The Finance Minister and Prime Minister-in-waiting Najib Tun Razak is to announce the 2nd stimulus package later to day.In my earlier posting under "Economic Malaise:Will The Government 'Broke The Buck' " I mentioned that anything less than RM30 billion would be insufficient to inject new lease of life into the economy. The stimulus has come a little late but not too late to rescue the economy provided the government dispense the package only in critical sectors of the economy, not projects manufactured to put money in selected pockets.
If the government have not sat on its laurel and took positive actions to put in place a contingency plan on the first sign of a downturn and at about the same time when I wrote my article "Badawi's State Of Euphoria" which appeared in Asia Sentinel in January 2008, it wouldn't be so topsy-turvy today.
The stimulus need not be in cash injection alone but can come in the form of cash, incentives,tax rebate and tax reduction.
Malaysia is the third most export-dependent country in this region after Singapore and Hong Kong. Special attention should be given to this sector to maintain high level of export receipts by providing various incentives and assistance.Special incentives should be given to Malaysian products using high level of local materials and added incentive if this value added products are exported overseas.
Manufactured products and services are the biggest contributors to the GDP, naturally these should be the areas the government should provide the highest priority
Some of the things, among many others, the government need to do immediately for the rest of 2009.
1. Provide incentives in the form corporate tax reduction for all manufacturing companies and bigger tax reduction for companies that export at least 50% of their products overseas.
2.Give bigger tax reduction for companies in selected sectors such as plantations and construction that employ 70% or more Malaysian labour.
3.Remove all export cess or duties on primary products exported overseas.
4.Suspend EPF contributions from all employers and give option to employees to contribute or not.
5.Require banks to suspend loan repayment for principal amount only for companies affected by the downturn and for Bank Negara to impose at least 6 months, as rule of thumb, before such account goes under NPL (non-performing loan).
6.Provide export credit scheme for selected countries and cheaper pre-shipment financing for exporters.
7.Allow those who lost their jobs to draw half of their last drawn salary from their EPF savings for a maximum of 6 months.
8.Remove personal income tax for the year 2009 for those who earned less than RM36,000 per annum.
9.Stop recruitment of all foreign workers and repatriate those that have been retrenched.Require companies to give names and particulars of all foreign workers retrenched to the Immigration Department to ensure they have left the country.
10.Consider re-pegging of the ringgit to RM3.80 to US$1.00 to arrest the volatility and maintain stability of the currency.
Under the current economic conditions the ringgit will not be stable and the government do not have the money to continuously prop it up. With the global recession there wouldn't be many FDI (foreign direct investment) coming to Malaysia or repatriation of capital and profits, therefore, a pegged currency will do little harm to the nation's reputation.
The government must face the grim outlook of the possibility that the nation will face a serious negative growth this year, which we have not seen for many decades and it must not be foolhardy to think otherwise.
What kind of stimulus package Najib will deliver later today will decide whether he has what it takes to lead this country until the next general elections or a revolt within his own party to throw him out before his time is up, just like what they did to Abdullah Badawi.
Will Najib have the right formula to rescue the nation from economic disaster ?
Let's wait and see what's in the package.