Is it a RM60 billion con?

I propose that we evaluate each of the major initiatives on its own and try – I understand this will be difficult – to make sense of what is being proposed and the likely impact it may or may not have.

1. RM2 billion to reduce unemployment, increase employment

In summation, the government will create over 160,000 job opportunities, they will hire over 60,000 Malaysians as contract civil-servants, open a number of job centres and also actively promote the idea of further education by financially assisting those who wish to enhance their knowledge.

All well and good and, in fact, I am quite drawn to it. But how does this create jobs or even promote a culture of employment besides using the civil service as a buffer?

The 160,000 odd jobs that the Government “intends to create” will have to come from the private sector.

However, without the proper tax and business incentives, there will be no compulsion or even aggravation for businesses to hire more people.

Furthermore, with demand dropping, production will likely decrease, and that will again lead to job losses, not additions.

So I fail to see how the Government intends to create jobs besides using the civil service to employ Malaysians who are otherwise unable to find a job.

2. RM10 billion to ease the burden of the rakyat

There is nothing stimulating about this; in fact it is simple benevolence with a very political motive.

The government’s continued rants on the price of oil is indeed baffling. How can we still be paying subsidies when the price of oil is hovering around US$40 a barrel? In fact the pump price of petrol should be lower than the current RM 1.80 per litre.

According to the Penang chief minister Lim Guan Eng – based on previous prices – the price of oil should be RM 1.30 a litre when the price of oil is US$44 a barrel. I can only suspect that the government is using fuzzy figures to justify the so-called subsidising.

However, all is not bad in the RM 10 billion allocation to assist the rakyat in these trying times. There are allocations for road building, constructions of schools, upgrading of welfare homes, tax relief on home mortgage repayments, and a number of other laudable initiatives. There will be multiplier effects and most of this project will spur downstream economic activities.

Again, the phrase “it is the implementation, stupid!” comes to mind (I have adapted it from Bill Clinton’s famous quote: it is the economy, stupid).

So if the government is unable to ensure that leakages and abuses do not happen, all this stimulation will be futile at best. I do not even dare imagine how it would be at its very worst.

Furthermore, these projects will take time to implement and I doubt the economy will be patient enough to wait for our cumbersome government machinery and bureaucracy to move and react to these initiatives.

3. RM29 billion to assist the private sector

This is the initiative I am most suspicious about. The Government will be providing capital guarantees to stabilise the private sector especially small and medium enterprises. Now this is important and this will provide much needed stability and provide a lifeline to companies who need credit but are unable to find someone who is willing to guarantee their credit facility.

Banks are nervous when it comes to lending because of the collapse of the banking system in Europe and America. If banks in Malaysia were to wantonly lend money, this may create a bubble and we all know what happens when a bubble bursts!

However, I am ambivalent about the mechanism that will be employed to administer these guarantees. There are some basic rules regarding shareholders’ equity but besides that we have very scant knowledge on who qualifies and what filters will be employed to decide on deserving companies.

Furthermore, what guarantee do we have – as Malaysian taxpayers – that the guarantees will be judiciously disbursed? And anyone who qualifies will actually get the help they need. The answer is none at the moment.

Also, the programme is more about stability than stimulation and the government must be forthright on this and not package it as a stimulus.

Furthermore, the fund that will be used for equity investments look nothing short of a bailout fund that can be immediately called upon when the need arises. While the American government readily bailed out a number of large American corporations, I will not wholeheartedly support any form of bailouts in Malaysia because in 1997, we had a number of bailouts on the back of a call for greater transparency and accountability but corporate Malaysia has seriously fallen short on this promise.

So again, how are Malaysians to trust both the private and public sector?

4. RM19 billion to build capacity for the future

I am all for building future capacity but I am not sold on the fact that it should be part of a stimulus package. This could have waited for the next budget.

All of the projects announced sound attractive but how rakyat- and community-centric are they?

Besides the LCCT and the extension of the Penang Airport which are necessities, the others could have waited until we stabilise our economy and get the projects announced in the first stimulus package in motion.

I understand that development projects create a multiplier effect but even so, where is the multiplier – however small – from the first stimulus package?

How will the farmer in the kampung benefit from Khazanah’s RM10 billion investment fund or even the single mother in city? This fund could have been created if we were flushed with cash or we were riding on a boom, neither of which is true at this point. Even if assets are cheap as some have contended, can we really afford it at a time when

Malaysians are losing their jobs and having their livelihoods imperilled?

Furthermore, most of these projects will be likely tangled in red tape and the much touted multiplier effect will be nothing but a damp squib.

Throwing money at this problem – as many have suggested – has proven counterproductive. Just ask President Obama, he came to Washington shouting this is the worst crisis America has faced since the Great Depression but only yesterday he had to change his tone and tell Americans, “the crisis is not as bad as it looks” because all the stimuli does not seem to be working and the confidence of Americans is at a terminal level.

In conclusion, the bigger crisis facing the government is a crisis of confidence. This is not a stimulus package but more of a budget – maybe that is why it was categorised as a mini-budget.

However, the priority should have been on stimuli and not capacity building for the future.

The urgency of this crisis warrants immediate and precise action not lofty goals and comforting promises. I suspect that a lot of projects were added in to bloat the package rather than ensure its effectiveness.

I was speaking to a friend in the banking sector and he was of the view that Malaysians simply do not trust what the government says or does. He said to me: “Ivan, we can have a hundred stimulus packages but nothing will change unless the people get their confidence back.” I echo this thought, verbatim.

The confidence will abound through honest governance and a change in approach and this crisis is a unique opportunity to remould Malaysia.

We all want to see a Malaysia that is more equitable, more just and more united but the government seems to think that all we need is to “throw money at the problem.”

We are on a perilous road and make no mistake about it; we are sinking deeper into a crisis with certain leaders still warped in denial.

I can only pray for divine intervention at this time but I am worried that we have been too late for even that.

This RM 60 billion package is nothing more than a bluff because, if you take a closer look at it, only the RM 15 billion in direct fiscal injection and RM 3 billion in tax incentives will provide the much needed immediate stimuli and the rest is at the mercy of our cumbersome civil service and delivery system; and I for one will not put a wager on that!

* Ivanpal S. Grewal is an analyst with SEDAR Institute. The views expressed are a personal observation.