Published January 23, 2009

KL speeds up disbursement of special funds

By PAULINE NG
IN KUALA LUMPUR

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GALVANISED by alarming news on jobs - the latest chip maker Intel Corporation's plan to shut two plants in Penang - the Malaysian government has moved to accelerate the disbursement of special funds announced more than two months ago.

Mr Najib: RM5 billion has been transferred to ministries and agencies

Deputy Prime Minister Najib Razak said yesterday federal ministries and agencies have been ordered to immediately implement the RM7 billion (S$3 billion) special economic package, amid mounting criticism it has been slow off the mark.

Mr Najib, who is also finance minister, said that RM5 billion has been transferred to ministries and agencies and the remaining RM2 billion will be allocated next week.

The order comes after Intel decided to close two assembly and test facilities in Penang as part of a plan 'to restructure some of its manufacturing operations and align its manufacturing capacity to current market conditions'.

Market conditions have quickly turned sour following the global financial implosion, and electrical and electronics manufacturers have been among the worst hit.

Intel warned recently that it could suffer its first loss in 21 years this quarter. Besides Penang, it plans to halt operations at Cavite in the Philippines, Hillsboro, Oregon, and Santa Clara, California.

Intel has six plants in Malaysia - three each in Penang and Kulim. They employ a total of 10,000 staff who undertake manufacturing, test assembly and research and development. The two facilities to be shut by the end of this year are older ones. The move will affect more than 1,000 workers, though Intel has said that it intends to offer them 'comparable jobs' at its other local plants.

Last month, the American Malaysian Chamber of Commerce said that it did not know of any other company that planned to retrench staff or cease operations, after Western Digital said a Sarawak plant that employs 1,500 people would be closed.

'We will certainly see more of these things because the global scenario is so bad,' said an economist who believes Malaysia's unemployment rate this year could reach 4.5 per cent or over half a million people, not including retrenched, low-skilled foreign workers.

Intel Malaysia spokesman Loo Cheng Cheng told BT the decision to shut the Penang facilities was made 'in the past few days' after the blow of sharply lower fourth-quarter earnings.

Malaysia's central bank this week slashed its key lending rate 75 basis points to 2.5 per cent in an attempt to lower borrowing costs and stimulate demand.

The economist said that the deeper-than-expected cut shows the authorities now realise that Malaysia will not be as immune to the global financial downturn as they had thought, and could even veer into recession. The disbursement of federal funds to ease the pain could take another month or two. And even then, there are concerns the benefits may not amount to much.

'Spending is easy, but ensuring commensurate returns ought to be the most crucial aspect of the stimulus package,' said an executive, adding that the lack of open tenders will invariably lead to huge leakages. 'About RM46 billion was said to have been spent last year under the Ninth Malaysia Plan, yet people say they don't notice or feel it,' the executive said. 'I would be more confident if it was done through an open tender system.'