Published November 5, 2008
M'sia pads up Budget as chill wind blows
Najib announces RM7b stimulus package, revises growth, deficit estimates
By S JAYASANKARAN IN KUALA LUMPUR

Email this article

Print article

Feedback
MALAYSIAN Deputy Prime Minister Najib Razak presented an essentially revised Budget 2009 before Parliament yesterday that included an additional RM7 billion (S$2.9 billion) stimulus package as a 'policy response' against the spill- over effects of the global financial crisis.

Winding up the debate for the 2009 Budget, Mr Najib, who is also finance minister, also revised downwards Malaysia's real growth in gross domestic product terms in 2009.
Mr Najib estimated that it would slow to 3.5 per cent - from 5.4 per cent previously - while its budget deficit would remain flat at 4.8 per cent of GDP instead of coming back down to 3.6 per cent as had been forecast earlier. Inflation, however, would moderate at between 3 and 4 per cent.
Mr Najib said that the higher deficit was due to lower revenue collection to RM168.7 billion from RM176.22 billion. Previously, revenue had been predicated on US$125-a-barrel oil and RM5,000 a tonne of crude palm oil. Both have more than halved in value.
Mr Najib said the government 'was not in denial' and was 'aware that Malaysia is not exempt or sheltered from the risks of challenging global developments.'
On the consumption front, the finance minister took a leaf out of the opposition's book and proposed that mandatory employee contributions to the Employees Provident Fund be cut by 3 percentage points to 8 per cent on a voluntary basis for two years.
Should everyone do so, Mr Najib estimated that consumers would have an extra RM4.8 billion to spend. The proposal had originally come from opposition leader Anwar Ibrahim.
The new measures will bring relief to analysts and private economists who had worried that the government's seeming unwillingness to come to terms with the changing global landscape suggested that it had been in denial since the Budget was originally passed almost two months ago.
Even so, some wondered if Kuala Lumpur was not being too optimistic about its growth estimate. UBS, for example, had forecast zero growth for Malaysia next year while more optimistic numbers - CLSA for example - had been between 2 and 3 per cent.
Still, most would agree with the government that Malaysia was in fairly good financial shape.
Mr Najib said that the country's international reserves remained at 37 per cent of GDP while the banking system's non-performing loans stood at 2.4 per cent of gross loans. Meanwhile, the capital adequacy ratios of the banks were at 13.2 per cent, well above the international standard of 8 per cent.
The finance minister, however, did not clarify where exactly the extra RM7 billion would come from beyond a vague 'savings on fuel subsidies.' Even so, he said that the amount would be divided between 'high multiplier effect' projects such as roads, schools, public transport and a high speed broadband project throughout Peninsular Malaysia.
Mr Najib also came out with at least one interesting proposal which was welcomed by analysts. His suggestion: that the government tender out to the private sector large parcels of government land in and around the capital for development.
These parcels of land - in Jalan Cochrane, Sungei Buloh and Ampang Hilir respectively - are either occupied by government quarters or are being used for research purposes by agricultural agencies and had long been targeted by influential businessmen as easy pickings. Putting it up for open, and competitive, tender would certainly fetch the government a better price.
Other liberalisation measures announced by the finance minister include:
The abolition of import duty and approved permits for cement and long iron and steel products;
The waiver of Foreign Investment Committee approvals for foreign purchases of commercial land worth RM500,000 or more;
The granting of work permits directly to knowledge workers instead of their employers.