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Stimulus Plans, to be spent Wisely or ended up Elsewhere?



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Nov 06 2008
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Outgoing PM Abdullah Badawi said “Anyone can be PM” after reporters asked the sleeping beauty if it were possible for a person from a minority group to become Prime Minister in Malaysia, apparently referred to President-elect Barack Obama. That would be a bold and positive statement that would raise millions of eyebrows and earn applause if it was made four-years ago. Sadly Badawi still has another four months to go before hand-over his comfy bed to his deputy PM Najib. So it doesn’t matter what Badawi said as it does not carry any more weight. The focus is on Najib, advisor Mahathir, Deputy-PM-in-waiting Muhyddin and of course CIMB Group chief executive Nazir Razak (Najib’s brother).

Najib Nazir Razak Stimulus PlanIn time of uncertainties investors need all the assurances they can get and the new Finance Minister Najib tried to do that. His brother, Nazir, also extended his assistance to assure the investor community that Malaysia banks are still strong (what else can he say anyway). While Badawi at best will provide empty slogan that the country will not enter the recession door if he was not forced to resign today, Najib provided both the slogan plus the RM7 billion stimulus plan to excite the economy. Najib earlier rubbished that the country will enter technical recession phase but has come to his senses now hence the downward revision of economic growth from 5.4 percent to 3.4 percent in 2009. The RM7 billion stimulus package announced was also welcomed.

However critics are questioning the source of the money, the huge RM7 billion after the earlier RM5 billion capital injection to boast stock market was tainted with claims that the money was actually needed to pay the debts-due from Valuecap. Furthermore it will be an uphill task to track the money spent on the so-called projects identified. Every Tom, Dick and his dog knows “leakages” are bound to happen within the current administration but little activities are still better than no activities in the attempt to boast domestic economy. Najib (and his advisor Mahathir) knew they can’t depend on foreign investor but to rely solely on the domestic supply and demand to create excitement. Execution is important and Najib’s boys need to ensure whatever projects trumpeted would be properly carried out.

EPF 3 percent cutStill, if the RM7 billion was not from the money saved from reduced petrol subsidy then where will it comes from? As unique as it is that any amount of money needed from the cash-rich EPF (employee provident fund) does not require any approval from either Lower (Dewan Rakyat) or Upper (Dewan Negara) house of representatives, people are questioning the transparency of such unique plans. Well, the 3% cut in EPF contribution for employees will definitely boost domestic consumption provided there’re sufficient contributors bought the idea to subscribe to such plan. However Malaysians are known to have high saving so it would be overstatement to project that RM4-5 billion could be released into the street. Furthermore people are more conscious and careful about spending future money now although the cut was only for two years. However a 3% cut in income-tax would definitely do the trick and send more applause to the desk of the Finance Minister *grin*.

If Nazir speaks on behalf of his brother Najib, expect more similar multi-billion stimulus packages to supplement the current RM7 billion based on the statements released by the National Economic Council to which Nazir is the member. And he actually recommended former premier and dictator Mahathir for Nobel economic prize? Absolutely amazing!

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Betty

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