Here’s a brief run through of the mini-budget, proposed by the Ministry of Finance.

Total Stimulus: RM60 Billion

Allocated to the following categories:

RM15 billion: Fiscal Injection (pumping cash to increase liquidity)
RM25 billion: Guarantee Funds
RM 10 billion: Equity Investment (via Khazanah)
RM 7 billion: Private Finance Initiative
RM 3 billion: Tax Incentives

Implementation Timeline: 2009-2010

2009 GDP Forecast: -1% to 1%

Fiscal Deficit: 4.8% to 7.6%

Others: RM5,000 rebate for new car purchase with trade-in of an at least 10 years old car.

Detailed PDF format of the speech is available here.

First of all, a mind-boggling figure- RM60 billion. Although the entire government machinery claims that the recession is not going to hit Malaysia, the RM60 billion figure seems to reflect otherwise. If we are insulated, why would we need so much money for a stimulus?

Since I am not so arithmetically-inclined, an easier way to visualize the impact of RM60 billion is to break the figure down to the amount of zeros. Here’s how it looks like- RM60,000,000,000. If an average Malaysian spends RM15 for food daily, RM60 billion would be just about enough to feed the entire nation for 5 months. Or about the amount paid to PLUS in compensation from year 2008 to 2038, that is if we don’t do something about it.

Khazanah?? Authorized Comments on the 2nd Stimulus Package March 2009
by Tan Sri Dato??Azman Hj. Mokhtar, Managing Director

10th March 2009- The RM60 billion package in its totality is sufficiently chunky to have an immediate and significant impact while the 80:20 (RM48bn:RM12bn) split between private sector/capacity building initiatives and social safety net measures is well balanced and well crafted.

For Khazanah and the companies in our stable, the stimulus package will intensify and accelerate the implementation of investment plans in high economic multiplier, strategic, service-oriented sectors including telecommunications, leisure and tourism, technology (including ICT, creative industries and sustainable development or ??reen??technologies), life sciences, healthcare and agriculture. The investments in these sectors in 2009 and 2010 by Khazanah and our major GLCs will total more than RM10 billion, with the potential to create an estimated 70,000 jobs by 2011.

These sectors with its higher emphasis on services and intellectual property content, represents the new growth engines for the nation and will support the Government?? ongoing structural upgrade of the economy. The sectors and specific investments are by and large in new areas and hence are more catalytic in nature that will further spur additional private sector participation over time. Also worth noting that all these investment programs involve projects that are already ??hovel-ready??as they are the product of various detailed sector studies that Khazanah has undertaken in all these sectors along with work on specific investment zones such as Iskandar Malaysia.

On the overview, there’s nothing much for the little people like you and me to rejoice about. No personal nor corporate tax rate adjustments, no abolishment of tariffs such as the government service tax (GST), retail service tax, additional tax reliefs and tax rebates. There’s also no mention on allocation for industries that drives the domestic market. And also, there’s absolutely no mention on how the government aims to combat the combat the cancer of a healthy economy. No, it’s not the recession that we should worry too much about, but rather the amount of corruption involved in the cost of doing business and even in the daily lives of all Malaysian citizens. Corruption chemotherapy is probably not in the scope of MoF, but until the corruption money is being channel back into the mainstream economy which it rightfully belongs, no multi-billion stimulus is going to save this termite-infested economy.

12 March 2009

Najib Explains Why No Tax Cuts
Yong Min Wei

KUALA LUMPUR:The current tax rates for the corporate sector and small and medium-scale enterprises are still reasonable, despite the economic downturn, said Deputy Prime Minister Datuk Seri Najib Razak.

He said on March 12 that since the tax rates were “still reasonable and competitive”, the government decided not to cut taxes as part of the RM60 billion stimulus budget.

More…

Sometimes, the most direct way and simple measures just don’t seem so obvious to these think tanks.

If there’s a good lesson learn from this crisis, it is that an overly export-dependent economy is never a good idea. I am not against international trades, but rather, there needs to be a balance to ensure that Malaysians can be self-sustainable using internal resources. We don’t have to look very far to see how the impact of an export-driven economy can have on a country when a global recession hits. Balancing between the interdependence on a globalized economy while maintaining self-sustainability is key.

I can only conclude that the mini-budget only managed to surprise the public with its ball park figures, but has not effectively address the urgency of the impending crisis. With so much efforts focused on the nation’s political crisis, the effect of the economic decline is only further amplified, and the effect is already apparent in the local business community.

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