All stimulus packages announced by governments the world over are directed towards boosting something called aggregate demand.
Aggregate demand is a special phrase used by economists (and those who pretend to be one) to describe the total demand for final goods and services in the economy at any given time and at various price levels. Of course, this is a simple description. But, it will do for our purpose.
There are 4 elements that comprise aggregate demand. These are:
C for consumption, which basically means the disposable income that is available to everyone in an economy multiplied by something that Keynes called the marginal propensity to consume. Basically, it is assumed that whatever is NOT saved, will be consumed or spent.
I for investments by the private sector.
G for government spending.
(X - M) which basically means the net effect total exports (X) minus total imports (M).
Unless you were in some faraway place without access to Malaysian business news, you will probably be aware that C is declining. This could be a matter of people deciding to postpone spending. It could be a matter of people having less money to spend (maybe lost in the share market). So, C doesn't look good.
Looking at (X - M)
This is a strange thing. Imports (M) are down. Exports (X) are also down. So, in absolute terms, the net effect of (X - M) has a lower value. So, (X - M) doesn't look good either as a component of aggregate demand.
I is looking shaky
Businesses who are related, directly or indirectly, to FDI activities, particularly the Electrical and Electronics (E&E) sector won't be investing in new plants or equipment for some time. Many SMEs which produce goods for export also won't be investing any time soon either.
Which leaves good 'ol G
The G component includes the RM7 billion first stimulus. It will also include the estimated RM10 billion to RM30 billion (no one can confirm yet, until March 10) second stimulus package.
Where will G go?
This is the billion Ringgit question.
Which part of I can the G stimulate and arouse?
Which part of C can the G stimulate and arouse?
The best G-spot
Where does education and training fit in? Because that is the absolute and, most important, expenditure that G should be directed into. It is not sexy because education and training has a time-lag effect. It takes time.
But, education and training is directed towards HUMAN CAPITAL. That has to be the best G-spot of all to arouse; the MINDSET and SKILL SETS of the Malaysian.