Its President, Datuk Wong Khen Thau, said there are lots of cash handouts in the Budget that was presented by Prime Minister Datuk Seri Najib Tun Razak last Friday.
However, he envisioned that these would create short-term inflation later.
"Such expansionary measures would boost economic activity in the immediate term but it also has risk of inflation later," he told a press conference.
While the budget is commendable, he said, there must be a corresponding improvement in efficiencies on the part of civil servants as exemplified by some of Sabah's government agencies recently awarded four-star rating in the Auditor-General Report.
To this, he said, the consistent rave reviews by the A-G on Sabah's financial management is an achievement that the people should take pride in.
He said the Government also ought to consider giving more than one-and-a-half month's bonus to departments that really excelled.
He said there are some departments and agencies that do not really perform and yet still receive similar bonus.
If the departments and agencies that performed well were given a two-month bonus, the staff there would continue or enhance their work performance.
Wong said this is what the private sector has been advocating.
In view of the Kedai Rakyat 1Malaysia (KR1M), he said, the government should ensure that it is not set up for the purpose of profiteering.
"We caution the Government to look into KR1M seriously because we don't believe that the Government should be making a business out of it," he said. The KR1M, he said, could pose a challenge to hypermarkets because of the prices it will offer.
"The KR1M also could kill small businesses in rural areas where most of the operators are local entrepreneurs," he said.
He said the Government should consider using some of the RM386 million meant for price uniformity programme (PUP) to improve the infrastructure in Sabah. The Government also should look into the licensing fee for trailers in Sabah because it is too high, he said.
A recent statement by the Sabah lorries association claimed that lorry operators in the peninsula are not imposed any licensing fee while in Sarawak, only about RM200 compared to a whopping RM1,000 in Sabah.
"The Price Uniformity Programme is a move in the right direction, albeit more a stop-gap measure rather than solving the underlying problem of price inequality between Sabah/Sarawak/Labuan and West Malaysia," he said.
With regards to assistance given to SMEs, he said, the budget seemed passive in nature such as on loans and tax deductions on certain expenses.
"The FSM was expecting more direct assistance such as grants and subsidies to actively bring down the costs of doing businesses especially with the implementation of the minimum wage," he said.
Expressing disappointment, Wong said the one per cent reduction in individual tax rate should also be extended to corporate tax.
Further on the budget, he said, the allocation for development programmes in 2013 is not as much as what the FSM had hoped for.
He said only RM49.76 billion is earmarked for development expenditures while more than RM200 billion is for operational expenditures.
On skills enhancement and training for students and graduates, he said, it is important that educational institutions work closely with the business sectors to ensure compatibility of skill of workers with the needs of industries.
Wong also said the Federal Government should give more money to Sabah because of its proven prudence.