Najib: Projects to stimulate economy must take off soon

Related: RM7bil Spending

Nov 11, 2008, KUALA LUMPUR: Programmes under Budget 2009 and the RM7bil stimulus package must preferably take off by the first quarter of next year.

Finance Minister Datuk Seri Najib Tun Razak said it was important for the programmes, which were introduced to reinforce the economy, to be implemented soon.

“Right now, that’s our priority,” he told reporters yesterday after attending the Economic Council meeting, chaired by Prime Minister Datuk Seri Abdullah Ahmad Badawi, at Parliament House.

Najib said the Government would introduce several measures to insulate the country’s economy from the global financial crisis.

Among them were making structural changes to encourage better and competitive economic growth, encouraging more investments from the private sector in the local economy and implementing progressive liberalisation of the services sector.

To a question, Najib said the Government would only come up with additional stimulus packages if the situation warranted them.

“We have the capacity to make capital injections, but at the same time we cannot allow the Government’s fiscal deficit to become too high,” he added.

Najib said more effort would also be made to encourage additional foreign direct investments in certain economic sectors and sub-sectors.

He said the meeting also decided that more skilled or knowledge workers were needed, especially for the main growth corridors.

Earlier when addressing the inaugural Asean Infrastructure Financing Mechanism Conference, Najib said Asean was inviting the private sector and multilateral organisations to assist in implementing and developing infrastructure projects, which were essential in accelerating the region’s economic growth.

He said the Asean Finance Ministers were inviting the private sector to engage with the Asean Infrastructure Financing Mechanism (AIFM) Task Force set up to facilitate the establishment of the best frameworks and mechanisms to attract greater private sector participation and investment.

Malaysia chairs the task force.

Abdullah, in his welcoming speech to the Economic Council, said Malaysia was not completely insulated although it had strong macro-economic fundamentals and a resilient banking and financial system.

He said that while the stimulus package announced by Najib last week was a short-term policy response, the Government believed it should also take the opportunity to address medium and long-term structural issues and formulate a strategic package to ensure rapid growth of the economy.

RM7bil package may not be enough: Ariff

Nov 6, 2008, PETALING JAYA: The RM7bil stimulus package will help cushion the adverse impact of a global economic crisis but is unlikely to avert a possible recession, says Malaysian Institute of Economic Research executive director Professor Datuk Dr Mohamed Ariff Abdul Kareem.

In an e-mail to StarBiz yesterday, Ariff said the crisis was simply too big to be contained by a package of this size and there was a strong possibility that Malaysia might face two consecutive quarters of quarter-on-quarter contractions in the gross domestic product (GDP) growth.

“The strategy, which is mainly of increased spending, may not be sufficient to ward off the impending crisis. For one, there are limits to public expenditure, given the serious budgetary constraints.

“For another, there are no incentives in the package for increased private sector investment expenditures,” he said,

He added that the package would work better if it were accompanied by policy liberalisation.

Finance Minister Datuk Seri Najib Razak said on Tuesday the GDP growth forecast for the year had been pared down from 5.7% to 5%, while for 2009, was revised to 3.5% from 5.4%.

Meanwhile, the budget deficit for next year has been raised to 4.8% from 3.6% due to lower government revenue from commodities.

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said the overall strategy to have an expansionary fiscal policy was a step in the right direction by the government.

“Economists have learnt over the years that a contractionary budget will only lead to disastrous outcomes when implemented during an economic slowdown,” he said.

Macro indicators seemed to suggest that the US economy would be experiencing a full-blown recession and an open economy like Malaysia is expected to be adversely affected through various linkages, particularly external trade and investment, Zahidi said.

“As such, efforts should be made to support domestic economy, particularly through consumption and high-multiplier projects. The reduction in employees’ contribution to the EPF would aid private consumption, the major pillar of the Malaysian economy,” he added.

In contrast, Ariff said it was not wise to use the EPF as an instrument for short-term macro-economic stabilisation.

“EPF savings are meant for the future, not for current consumption, and studies have shown that in most cases, EPF savings are inadequate to take care of the retirees’ financial needs,” he said.

However, Zahidi said that due to such concerns, the government had made the reduction in EPF contributions optional and would only be implemented for two years.

Source: http://biz.thestar.com.my/news/story.asp?file=/2008/11/6/business/2470214&sec=business

RM7 Billion Stimulus Package Breakdown

In response to the global financial crisis, the Government announced a RM7 billion stimulus package to boost the country's economy.

Deputy Prime Minister cum Finance Minister Datuk Seri Najib Tun Razak, announced the package which he termed as expansionary policy.

The breakdown of the stimulus package, as following

• RM1.2 billion allocations for the construction of 15,000 low-cost and medium-cost houses.
• RM500 million to refurbish police stations and police quarters, as well as army camps and their living quarters.
• RM600 million for small projects under the Public Infrastructure Maintenance (PIAS) for repairing village roads, building of community halls and small bridges.
• RM500 million for the preservation and repair of public amenities such as schools, hospitals and roads.
• RM500 million for upgrading and construction of rural roads and village roads.
• RM200 million to four groups of schools. RM50 million each for fully-aided religious schools, mission schools, Chinese schools and Tamil schools.
• RM300 million for creation of funds and to implement skills training programmes in the Development Corridors.
• RM500 million to strengthen the public transport especially the LRT, Komuter and bus systems in urban areas.
• RM1.5 billion ringgit as investment funds to attract more private sector investors.
• RM400 million to expedite the high-speed broadband project implementation.
• RM200 million to build human capital through various training programmes by various ministries.
• RM100 million for Rakan Muda projects.
• RM200 million to revitalise abandoned housing projects.
• RM200 million for early education for kids.
  

Read the full speech here.

RM7bil spending

Nov 5, 2008, KUALA LUMPUR: A total of RM7bil will be spent by the Government in its stimulus package to boost the country’s economy in the face of the global financial crisis.

Finance Minister Datuk Seri Najib Tun Razak, in announcing the package which he termed as a policy response to the crisis, said the Government was adopting an expansionary policy.

The money is to be spent on a wide range of projects, from the LRT to repairing of houses belonging to the poor.

Among the major announcements in Najib’s winding-up reply in Parliament yesterday were:

• Gross Domestic Product (GDP) this year expected to be at least 5% while the GDP for next year is estimated to be 3.5%. Update: GDP may grow below 3% next year (http://biz.thestar.com.my/news/story.asp?file=/2008/12/3/business/2705054&sec=business)
  
• The inflation rate expected to drop next year to between 3% and 4%, provided crude oil prices continued to fall.
• Contributors allowed to reduce their EPF contribution by three percentage points to 8%, so that they will have more money to spend.
• Civil servant car loans increased by RM10,000.
• Religious, missionary, Chinese and Tamil schools to get RM200mil as aid.
• Open tender system will be practised in the sale of government land and in government procurement.

Source: http://thestar.com.my/news/story.asp?file=/2008/11/5/nation/2459309&sec=nation

Nov 6, 2008 - RM7bil package may not be enough: Ariff
Nov 5, 2008 - RM7 Billion Stimulus Package Breakdown