Published March 6, 2009

Malaysia sets aside RM10b for second stimulus package

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA has indicated that RM10 billion (S$4.1 billion) would be allocated for its second stimulus package to be unveiled next week, with half of the funds earmarked for development and the balance for operations.

Details of the mini-budget - as it is being described - were not revealed at the first reading of the Supplementary Bill 2009 in Parliament yesterday by Deputy Finance Minister Kong Cho Ha, but the size was a big letdown to those advocating a larger package to avert a recession this year.

Together with the RM7 billion package announced in November, the cumulative RM17 billion would only amount to 2.6 per cent of gross domestic product (GDP), said Bank Islam economist Azrul Azwa who is of the view the total ought to be closer to RM32 billion or 5 per cent of GDP.

Compared to Singapore's stimulus - 8 per cent of GDP, or China's - 16 per cent, he said the RM17 billion is too little 'given the severity of the crisis'.

The second reading of the bill is to be tabled by Finance Minister Najib Razak on Tuesday, where details would be revealed as well as the revised GDP forecast for the year.

An earlier projection of 3.5 per cent growth has been discarded as unrealistic in the current global slump.

With exports tanking 15 per cent year-on-year in December and its major trading partners deep in recession, Malaysia would be hard put to avoid a contraction this year.

Many expect the economy to shrink this quarter, after it only managed a dismal 0.1 per cent growth in the last quarter.

Although the new allocation is likely to swell the budget deficit to about 6 per cent of GDP, Mr Azrul maintained growth should be the priority.

Provided Malaysia could commit to a time-frame of how and when it intended to return to a fiscal balance, spending could have been increased, he said.

Already the slow pace with which the earlier package is being implemented has been criticised by businesses.

Mr Azrul said the details would reveal if the package 'is well-framed', but hoped the mooted projects would be focused and transparent with regular updates.

Mohd Othman Zainal Azim, chief operating officer of the project management unit - a unit in the finance ministry established specifically to manage the disbursement of the funds - said RM5.29 billion or three-quarters of the first allocation had been disbursed.

According to local wire agency Bernama, Mr Othman told a media conference that the funds had been disbursed for some 38,000 projects nationwide, mainly for the building of houses as well as rural roads.

The projects would be rolled out by end-April and completed by August, with the full impact of the injection 'hopefully felt in May and contributing one per cent of GDP growth'.

Mr Othman added the projects would mainly benefit Class F contractors - those entitled to bid for projects up to RM200,000, and who incidentally form the bulk of supporters of Umno, the country's dominant party.

Needing few qualifications, Class F contractors form the bulk of the estimated 60,000 contractors in the country.