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Malaysia unveils $16.2 bln economic stimulus plan

Malaysia unveils $16.2 bln economic stimulus plan

Malaysia's government unveiled a massive 60 billion ringgit ($16.2 billion) economic stimulus package, but acknowledged the export-dependent nation may not be able to avoid a recession and mounting job losses.
"The implementation of such a large stimulus package is unprecedented in the nation's history," Finance Minister Najib Razak told Parliament in a speech Tuesday to detail what has been dubbed a mini-budget. "Without these efforts, the economy faces the prospect of a deep recession."
The package _ equivalent to 9 percent of one year's gross domestic product _ is in addition to 7 billion ringgit ($1.9 billion) of stimulus spending announced in November.
Lawmakers thumped their desks in appreciation when Najib, who will take over as prime minister later this month, announced the figure of 60 billion ringgit to be spent over 2009 and 2010.
The money will be spent in five broad areas _ fiscal injection, government grants, equity investments, infrastructure projects and tax incentives.
A fiscal injection of 10 billion ringgit ($2.7 billion) in 2009 and 5 billion ringgit ($1.35 billion) in 2010 will raise the government budget deficit from 4.8 percent of GDP to 7.6 percent this year, Najib said.
He said the government has slashed its forecast for the economy to grow 3.5 percent this year. It now expects the economy will shrink 1 percent in the worst case scenario and grow 1 percent in the best case scenario.
Economists welcomed the measures but doubted whether the spending could completely make up for the slump in exports as world demand evaporates.
"There are many positives to drawn from the package but whether or not it provides the boost to growth that is needed still remains to be seen, primarily because the economy is export driven," said Philip McNichols, an economist with research firm IdeaGlobal in Singapore.
Painting a gloomy picture of the world and domestic economy, Najib said unemployment is forecast to rise to 4.5 percent from 3.7 percent last year. Since October, about 25,000 workers have been retrenched and 30,900 temporarily laid off.
Malaysia's heavily trade dependent economy has been severely hit by the decline in global demand. In January, exports fell 27.8 per cent. Commodity prices have also declined sharply, especially in oil and gas and palm oil, which are Malaysia's main exports.
Foreign direct investment was expected to decline by almost 50 percent to 26 billion ringgit ($7 billion) in 2009 against 51 billion ringgit ($13.7 billion) in 2008.
"Given these factors and in the context of the sharp deterioration in the global economy, Malaysia now faces an extremely challenging economic environment," Najib said. "We cannot depend on orthodox economic recovery policies. We must be bold."
He said the stimulus package has set aside 2 billion ringgit ($540 million) to create 163,000 training and job placement opportunities in the public and private sectors and to give a tax deduction to employers who hire retrenched workers.
Assistance to the private sector will account for 29 billion ringgit ($7.8 billion), including a 5 billion ringgit ($1.35 billion) working capital fund guaranteed by the government. It will also facilitate access to capital markets, providing support for the automotive and aviation industries and boost the tourism industry.
Najib said 19 billion ringgit ($5.13 billion) will be spent on capacity building. This includes 10 billion ($2.7 billion) to be made available to Khazanah, the government's investment arm, for investing over two years in domestic industries.
Another 5 billion ringgit ($1.35 billion) will be allocated for projects including a budget airline terminal, expansion of the Penang airport, a high speed broadband network and a covered walkway in the famous Golden Triangle shopping district in Kuala Lumpur.
About 10 billion ($2.7 billion) will be spent on easing the people's cost of living burden, including giving tax relief for interest paid on housing loans up to 10,000 ringgit ($2,700) a year for three years, improving schools, giving micro credit to fishermen and farmers, and issuing Islamic bonds with guaranteed 5 percent returns.
He said the levy on foreign workers will be doubled for all sectors, except construction, plantation and domestic help in a bid to reduce dependence on foreign labor and utilize the domestic labor force.
The government will also set up a financial guarantee institution to help strong companies raise funds from bond markets.


Updated : 2021-04-22 09:09 GMT+08:00