Published April 15, 2009

Call to set up RM22m fund for the jobless

Rising number of unemployed will threaten recovery: economist

By S JAYASANKARAN
IN KUALA LUMPUR

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A MALAYSIAN economist has suggested setting up a RM22 million (S$9.2 million) fund to help the country's unemployed as the recession bites deeper into the economy.

Manokaran Mottain, an economist with the Arab-Malaysian banking group in Kuala Lumpur, reckons unemployment will top 5 per cent this year - versus the official projection of 3.7 per cent - and, if left unchecked, will 'threaten the recovery'.

Most retrenchments so far have been in manufacturing - around 70 per cent, according to official estimates. The job losses were due to plunging export orders - exports fell 27 per cent in January and 30 per cent in February.

The pain in the manufacturing sector is also evident from a 14.6 per cent year-on-year fall in the Industrial Production Index in February, even though this was less brutal than January's 20-plus per cent drop. Manufacturing contributes more than 70 per cent to the index.

The result has been rising job losses. According to Ministry of Finance statistics, 25,000 workers have been axed since October last year, while an estimated 31,000 have been put off temporarily. In addition, about 100,000 workers have had their overtime cut.

Mr Manokaran is pessimistic: 'As export orders decline sharply amid recession pressures from major economies, we expect retrenchments this year alone to easily exceed 100,000.'

He notes that higher unemployment will have a direct impact on the economy, with 'household spending declining and capital spending by businesses contracting further'.

Private consumption has become a key driver of the economy in recent years, so this must be a worry for Kuala Lumpur.

Mr Manokaran does not see private consumption falling off a cliff. Rather, he expects it to grow 3.5 per cent in 2009, down sharply from 8.4 per cent last year. Lower growth is already evident 'in the plunging sales of motor vehicles and slowing credit card spending', he says.

Concerned that high unemployment could derail recovery - expected by September - Mr Manokaran has suggested setting up of a retrenchment fund, with unions collecting RM1 from each worker. This would amount to RM11 million given the size of labour force, and should be matched dollar for dollar by the government, he says. This would be 'similar to the one proposed for Singapore by the unions'.