PETALING JAYA: Malaysia’s economy will be crippled if the goods and services tax (GST) is lowered from six to three percent, Prime Minister Najib Razak said in defending the controversial tax.

Replying to a question from Liew Chin Tong (DAP-Kluang) during question time to lower the GST rate as it was “dragging down domestic consumption”, Najib said it is a wrong interpretation by the opposition.

“If there is no GST, the country’s economy will be paralysed,” said Najib, who is also the Finance Minister.

He also said Malaysia’s exports, especially in the commodity sectors like oil and gas, oil palm and minerals, have dropped, due to the weakening global economy.


To overcome such issues and to increase domestic resilience, the government will focus on fundamentals such as increasing export, productivity and innovation, said Najib, adding that the country’s gross domestic product (GDP) for this year is expected to be between four to 4.5 per cent.

To an additional question from Dr Tan Seng Giaw (DAP-Kepong) on the Spratly Islands dispute, Najib said Malaysia will continue to have friendly relationship with China.

The Spratly Islands issue is an ongoing territorial dispute between Brunei, China, Malaysia, the Philippines, Taiwan, and Vietnam, concerning ownership of a group of islands and associated “maritime features” located in the South China Sea.

In July, the Permanent Court of Arbitration (PCA) in The Hague, ruled that China has “no historical rights” to the group of islands. China has rejected the ruling.

“As a sovereign country, we are of the opinion that any differences over Spartly Islands must be resolved through peaceful discussions, because it involves the freedom of navigation and overflight,” he said, adding that Asian countries have a Code of Conduct signed with China to prevent any conflict in Southeast Asia.

“Malaysia’s stand is clear, that all countries must make sure there is peace and any form of provocation needs to be avoided. Disputes have to be resolved peacefully according to the United Nations convention,” he said.