The much-anticipated 2nd stimulus package or mini budget was finally unveiled by the Deputy Prime Minister who is also the Finance Minister I.
I am surprised that the amount RM60billion over 2 years was much higher than anticipated. This is a good sign that the government is not in state of denial and Malaysia, like any country in the world will not be spared from the economic tsunami originating from America.
It is good that the government has readjusted the GDP growth this year from a predicted 3.5% when presenting the 1st stimulus package to 1 to -1% of GDP growth this year. The 2nd stimulus package is about 9% of GDP growth over 2 years. This will be financed from the domestic financial system. That will not burden the government with foreign debts, which may have an impact to the actual cause of borrowing because of currency fluctuation.
If we take into account that the yearly budget under RM9 is RM40 billion, the additional RM30 billion would mean a RM70 billion budget for 1 year. However, the actual government spending under the 2nd stimulus package is only RM15 billion since the rest is in the form of government guaranteed bank loan.
With the private sector reducing their investment and spending, the government needs to balance the economy through direct spending to prevent a steep downturn.
If the 1st and 2nd stimulus package can reach its target, we will be spared a severe economy contraction as experienced by other countries
It is good that the 1st thrust of the stimulus package is to reduce unemployment and increase employment opportunities. RM700 million is allocated to create 163, 000 job opportunities in public and private sector. The double levy imposed on foreign workers except from plantation, construction and domestic sectors hopefully will reduce the number of foreign workers.
The service sector will feel the pinch since doubling the levy for foreign workers means that the new levy is RM3600 per year per worker.
Reducing the cost in doing business is crucial with turnover down and a margin squeeze. Hence, a lot of people are disappointed that there are no reduction in corporate tax. However, incentives are still given to business which is up to a maximum RM100, 000 for loses incurred this year to be offset against last year’s tax period. For example, if you make a lost of RM200, 000 this year and made a profit of RM300, 000 last year, you are able to claim RM100, 000 loses last year.
Besides that, the double tax reduction on worker’s salary for companies that employ retrenched workers is a welcome move by the private sector. However, the salary should not be more than RM10, 000 a month.
There is also reduction in certain sectors and levy to the human resources fund. The working capital guarantee scheme would help SMI to obtain loans from the financial institutions.
To reduce the burden of the common rakyat of the financial burden, the RM674 million in subsidy to avoid increase in price of bread, rice and wheat and no increase in toll rate will be welcomed by most consumers. House buyers will be given tax relief for interest up to RM10, 000 per year for three years and hopefully this will provide a booster for housing developers.
A lot of industries are disappointed that there is no reduction in electricity tariff and the price for industrial gas remain high.
During an economic downturn, many graduates may opt for post-graduate studies since a total of 500 phd and 10, 000 Masters degree are offered in local universities. Tuition fees and research grants will be given. It is hoped that students will take up these offers rather than be unemployed.
The government becomes more generous to Chinese, Tamil and Mission schools. I am glad to note that the government has allocated RM300million to the Chinese, Tamil and Mission schools. This is in addition to RMM200million announced in the 1st stimulus package. This is important to show that the government does not give goodies only during election and the government must demonstrate its commitment in education regardless of race and religion.
I am glad to note that all government procurement will be held through open tender. The concept of design and build will not be allowed except highly technical development. This will make construction projects more transparent and people will get project without any political connection and patronage.
To ensure that there is no cost overrun, the government should beef up its standard and cost committee so that all costs of any government projects would be subjected to scrutiny.
However, the committee needs to be staffed by people who are technically competent and that they are there as facilitators for private sector development and not to frustrate private sector.
All in all, it was a good 2nd stimulus package. No stimulus package will satisfy everybody. It is heartening to note that the government is not in denial and is aware if steps are not taken, this impending slowdown may be a long one. To achieve its target, implementation should not be delayed and this may require constant monitoring by various agencies.