Relationship Between Government Policies And Investment Market

Topics: Public finance, Tax, Real estate Pages: 16 (4871 words) Published: December 3, 2013
We would like to thank the all people who assisted us in the preparation of this report especially to our lecturer Puan Noor Aishah Mohamad Hamdan.

According to Malaysian Investment Development Authority (MIDA), government policies that maintain a business environment with opportunities for growth and profits have made Malaysia an attractive manufacturing and export base in the region. The private sector in Malaysia has become partners with the public sector in achieving the nation's development objectives. Over the decades, the Government of Malaysia has effectively used the fiscal policy through tax measures and allocation of operating and development expenditures to attained a broad range of macroeconomic objectives such as growth & equity, macroeconomic stability, reform & restructuring such as tax incentives to facilitate reform and structuring of economy, sectored and regional development such as tax incentives and expenditure directed at targeted sectors (Narayanan, 2007). Narayanan (2007) also cited that Malaysia has experienced difficulties in balancing its budget. Therefore in this recent year, Malaysia has becoming run deficit budgets. The slow growth or decline of several sources of revenue has given pause for reflection on the approach to fiscal management. The key to fiscal flexibility is to ensure that the mandatory spending and the size the government is not too large, the fiscal deficit is not structural and public debt level not excessively high. 1.1 Backgrounds

Construction Economics III is aimed to provide an in-depth study of development economics including investment market and property development, preparation of feasibility studies, financing and risk and uncertainty of development works and the influence of government policies on such works.

The purpose of this report is to study and understand the relationship between government policies and investment market, to investigate the effects of government policies to investment market and to forecast possible changes of investor’s decision in property market. It is hoped that with more discussion in this report, it will increase the level of understanding about property investment market. 1.3Scope

The study for this report focused on the impact of the increase of the oil price in Malaysia on 2nd September 2013 towards property investment market. The policies related to government expenditure and their effects to investment market in general will be discussed. Besides, the importance of these policies in relation to investment market and their influences on investors’ decision especially in property investment will be included.


The data from various sources will analyse. The budget 2014 will be main sources to analyse new policy.


On 2nd September 2013, Prime Minister Datuk Seri Najib Tun Razak announced the Government’s decision to increase the price of RON95 and diesel by 20 sen to RM2.10 and RM2 per litre, respectively, effective on 3rd September 2013, as one of its measures to rationalise subsidies. It expects to save RM1.1bil this year from September to December and RM3.3bil per year in subsidy bills from the exercise, helping to tame the fiscal deficit. The Government has targeted to reduce budget deficit to 4% this year, 3.5% in 2014 and 3% by 2015. This report will analyse the effect of government policy including reducing in fuel subsidy towards investment market especially property.

3.1.1 Fiscal Policy
Fiscal policy is the government’s steps to change the government spending and structure of taxation to influence the level of aggregate spending in the economy. Fiscal policies seeks to reach full employment level and to control inflation. There are three major ways in...

Bibliography: 1. Graham, J. P., & Spaulding, B. R. (2005). Understanding Foreign Direct Investment. Retrieved October 26, 2013, from
3. BBC news 2013."Malaysian cut subsidies on fuel" Retrieved on October 26, 2013 from
5. Sinar Harian 2013. " 11 tahun negara dalam hutang” Retrieved on October 26, 2013 from
7. The Star 2013. “Malaysia Ringgit Hits 3-Week High After Fuel Subsidies Cut” Retrieved on October 26, 2013 from “
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