After speaking about the country's strong fundamentals for the last few weeks and inviting criticisms of being in denial, Najib went for the jugular today. He said that the country's growth for next year will slow to 3.5 per cent while the budget deficit will widen from 3.6 per cent of the Gross Domestic Product to 4.8 per cent of the GDP.
He also said that the government will pump RM7 billion more into the system next year and introduce additional steps to maintain the country's economic momentum. "The emphasis will be on encouraging domestic economic activity to spur economic growth, '' he said.
Among the slew of initiatives and projects announced by Najib were:
#' RM1.2 billion to be spent on building more low and medium cost housing, RM500 million on quarters for police and military personnel, some RM400 miillion on the double-tracking rail project and RM500 million will be set aside to improve public transportation in urban centres.
Besides allowing more Malaysians to own homes, upgrade the living conditions of uniformed personnel and improve transportation in the country, this infrastructure spending is aimed at keep the important construction industry humming. This sector puts money into the hands of hundreds of thousands of Malaysians, directly and indirectly. A strong construction sector impacts a wide range of industries, from cement factories to transportation companies to furniture shops.
To keep the construction costs down and spur growth in the industry, the government also said that it was abolishing the import duty for cement and long iron and steel products. But a robust building sector without demand is a recipe for a property overhang. To avert this problem, foreigners and foreign companies are now allowed to buy commercial properties valued at RM500,000 and above without needing approvals from the Foreign Investment Committee.
#' Allowing employees to reduce their EPF contributions from 11 per cent to 8 per cent for two years from January 2009. For someone earning RM2,000 a month, this puts an additional RM60 per month disposable income in the pocket. Assuming that only half of all EPF contributors choose to take up this offer, private sector spending will increase by RM2.,4 billion.
In addition, the government will allow those with existing housing loans to lengthen their period of repayment from 25 to 30 years. This will put more disposable income into the hands of civil servants, encouraging them to keep their wallets open. The government will also urge banks to make similar arrangements for those in the private sector with housing loans.
# Increasing the threshold for car loans for civil servants in the hope that they will be persuaded to get a car or upgrade.
# Extending shopping hours at hypermarkets until 11pm on week days and 1am on weekends. The move is aimed at getting Malaysians to spend more and push the consumption of local goods.
#' Doubling the social safety net for Malaysians, from 55,000 to 110,00. Najib took pains to stress that the additional RM7 billion which the government will spend next year is from savings from a tighter subsidy regime. But there is little doubt that the government is mindful that it will have to raise more revenue and from different sources if it is to carry on this expansionary approach beyond 2009.
That could explain why it has decided to maximise returns on its assets and develop prime land that it owns. This includes swathe of real estate in Sungai Buloh, Jalan Cochrane and in Ampang. Under this open tender
system, the private sector and government-linked companies can put forward proposals to develop this land.
Najib said that if this development concept takes off, government stands to gain handsomely.
Clearly the administration is also concerned about the slump in crude palm oil prices and its impact on the industry and country, the government today announced that it was abolishing the import duty of mineral fertilisers and taking steps to reduce the cost of fertilisers by 15 per cent.
This would come as a great relief to the palm oil industry as fertilisers make up nearly 60 per cent of the cost of production. Lower cost of production will especially benefit the 120,000 Felda smallholders. Traditionally their palm oil yield is lower than the industry standard and their cost of production is higher. In this environment of falling crude palm oil prices, many of these smallholders were staring at tougher times. The government's intervention may keep them in the black, and allow them to keep their wallets open.
Valuecap RM5 billion EPF loan still on
Unfortunately, Najib is bulldozing through the RM5 billion loan from EPF to Valuecap. This shows that there is hardly any checks and balances from within the EPF board of directors.
Does the EPF board have to blindly obey the Minister or, are they supposed to be independent under the Employees Provident Fund Act 1991?
Section 11 of the Act provides that the Minister (of Finance) may give to the Board directions of a general nature not inconsistent with the provisions of this Act as to the exercise of the functions and powers of the Board and the Board shall give effect to those directions.
So, going by Section 11 of the Act, whatever MOF1 says the Board must obey.
UPDATE Nov. 5: An extract from the Straits Times report:
Malaysia's economy has largely been shielded from the global turmoil, thanks to capital controls and reforms following the 1998 Asian crisis.
But economists note that it remains heavily dependent on exports and commodities.
Kenanga Investment Bank economist Wan Suhaimi Saidi told The Straits Times that the success of the measures outlined yesterday would depend on their speedy and transparent implementation.
'The government can say what they want but it all depends on the execution. At best we will start to see the effects only in the second half of 2009.'
Mr Abdul Jalil Rashid, head of equities at Aberdeen Asset Management's Malaysia unit, told Reuters: 'I am quite surprised that it's quite straight rather than more detailed. The market would have been happier if there had been more details on what's being done.'
Meanwhile, Mr Alvin Liew, economist at Standard Chartered, said the RM7 billion seemed 'affordable for the government' but added that the increase in the 2009 fiscal deficit was 'a bit of a concern'.
3 comments:
A kenyan can win the US presidential election.
Can a dayak win the chief ministership of sarawak?
Neil
Stephen Kalong Ningkan, the first CM of Sarawak was Dayak. I think the answer is, therefore, YES. It's happened in Sarawak's history and, it should happen again.
So it's pump-priming again. While that's fine, it also reveals how few cards the government has:
oil, commodities, land, EPF
Look soon to a new rash of tenders that favor one group. That's ok too, since they will not survive otherwise. But somehow you would expect if this government is at the same time concerned about relaxing some of its ardent policies, there should also be something for the other groups in the same construction sector; they're not exactly doing swimmingly well, if one can just motor around to look-see (instead of just putting things on paper to look good)
Which also begs the point about support for those schools; if religious schools of one faith have already been supported to the zenith all these years, why would they be needing again as much support as has not been given to those of other faiths and vernacularities?
Just think, to be happy to get something to save your school from termites at this beginning of the 21st century of this 52-year old nation. The saying, 'don't underestimate the power of termites' hardly consoles.
It remains all about race, innit?
Now, EPF. The rakyat now understand that EPF contributions will be reduced. That's just telling the rakyat to support the government's new non-denial of their previous denials of being lax. In the near future, with a ringgit which had to be propped up by an amount no less than this pump-priming seven B, the rakyat will have to live by less in their twilight, non-producing, years. In other words, with medical costs and living costs going up, they should invest immediately now in getting their hearses ready, since they will be having less EPF to live on soon. It's a death sentence, renewed.
To that, adjunct the other thing - Valuecap (sic). Someone sallied in to say that the five B was needed to prop the market, else it will collapse and all will perish.
If a government doesn't have five B from elsewhere to mask its own mistake but have to take it from the EPF by a circuitous route through a proxy, and now is intent on shaving the EPF further, won't anyone think it is in bigger shit (echoed word) than one had surmised before? If they can think about spending two B or so on twelve copters, why can't they find five B from elsewhere that will affect 27 B while knowing full well that five B is already goners in five seconds in this bleeding market? Sucks, doesn't it? And yet he went through with it - WHY?
The FDI-centred manufacturing promotion program and the tourism sector are the only two things they seem to have mentioned before. Where are they now?
Without digressing from the same vein, what about the SMEs? Considering these are super-important pillars for the whole economy as well as the first to be hit by any wave next year, why isn't there anything for them?
I wish the other Neil was here. He would know what to say...
;P
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