Published January 26, 2009

A matter of (waning) confidence

Spending down this CNY; and a sloppy stimulus package isn't helping things

By PAULINE NG
IN KUALA LUMPUR

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THE pre-Chinese New Year throngs were there but not as large as before.

Little festive cheer: Chinese New Year decorations at a KL temple cannot mask the sombre mood prevailing in Malaysia. With thousands having lost their jobs and with fears of more retrenchments around the corner, many people are keeping the festivities simple this year. It's a double whammy for the economy - flagging domestic consumption coupled with shrunken external demand

Many were trying to reduce the symbolism attached to the Chinese New Year celebrations - in other words, a simple affair minus too many frills. ÂÂ

This holding back is ominous, especially when consumption is flagging along with shrunken external demand.

But with fears of more retrenchments around the corner, many are preferring to keep the festivities simple.

Multinational companies are cutting jobs by the thousands in the face of a near collapse in demand.

Intel Corporation's decision to consolidate its plants globally and close two in Penang after its dismal fourth-quarter earnings shows how fast these companies are compelled to act.

Local employers were slower to act but now seem to be thinking along the same lines.

A survey last November of Chinese small and medium-sized enterprises (SMEs) indicated that nearly half planned to trim their workforce.

Until the US, which precipitated the global recession, is able to contain the credit squeeze, little can create external demand.

However, more needs to be done locally. The second stimulus package - currently in the pipeline - will have to be implemented in a better fashion than previously.

The first package of RM7 billion (S$3 billion) announced last November has so far had only limited effect. This is because much of it remains to be disbursed and there is also criticism that it has not reached the needy.

Former finance minister Tengku Razaleigh Hamzah last week observed that the first package 'appears to be a hodgepodge of projects driven by special interest with no economic plan behind it'.

Although a member of Malaysia's biggest party Umno, which forms the backbone of the ruling Barisan Nasional (BN) coalition, the Kelantan prince makes no apologies for his often strident criticism of the current administration. He is convinced the administration is not taking the crisis seriously enough.

'The most memorable element in it (the stimulus package) for me was the provision for RM200 million of this fiscal stimulus to go towards 're-engineering' all Malaysia's toddlers into 'holistic human capital', whatever that is, in nurseries run by an organisation led by the wife of the deputy prime minister,' he observed in his blog.

The dig aside, there is no denying the growing lack of confidence in BN's leadership. It was evident in the March 8, 2008 general election and also when it lost two by-elections since, which the opposition Pakatan Rakyat has won convincingly.

The last loss in Kuala Terengganu was only a week ago. It was a seat, already occupied by BN, and where the government had used all its resources during the campaign.

Deputy Prime Minister Najib Razak had led the campaign in Kuala Terengganu and the defeat of the Umno/BN candidate would have been a personal blow since he is to take over as prime minister under the transition plan.

Mr Najib has since urged a 'paradigm change' for the coalition - for example, ensuring future programmes and projects meet the public's needs - or risk further punishment and a send-off in the next general election.

BN should make sure that funds from the stimulus package are used in a transparent way. Open tenders are the only way to ensure the execution of the projects and also instill confidence in the leadership.