Critics Say Huge Stimulus Is Inadequate
By EILEEN NG/ AP
Malaysia's larger-than-expected 60 billion ringgit ($16 billion) stimulus package brought cheers to businesses but some economists said Wednesday (11 March) it lacked steps to give an immediate jolt to the slowing economy.
Consumers and opposition lawmakers also expressed disappointment that the mini-budget unveiled Tuesday (10 March) was lopsided in favor of businesses and little done to improve overall income of the people.
The unprecedented massive spending to spur growth over two years is aimed at avoiding what could be Malaysia's first recession in a decade this year. The government expects the economy will shrink 1% in the worst case scenario and grow 1% in the best case scenario.
With government guaranteed loans for businesses worth 25 billion ringgit ($6.7 billion), or 41% of the package, it will buffer downside risks to corporate earnings and help industries struggling with debts.
Some economists, however, said there would have been greater impact if the package included measures to raise disposable income for lower and medium-income groups.
"We had earlier expected several measures to boost consumption like cash-vouchers or cash bonuses, which would have had an immediate effect on Malaysia's economy. A tax waiver…would have also provided the most and fastest multiplier effect," AmResearch said in a report.
The Federation of Malaysian Consumers Associations said subsidies for fuel and food allocated under the package provided temporary relief but nothing was done to improve the overall standard of living.
"The government should have increased the spending power of the people instead of just giving breathing space because at the end of the day, the people will still find it hard to make ends meet," said its secretary-general Muhammad Shaani Abdullah.
Opposition lawmaker Charles Santiago said the measures were "too little, too late and too laxly structured" to generate positive economic impact. He called for direct cash assistance to the people or tax cuts to boost domestic consumption, as was done in Japan, Singapore or Taiwan.
Opposition parties also expressed concern that 10 billion ringgit ($2.7 billion) allocation for equity investment may be misused to bailout government-linked companies.
AmResearch said the measures were unlikely to help halt weaknesses in Malaysia's exports, which plunged nearly 28% in Jan, its largest drop in 28 years. It predicts the economy will shrink 2% this year.
The package is in addition to 7 billion ringgit ($1.9 billion) of stimulus spending announced in Nov.
It includes a fiscal injection of 10 billion ringgit ($2.7 billion) in 2009 which will raise the government budget deficit from 4.8% of gross domestic product to 7.6% this year. There will be another 5 billion ringgit ($1.35 billion) injection in 2010.
The stimulus plane failed to boost the stock market, where the benchmark index fell 0.6% Wednesday.
The Malaysian Employers Federation has also expressed concerns that plans to double the levy of foreign workers under the package may backfire as it will raise the cost of doing business. The Malaysian Indian Restaurant Owners Association said many of its members may have to close shop as they won't be able to afford the higher levy.
The increased levy is aimed at cutting reliance on more than 2 million foreign laborers in the country and give jobs to locals.
Despite the doom and gloom, ECM Libra said in a report that it was optimistic that some form of weak recovery will emerge later this year. The stimulus plan doesn't contain market-moving measures but the impact on the economy will be positive, it added.
