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.
15 comments:
RM60 billion is enough if prudently utilized to help the economy, businesses and needy workers affected by the downturn. No amount of money will help if it is spent foolishly or cynically to advance political goals. Like giving out contracts on a lucky draw basis to supporters in a by-election. That sucks. This government may not not have the gumption to be all-inclusive, to use the stimulus funds in a transparent and incorruptible manner. That worries me.
It is easier for a camel to pass through an eye of a needle, than to wipe out corruptions in the ruling administration.
It is like taking a bucket full of water and pouring it from the top of a tree, little reaches the ground...where it is needed most.
My concern is, future generations will be burdened with the nation debts... to clear the mess!
in reality the rm60B package is not very big, and it is too long delayed. why do i say it is not big? because it is over 2 years, and the way the delivery system works in malaysia, it will be back loaded, which means the bulk will be spent only in 2010.
and worse still, only those non-demand pull items will be spent in 2009. i bet you the government will use up the bulk for 2009 to (1)bail out sime darby and cimb (mainly) and other crony companies that umno warlords have large holdings and whose equity are pledged to banks that are under water and banks are chasing for their top-up, which will eat up the rm10B equity investment supposedly to prop up the klse,
(2)rm25B will quickly disappear to guarantee loans for crony water, power generation, and toll companies who have huge borrowings, especially tenaga who is getting buzzed by us$ denominated, and ytl by yen denominated loans, which have greatly appreciated in value against the RM.
what's left to help the SMEs and SMIs will be tied up in the delivery system, that by the time the $ is approved, some of these are already dead.
so why announce RM60B? the government hope the big sum will spur the rakyat psychological reaction to go spend, spend, spend in the believe that the economy will be cured with this big bang.
so this RM60B is more to boost confidence than anything else. nope, the rakyat will not benefit much from this, except for some trickle down, depending how much already filtered by the many layers of umno feudal lords.
Well i'm rather dissappointed that there is still no reduction of personal & corporate tax.
I'm no economic wiz, but in times of recession, wouldn't it be better to give people are $$$ to spend.
I'm very if-fy, on the opening of job centres in high-density areas especially in major shopping centres. Is there any place available for them & will they buy or rent at over-inflated cost.
In my opinion I am not too sure whether the amount is sufficient to rescue us from recession because I am not an economist. I don't even know how many zeros there are in 60 billion. However, I believe the situation here is unlike USA. Our main problem is the fall in demand for our goods and services overseas. This will have a chain effect on the livelihood of the people. It will happen slowly but surely if the stimilus plan don't work. From my brief observation the plan seems to be rescuing the various sectors of the economy.Helping companies rather than the individual consumers. If there is a drop in external demand, my common sense tells me that that drop must be replaced with domestic demand in order that the economy may be revitalised. The mini budget may create more jobs but will they be taken up by locals ? Will the RM60bn finally end up in the pockets of the consumers in order to build up spending confidence ? Reviving the economy, at least to me, is not about just figures. Something has to be done to push domestic demand to take over the loss in our exports.
Ultimately, the big Q is, "How will this mini-budget benefit me or that makcik in the kampong or the neighbour with 3 children who lost his job?"
Answer: Zero. Nothing.
In fact the neigbour has to pay his income tax for last year's income. He has to pay his home loan.
Whilst the RM60 billion stimulus is welcomed, the distributions/channels seem skewed in that it is not addressing the bread and butter issues. Too much top down and nothing from the bottom up! Singapore immediately has reduced public transportation fares and thats a good start and can be 'felt' by the man on th estreet. I am not sure about how retraining can help unemployment? Valerie
WITH $60B THERE IS A PROBLEM HERE(below), I THINK IT SHOULD NOT BE MORE for this group:
OH, WHAT A STIMULATING TIME!
Hi Kay Peng,
Regarding your suggestion on expenditure for public transport, I have the following opinions to share:
I think in Malaysia our private cars are the most expensive in the world, but why Malaysian still want to commit on this overpriced product even though a lot of transactions in 2nd Market, Seller facing deficit (Cough up additional money to redeem car from finance company despite after years of instalments), based on my own experience, I have incurred lost nearly RM100k by changing cars 3 times within 10 years.
The primary reason for Malaysian keen to buy cars because they feel more safe to use private cars to travel compare to public transport as throughout the years,the criminality (Kidnap, rape, rob & etc) in the country are keep rising, it is no longer save to walk alone in a lot of places(You can do your own survey by checking with your friends' opinion and read reported news daily), that is why, if Govt focus a lot of fund on Public Transport, I don't think it can bring Ideal benefit to the Rakyat unless crime rate can be reduced.
According to my friends,they willing to increase financial burden to buy this overpriced cars in Malaysia for family members because concern of their safety (Especially for those who have Wife, Children, Mother and Sisters).
I hope Govt can look into the safety issues and our national car manufacturer has the conscience to product quality, features and pricing to less the burden of our young executives.
Thanks
People will go gaagaa over the figure 60billion and as you say where is it coming from? It's so easy to pluck a nice impressive number from thin air.Why not 100billion 150billion?
Even then whatever the amount is, there will be vague accountability;I mean look at the first stimulus;where did it all go...I really think these people have been stuck in make believe land so long they haven't a clue what to do now the recession is upon us...
It appears that the local stock market has already given its verdict on this 2nd S-Package.
The KL stock indices have been slipping down these past three days when normally an announcement of this magnitude would have sent the stock market higher.
one big q-whats the 10 billion to khazanah for? to bail out cronies? the GLCs have all the plum jobs already and funding is needed to bail them out?
Dear readers,
Thanks for your response. Rightly pointed out, the 2nd stimulus package has failed to restore market confidence. We have every legitimate reason to be worried about the implementation of the stimulus.
The lack of details is dizzying. Second, it appears that middle class working people like us are not going to get anything from the stimulus. Personal and corporate tax cuts should have been given to the package.
There is not much evidence to suggest that domestic demand is going to go up anytime soon.
I agree on the lack of public safety. Our policemen are too busy with politics. But it does not mean we should not invest in public transport system.
I don't have time to go into details but would like to highlight the following:
(i) The intention of issuing bond to public is to encourage saving, which goes against the plan to stimulate ecoonomy. Public need money to spend in order to rejuvenate economy!
(ii) RM10,000 tax deductible for rental-yielding property purchasers. If one can afford to buy property amid economic downturn, do you think the buyer still needs to receive such benefit?
Potential buyers may adopt wait-and-see attitude and may postpone their purchases rather than being attracted by RM10,000 in tax savings. If the property prices fall another 10%, this price difference will outweight the benefit of tax savings.
iii) RM5,000 to trade-in. Another policy to reiterate the government's subsidy mindset!! This will depress prices of Proton & Perodua in the medium-term, another suicide act by the government!
utopiainjapan@yahoo.com
My hope is that the money shall be spent only for Bumiputra overseas education. The econonomy will go south and the haves (read chinanese pendatang) will be bankrupt and the new Bumiputras will rise
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