standard (SDDS), and as such meets the SDDS specifications for the coverage, periodicity, and timeliness of fiscal data and for the monthly dissemination of advance release calendars, which give at least one-quarter advance notice of precise release dates for the fiscal sector and are available on the website of the Central Bank and the Department of Statistics. In other words, as confirmed by its website, the Malaysian Central Bank provides timely and sufficient coverage of daily, weekly, monthly, quarterly and annual data and other technical publications related to the fiscal sector, and all are available online. Also, in compliance with the Financial Procedures Act (1957), the Malaysian government releases monthly data on central government debt. Since the Asian Financial Crisis of 1997, the Central Bank has regularly released the coverage ratio between total external short-term debt and its gross international reserves.
Other sources of publicly available information include: 1) the Central Bank's Monthly Statistical Bulletin, which disseminates data on central government operations within four weeks of the reference month; 2) the Treasury's Quarterly Updates, which disseminates data on central government operations (i.e. revenue, expenditure and deficit accounts) within three months of the end of the reference quarter; and 3) the MoF's annual Economic Report, which accompanies the budget speech and reports "federal government revenue and the consolidated financial position of state governments, the consolidated general government financial position (federal government, state governments, local authorities and statutory bodies), the financial position of non-financial public enterprises (NFPEs), and the consolidated public sector financial position" (OA 2006, p. 282). All the aforementioned information is available on the websites of the respective sources, replete with historical data.
In its 2006 Report on Fiscal Policy Transparency in Malaysia, Oxford Analytica rates Malaysia's compliance with this principle as "Compliance in Progress." According to the OA report, Malaysia has established open mechanisms for the preparation, execution and reporting of budgetary activities. Article 99-101 of the Constitution sets out the basic framework for budgetary activities. The Constitution is supplemented by Section 6 of the Financial Procedures Act (1957), Sections 2 and 3 of the Development Fund Act (1966), and Treasury Instructions governing the planning, programming, execution and reporting of the budget. Specifically, the Ministry of Finance - Kementerian Kewangan Malaysia (KKM) - has overall responsibility for coordination and management of budgetary and extra-budgetary activities. The Treasury is responsible for the annual budget, and a Macroeconomic Inter-Agency Planning Group, an inter-departmental committee, meets regularly to coordinate fiscal policy responses across agencies. Section 16(1) of the Financial Procedures Act (1957) requires the Federal Financial Authority to prepare an annual accounts statement immediately after the closing of accounts of that particular year, and this statement is subsequently made publicly available. Finally, the Financial Procedure Act (1957) sanctions "the control and management of the public finances and for financial and accounting procedures, including the collection, custody and payment of the public moneys of the federation and of the states, and the purchase, custody and disposal of public property (other than land) of the federation and states" (OA 2006, p. 286).
Malaysia uses three key publications to define and publicize its fiscal policy objectives. Vision 2020 updates the public on Malaysia's plan to become a fully developed country by 2020. The Outline Perspective Plan marks each ten-year phase of this plan. A five-year Malaysia Plan gives more detailed projections for annual budgets. The Minister of Finance makes an annual budget speech, which briefly reviews macroeconomic performance during the year and lists new policy developments and macroeconomic assumptions for the upcoming year. While fiscal risks are not quoted in the budget speech, the Economic Report, which typically accompanies the speech and the Malaysia Plan, succinctly describes likely domestic challenges in the following year and also summarizes risks in the global economy, particularly amongst Malaysia's key trading partners. The Economic Report also includes: 1) a full description of the implications for fiscal sustainability; 2) primary domestic and external debt balances of the federal government; and 3) and a consolidated public sector financial position, which complies with the best fiscal transparency practice recommendation from the IMF.
Malaysia subscribes to the IMF's SDDS for coverage, periodicity, and timeliness of central government data and public sector data, "although it has opted for a flexibility option for reporting non-financial public sector data, expanding the reporting period to ten months" (OA 2006, p. 286). Malaysia disseminates annual reports on consolidated central and state-level fiscal data within six months of the end of the financial year, and within one month for central government data. At the end of the budget-making process, the Treasury publishes the annual Program and Performance Budget Estimates Book, which includes detailed figures, projections, and identification of performance outputs supporting the budget. The book (like other results of major budget objectives) is fully vetted in parliament and publicly available.
In its 2006 Report on Fiscal Policy Transparency in Malaysia, Oxford Analytica rates Malaysia's compliance with this principle as "Compliance in Progress." The Financial Procedures Act (1957) and the Companies Act (1965) require Malaysian authorities to compile and ensure the integrity of central government and general government data (of the non-financial public sector). As a result, according to the OA report, fiscal data in Malaysia meet the IMF's SDDS, and all information pertaining to the methodology and sources of data is provided in the Public Accounts Statement of the Federal Government.
In Malaysia, there are two levels of external audit concerning government accounts. First, the National Audit Department, the primary auditing body for the central, state and local governments in Malaysia, ensures that government accounts abide by best accounting principles. Second, the Public Accounts Committee (PAC), an independent select committee of parliament appointed to examine the accounts of the federal government, scrutinizes the Auditor General's reports, thereby augmenting parliamentary oversight. Articles 105-107 of the Malaysian Constitution and the Audit Act of 1957 mandates the independence of the Auditor General, who enjoys legal protection from political interference comparable to that of a federal judges. The findings of the National Audit Department are made available to the public in the form of the Auditor General's Annual Report on the Public Accounts Statement and Activities of the Federal Government Ministries, Departments And Agencies, which includes audits of the accounts of all tiers of Malaysian government.
Other bodies involved in the independent assurances of integrity in Malaysia include the MoF and the Department of Statistics (DOSM). In its role as a central agency, the MoF monitors budget performance and works closely with the Auditor General, Accountant General and the PAC on issues related to government financial matters. The Department of Statistics (DOSM), governed by the Statistics Act of 1965 which grants the DOSM independence, determines data coverage, contents, methodology and periodicity of government data, particularly macroeconomic information (i.e. supply and demand).
Oxford Analytica, "Malaysia Fiscal Transparency - Country Report 2006," Oxford: OA, December 2006. Available from California Public Employee Retirement System website. Accessed on June 25, 2008. (OA 2006)
International Monetary Fund, "IMF Executive Board Concludes 2004 Article IV Consultation with Malaysia," Public Information Notice (PIN) No. 05/33, Washington, D.C.: IMF, March 2005. Available from IMF website. Accessed on June 25, 2008. (IMF 2004)
International Monetary Fund, "IMF Executive Board Concludes 2005 Article IV Consultation with Malaysia," Public Information Notice (PIN) No. 06/30, Washington, D.C.: IMF, March 20, 2006. Available from International Monetary Fund website. Accessed on June 25, 2008. (IMF 2006)
International Monetary Fund, "IMF Executive Board Concludes 2006 Article IV Consultation with Malaysia," Public Information Notice (PIN) No. 07/34, Washington, D.C.: IMF, March 16, 2007. Available from International Monetary Fund website. Accessed on June 25, 2008. (IMF 2006)
Malaysia