Deputy Prime Minister and Finance Minister Najib Razak has announced an unprecedented RM60 billion economic stimulus to counter the economic downturn. The sum is impressive but the devil is in the details.
Firstly, it is very important for the economic stimulus to return the people's confidence to continue spending and investing in the local economy. The source of funding the stimulus package should be made clear and transparent. The big Q is how is the government going to fund the stimulus.
Second, there is a need to create a solid mechanism to provide a reliable check-and-balance system to ensure that projects earmarked under the new mini-budget are economically viable and useful. The government should be careful not to spend on projects which are wasteful. It needs to ensure that leakages and wastages are kept at minimum level. Corruption is still a problem in the system. Another equally important concern is poor execution of contractors. Abandoned projects or those not completed on time equal to almost 20-30% of total project value.
Third, it is unfortunate that the government does not touch on special allocation to improve public transport system e.g. public bus, LRT and taxis. These services should be expanded and improved. More than 50% of our petrol consumption is taken up by private vehicles. The consumption is not productive and wasteful. Instead, the government is providing subsidy of RM5,000 for the scrapping of cars more than 10 years old to Proton and Perodua buyers. While there is a need to support the local automobile industry, the assistance should be made broader to include public transport system.
Allocation for cottage industry was a paltry RM50 million. This industry should be given more emphasis. The period of economic downturn is the best to encourage entrepreneurship amongst Malaysians. Some of the local industries which can be helped include local products such as handicrafts, food manufacturing, F&B, retailing, services and others.
A direct tax cut should be given to both companies and individuals. Companies which hire 100 percent local workers should be given additional tax rebate.
However, the government's willingness to change its PR rule to allow those with high net worth (USD2 million) and special skills to be given the status should be lauded. Malaysia needs to attract more talents into the country. With more talents, new knowledge centric industries can be founded.
Overall, there is nothing unorthodox about the stimulus despite the deputy PM's intention to keep it otherwise. A lot of money is still being poured into construction and infrastructure building. What about maintenance?
Is the stimulus enough to rescue us from recession? Technically, we should be heading for one by the next quarter. Let me hear from you.