Saving Malaysia: Najib's Recipe

Hantu Laut

It's RM30 billion, just what I figured it should be. Finally, they agree there is going to be a bad recession in the country.Full text of Najib's recipe here.

Finance Minister and Deputy Prime Minister Najib Tun Razak announced a two-year stimulus package of RM60 billion in a mixed basket of the good, the bad and the ugly.There was no mention of where the money coming from or how the government wish to raise the funds.

I must say overall the package is well thought out and should be able to stimulate the economy but obviously much depend on how it is managed and more importantly the global economy is working in tandem with our effort.Nothing much the government can do if the world economy stays in the doldrums.

Those in government and government linked economists wish to believe that Malaysia is different from countries like Singapore and Hong Kong. In some ways that may be true but in many ways they are the same......they are export-dependent economies, making them at the mercy of the world markets.

A prolonged recession would have dire effect on the people's livelihood.Many low and middle income Malaysians do not have savings to tide them over bad times. Severe and prolonged recession would raise tension against the government and ethnic tension, fan by those desirous of pitting the people against the government, would certainly increase.Although, the government have taken the right step to take care of the economic engines first and shows greater attention to its survival, it must not forget the interest and welfare of the individual. There is nothing worst than having no money to sustain your daily existence.That's why I proposed in my earlier post to allow those who have lost their jobs to draw half of their basic salary from their savings in the EPF for a maximum of 6 months.This would give them the basic necessities to survive before they can secure another job.

The double deduction to be given to companies that employ workers retrenched by other companies can lead to abuse. Unscrupulous employers can sack their existing employees and replace with new ones to take advantage of the double deductions.Unless, the government fine-tune the terms and conditions it will have negative effect.

Too much emphasis was given on the financing of business but very little in cutting the costs of doing business.That's why I proposed incentives,rebate and reduction of taxes and duties in my earlier post.In a period of contraction of the economy the costs of doing business must come down either by market forces, by intervention or both.

Loan guarantees and easy access to the capital market would be most welcome by the business community as long as they are not designed to bail out cronies and friends making it difficult for those not well-connected to have access to the facility.

In time of uncertainty, risky and low-yield investments the issuance of government-backed saving bonds is a welcome sign.Although, it will not increase liquidity in the system it is better than the current interest rate of fixed deposit with banks.There will be major shift to these saving bonds and a mad rush to buy it for those who have spare cash.

Equitable distribution of projects and suspension of the NEP during this period of economic uncertainty should be seriously considered if the BN wish to salvage its sunken popularity.

The drop in export is going to be pretty serious.It's going into a tailspin during the 1st half of this year.The 1st quarter result would be out by next month and I wouldn't be surprised to see a decline of 25-30%. A negative growth for 2009 is not a figment of the imagination. Malaysians should be prepared for more bad news.The stimulus will need at least 3-4 months to kick start and by then we would only have about 6 months left for the year and probably half the job undone.

As usual Anwar Ibrahim is uninspired.