Stimulus: Funding and First Thrust

The RM60 billion second stimulus package involves a budget deficit in the tune of 7.6% of Malaysia's GDP, up from the earlier forecast of 4.8%. This makes it the 2009 fiscal year, the largest fiscal shortfall that Malaysia has seen in 22 years.

Fitch Ratings had lowered the outlook on Malaysia’s long-term Ringgit credit rating of A+ to “negative” last month, citing an expected worsening of Malaysia's expected deficit budget position this year and next.

The source of funding for the second stimulus package needs to be clarified by the government as soon as possible.

Will the EPF's considerable funds be called upon? Tabung Haji and Tabung Angkatan Tentera also? These local funds must be the obvious candidates since the government has eschewed borrowing from overseas in foreign-currency denominated arrangements due to currency risk.

I hope the government isn't banking on selling government land in Jalan Peel and the Rubber Board's huge land bank in Sungai Buloh to fund the deficit. That sounded quite desperate to me when the Second Finance Minister announced the idea last year.

Back to the local funds. This is likely to mean the issuance of more Malaysian Government Securities or Treasury Bonds. Will the yield be similar to the 5% per annum for the Syariah-compliant Savings Bonds? By the way, the 5% per annum yield sounds pretty good to risk-averse people like me.

FIRST THRUST: REDUCING UNEMPLOYMENT AND INCREASING EMPLOYMENT OPPORTUNITIES
Under the so-called First Thrust, the plan is to create a total of 163,000 training and job placement opportunities in the public and private sectors.

Of the 163,000, a total of 100,000 training opportunities and job placements will be undertaken as joint collaboration between the Government and the private sector. This will be implemented through training programmes by various Government agencies, including government-linked companies (GLCs), and the private sector, including private training institutes.

The main objective is to enhance skills to meet industry requirements, as well as employability. The plan will also be to implement job placements and provide incentives to employers to recruit and train local workers.

The target should be employability. No point churning out half-baked workers who are useless to everyone, including themselves.

Double-deduction: A peculiar but inventive way to encourage employment
To encourage the private sector to contribute towards providing jobs to retrenched workers, the plan is for employers who employ workers retrenched from 1 July 2008 to be given double tax deduction on the amount of remuneration paid. The amount of remuneration eligible for this deduction shall not exceed RM10,000 per month and is limited 9 up to 12 months remuneration per employee. This incentive is applicable to workers employed from 10 March 2009 to 31 December 2010.

This double-deduction idea is quite interesting. Employers will prioritise hiring retrenched workers, then...if jobs are available.

Jobs opportunities in the already bloated Civil Service
The plan is to recruit 63,000 staff to fill vacancies and serve as contract officers in various Government agencies.

This one is dodgy. But, in a contracting economy a lucky 63,000 Malaysians will find a safe harbour for a few years....not permanently, I hope.

Opportunities for Post-Graduate Education
The plan is to encourage more Malaysians to pursue Masters and PhD courses. The Government will undertake to finance tuition fees and research grants up to RM20,000 for every student pursuing PhDs locally. For students in the Masters programme, the Government will provide up to RM10,000 per student.

I wonder which agency will undertake this bursary function. Although some other blogs have been cynical about this plan, I, for one, find it quite compelling. The academically-inclined Malaysians itching to write their thesis may just take the 2-year to 4-year sabbatical to pursue this...but not at Harvard, Oxford, Princeton, Cambridge and the like. The grants are not for that level. But, it's still good.

Reduction of foreign workers
The steps to reduce the dependence on foreign workers and give priority to hiring local workers is necessary. The measures undertaken will involve:

First: Levy on foreign workers will be doubled for all sectors except construction, plantation and for domestic maids. The levy will be paid by the employers and not by the workers;

Second: In the event the services of foreign workers are prematurely terminated, the levy will be refunded on a pro-rated basis to the employers. In addition, the employers’ bank guarantees will be returned; and,

Third: Freeze the issuance of licences to foreign labour recruitment agencies and tighten the conditions for recruitment of foreign workers by existing agencies.

The property and construction sector have been vocal in their complaints about this. But, really, how long can this sector use the excuse that Malaysian labour is too expensive? How long can they avoid being fined and prosecuted for having kongsi that double-up as cess-pools of Aedes mosquitoes and burglars? It is a social problem that the government is finally addressing, albeit indirectly.

More thrusts to come later....