Full Report - Subregional Office for East and North-East Asia - escap

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
Active fiscal policy helps boost domestic
demand
Fiscal policy remained accommodative across
the subregion, with several countries increasing
public outlays for infrastructure. In mid-2012, the
Government of Indonesia announced additional
capital spending of 0.3% of GDP mainly to enhance
lagging public infrastructure. The Government plans
to boost infrastructure spending by 15% in 2013,
although underspending has been observed in
previous years. Similarly, fiscal policy was stepped
up in the Philippines to sustain domestic demand
dynamism, with the increased spending primarily
concentrated on infrastructure projects. Initiatives
on private-public partnerships, which had earlier
exhibited slow progress, have benefited from
increased investor confidence. In Thailand, a largescale
public investment plan for water management
contributed to fiscal policy support, although the
boosting impact could be lower than planned due
to slow disbursement of funds. In the Lao People’s
Democratic Republic, the Government established
a State accumulation fund to be used in the event
of natural disasters or major economic shocks. In
Myanmar, the Government plans to allocate more
spending on infrastructure, especially for expanding
electricity production and supply. In Timor-Leste,
where oil revenues allow for policy space, the
Government is investing heavily in infrastructure,
including electrification and road upgrades.
For infrastructure development in
the Philippines, private-public
partnerships have benefited from
increased investor confidence
Fiscal policy was also aimed at boosting domestic
consumption. In Thailand, the Government
temporarily waived excise taxes for first-car
purchases, introduced higher minimum wages
nationwide and raised salaries for civil servants
with university degrees. To help the business sector
cope with rising labour costs, however, the corporate
income tax rate was reduced from 30% to 23%
in July 2012, and further to 20% in January 2013.
In Indonesia, the minimum level of taxable income
was also raised to support consumer spending.
Fiscal policy was also aimed at supporting vulnerable
segments of society and enhancing basic social
services. In Malaysia, cash assistance was furnished
to low-income families and book vouchers to students.
In Singapore, schemes to support households are
focused on financial assistance to elderly and
disabled citizens, expanding health-care services
and helping low-income families, with such means
as pre-school subsidies and a larger endowment
fund. In Viet Nam, the Government raised its health
insurance subsidy for the poor from 50% to 70%
of the premium in June 2012, as part of its efforts
to achieve universal health care coverage by 2014. 10
In Myanmar, the Government cut military spending
from 23.5% to 14.5% of total expenditure in fiscal
year 2012/13, while increasing social spending from
5.4% to 7.5%.
In addition to the above-mentioned demand-boosting
measures, higher-income countries had greater policy
space to accommodate medium-term development
strategies. For instance, the Government of Malaysia
announced in July 2012 a new strategic fund to
facilitate technology acquisition by local firms and
fiscal incentives that help Malaysian companies
to acquire foreign companies to gain frontier
technology. In Singapore, small and medium-sized
enterprises benefited from a cash grant and training
programme as well as financial incentives for firms
to enhance productivity and innovation efforts. In
Brunei Darussalam, the $5.2 billion budget approved
in March 2012 prioritized improved human resources
and government services, in line with the country’s
plan to further diversify its economy.
More active fiscal policy in 2012 resulted in
manageable increases in deficit in 2012 in countries
such as the Philippines and Thailand (see figure
2.15). In Indonesia, subsidies on fuel and electricity
exceeded their target and contributed to a larger
budget deficit. To finance the development
expenditures, the Philippines is focusing on widening
the tax base and efficient expenditure management. In
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