Where are all the economic experts, the second Finance Minister, the governor of Bank Negara and all those in government that try to muddle Malaysians into believing that there will be no recession in the country. Even the trained economists got sucked into this body of lies.
Such presumptuous and vacuous advisory to the people should not be taken lightly. It has serious repercussions on the economic welfare of the people and could stall the engines of recovery.If all Malaysians believed there are no economic problems and no recession sould there be any reason for them to put in extra effort to tend to the cut and bruises of the economy. All those who had intentionally misled the people should do the right thing......... they should resign from their jobs. Saying it once is fine, people accept you probably have made a mistake, but to keep repeating it over and over again is inconceivably stupid.
That was just a month ago when our government witch doctors and bomohs prescribed a good bill of health for the nation.Of late they have woken up to reality and faced with the magnitude of the problems, decided to swallow their pride and came up with a stimulus package.
When I first saw the amount of the package it was a shocking disbelief, the bunch of dead ducks in the Ministry of Finance is worse than what I have imagined. Not only are they bad in making economic forecasts they can't even evaluate the financial needs and optimal amount of the rescue package.As I have said in my earlier posts the stimuli would need another stimuli.....the RM7 billion is a drop in the ocean.The package is just too small to stimulate the ailing economy.The situation will worsen by the middle of this year.
The Malaysian stimulus package is different from that of the US government. Ours is a general rescue package of the economy while the US rescue package are mostly bail-out packages for ailing corporations and specific industries.The incoming Prime Minister should seriously consider revamping the Ministry of Finance.
In my forecast of the economic outlook for 2009 here I have predicted as early as October 2008 that Malaysia's growth rate would be in the region of 2% and below with high possibility of going into negative territory. The situation has changed, the outlook is bleaker, negative growth is no more a mere possibility, it's a reality. Unless the government increases the stimulus package and apply them in the proper sectors the stimulus might end up as stimulated waste.
Funding the wrong sector may cause more damage than good. The government should limit its exposure in propping up stock market and currency speculation to defend the ringgit.It has to face the fact that its foreign exchange reserve would dwindle in value if the ringgit depreciated against the USD.In the same posting I predicted export would decline by at least 20% during the 1st quarter of this year. The decline will affect all sectors particularly the major contributors like electronic, palm oil and crude oil.
There are two sides to a coin.The depreciation of the ringgit may not be as bad as some people imagined it to be.It is good for export. The depreciation can help compensate the diminution in value of export commodities. It's also a deterrent for huge capital outflow.Malaysians should be contented to keeping their money at home. The weak ringgit would make overseas travel more expensive and domestic tourism as cheaper alternative.
Whilst the government inject more money to boost the GDP and thereby increasing export, it must also not ignore to control import of certain commodities that are considered non-essentials.Imports of this nature should be reduced, suspended or imposed with higher tariff as deterrent. The tariffs and duties on luxuries (something pleasant to have but not necessary) like cigarettes, alcoholic beverages and other luxury items should be increased. The issue of APs for high end luxury cars should be suspended and the overall AP volume to be reduced.Increase road taxes for high end luxury cars. Incentive to be given in the form of tax rebate for manufactured products with high local components/contents. Promote and encourage 'Buy Malaysia First' to reduce incidents of unnecessary imports.
To overcome the unemployment problem the government must create incentives for Malaysians to take over jobs of migrant workers.Malaysians shy away from such jobs because of low wages and zero benefits.There must be re-education, minimum wage and better benefits to attract them to this sector.From my experience as businessman with offices and factories in many locations in the country, locals, especially bumiputras, throughout the country have the notion that blue collar work is menial and degrading and many would prefer to be drivers or office boys even if the dirty job offers 3 times more salary.I remember a case where I offered a bumiputra boy a job as a storekeeper in the company's logging camp with a starting salary of RM950.00 which he refused and wanted an office boy job which only pays RM300.00.His only other benefits of being an office boy is he sits in an air-conditioned office and gets a company's motorcycle.The job of storekeeper was eventually taken by a new school leaver, a Chinese boy. That's why re-education and revamping of wages and employment benefits are imperative to bring about the change of attitude.
Those are just few of what the government can do, there are many more.I have not touch on how the stimulus package should be spent.I'll keep that for another day.
Although, I hate it as much as any of you, all my predictions of the economy have manifested and the government was wrong......there is going to be a recession in the country. In fact it is already here.