We Malaysian have a lot of good view but nobody appreciate and listen. I highly recommend the government to reduce personal income tax rate. Why nobody listen?
Second stimulus package – When, who and where?
WHETHER the second stimulus package unveiled by Finance Minister Datuk Seri Najib Razak will soften the impact of an impending recession and lay the foundation for more rapid growth in the long term will depend on the answers to three critical questions.
1) First, when will the funds be spent?
2) Second, who will actually benefit from the initiatives in the second stimulus package announced last week?
3) Third, where is the Malaysian economy heading?
Judging by past performance, the likely answer to the first question is worrying. According to the Project Management Unit, RM6.5 billion of the first stimulus package worth RM7 billion, announced last November, has been disbursed to ministries and government agencies.
That 92.9% of the first stimulus package has been handed out is gratifying. The problem is only RM1 billion has been spent. If so, this pace of spending is mortifyingly slow. One gauge of the stimulus package’s effectiveness isn’t how much has been allocated or disbursed but how fast the money has been spent.
Given the economy’s rapidly eroding growth prospects, the need for speedy implementation is far more urgent. Fourth-quarter growth last year was a lacklustre 0.1%, exports plummeted by 27.8% in January this year and most analysts forecast growth in the first half of 2009 will be negative.
Furthermore, although the second stimulus package totals RM60 billion, the federal government will fork out only RM13 billion in cash this year, a report by CIMB says. Actual spending in the two stimulus packages could amount to RM20 billion this year, CIMB adds.
In other words, cash handed out by the federal government this year is just under 30% of the two stimulus packages. This suggests the federal government’s role is to jump-start the stalled economy while the private sector acts as the engine of growth. Any delay in government spending means the economy will remain a non-starter.
As for the second question, perception is as important as the reality. If a significant number of entrepreneurs believe they are unlikely to benefit from the stimulus packages because they are not Umno-putras – regardless of whether their belief is well-founded – they are likely to be passive bystanders rather than committed participants.
Another related issue is whether states ruled by the Pakatan Rakyat (PR) will benefit significantly from the two stimulus packages. Given the fact that PR controls Selangor and Penang, the two most developed states in the country, any attempt to marginalise PR’s role could retard Malaysia’s pace of recovery.
Politically, allocating development expenditure on the basis of political affiliation has proven to be a failed strategy. In the recent by-election in Kuala Terengganu and in last year’s general election, a significant number of voters appeared singularly tone deaf to Barisan Nasional’s appeal for support based on its strong track record in development.
To energise the private sector, top policy- makers must signal their commitment in addressing the third question – where is the economy heading? Although the stimulus package was silent on this issue, in an interview last week with Financial Times, Najib, who is also the deputy prime minister, offered an intriguing prospect.
Not only did he suggest greater emphasis on the services sector, he indicated its contribution to the economy should be raised to 70%. In 2007, the services sector accounted for 46.4% of Malaysia’s gross domestic product (GDP) – a proportion virtually unchanged from the 46.2% share recorded 20 years ago.
Given bleak prospects for growth based on exporting manufactured goods amid rising protectionism in the US and given Malaysia’s growing lack of comparative advantage in manufacturing due to high costs and shortage of labour, a dynamic services sector offers the prospect of more rapid growth.
That Malaysia’s services sector has failed to outpace growth in manufacturing suggests this country has neglected to give priority to developing its human resources. Because the biggest assets of a dynamic services industry is people, accelerating the sector’s growth could require a radical overhaul in two major areas – education and foreign labour.
In education, the emphasis – particularly in universities and colleges – must shift from quantity to quality. Meanwhile, the policy of welcoming unskilled foreign labour while restricting the employment of foreign professionals is economically moronic and should be revamped.
Whether Malaysia views the economic crisis as an opportunity for reform – as former Assistant Governor of Bank Negara Datuk Seri Panglima Andrew Sheng suggested to the Economic Council recently – will determine whether this country is relegated to the ranks of economic has-beens or becomes Asia’s latest success story.
Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with. Comments: schoo@noordinsopiee.com.
Updated: 09:58AM Mon, 16 Mar 2009
That 92.9% of the first stimulus package has been handed out is gratifying. The problem is only RM1 billion has been spent. If so, this pace of spending is mortifyingly slow. One gauge of the stimulus package’s effectiveness isn’t how much has been allocated or disbursed but how fast the money has been spent.
Given the economy’s rapidly eroding growth prospects, the need for speedy implementation is far more urgent. Fourth-quarter growth last year was a lacklustre 0.1%, exports plummeted by 27.8% in January this year and most analysts forecast growth in the first half of 2009 will be negative.
Furthermore, although the second stimulus package totals RM60 billion, the federal government will fork out only RM13 billion in cash this year, a report by CIMB says. Actual spending in the two stimulus packages could amount to RM20 billion this year, CIMB adds.
In other words, cash handed out by the federal government this year is just under 30% of the two stimulus packages. This suggests the federal government’s role is to jump-start the stalled economy while the private sector acts as the engine of growth. Any delay in government spending means the economy will remain a non-starter.
As for the second question, perception is as important as the reality. If a significant number of entrepreneurs believe they are unlikely to benefit from the stimulus packages because they are not Umno-putras – regardless of whether their belief is well-founded – they are likely to be passive bystanders rather than committed participants.
Another related issue is whether states ruled by the Pakatan Rakyat (PR) will benefit significantly from the two stimulus packages. Given the fact that PR controls Selangor and Penang, the two most developed states in the country, any attempt to marginalise PR’s role could retard Malaysia’s pace of recovery.
Politically, allocating development expenditure on the basis of political affiliation has proven to be a failed strategy. In the recent by-election in Kuala Terengganu and in last year’s general election, a significant number of voters appeared singularly tone deaf to Barisan Nasional’s appeal for support based on its strong track record in development.
To energise the private sector, top policy- makers must signal their commitment in addressing the third question – where is the economy heading? Although the stimulus package was silent on this issue, in an interview last week with Financial Times, Najib, who is also the deputy prime minister, offered an intriguing prospect.
Not only did he suggest greater emphasis on the services sector, he indicated its contribution to the economy should be raised to 70%. In 2007, the services sector accounted for 46.4% of Malaysia’s gross domestic product (GDP) – a proportion virtually unchanged from the 46.2% share recorded 20 years ago.
Given bleak prospects for growth based on exporting manufactured goods amid rising protectionism in the US and given Malaysia’s growing lack of comparative advantage in manufacturing due to high costs and shortage of labour, a dynamic services sector offers the prospect of more rapid growth.
That Malaysia’s services sector has failed to outpace growth in manufacturing suggests this country has neglected to give priority to developing its human resources. Because the biggest assets of a dynamic services industry is people, accelerating the sector’s growth could require a radical overhaul in two major areas – education and foreign labour.
In education, the emphasis – particularly in universities and colleges – must shift from quantity to quality. Meanwhile, the policy of welcoming unskilled foreign labour while restricting the employment of foreign professionals is economically moronic and should be revamped.
Whether Malaysia views the economic crisis as an opportunity for reform – as former Assistant Governor of Bank Negara Datuk Seri Panglima Andrew Sheng suggested to the Economic Council recently – will determine whether this country is relegated to the ranks of economic has-beens or becomes Asia’s latest success story.
Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with. Comments: schoo@noordinsopiee.com.
Updated: 09:58AM Mon, 16 Mar 2009
