Our economy may seem “fundamentally strong” for now. That does not mean our economy is immune from the financial meltdown occurring in the developed countries. Our central bank and finance ministry must have the ability to adapt and react immediately to the global economic changes.

We all live in a highly globalized world. The situations are interrelated and anything is possible. We must be able to prepare for the worst.

If the developed countries are down into recessions due to the credit crunch crisis spiralling out of control, our export industry will be impacted when global demand reduces especially from the west. There will be less palm oil or electronic goods to ship out from our country.

To sustain profibility, manufacturing plants may be forced to take steps to cut down expansion plan, cut head counts, freeze increment and bonus, or whatever downsizing measures. No matter how cheap our currency is, the export industry may shrink due to weak demand simply.

To address this issue and sustain economy growth, the government will have to spend more money on mega projects and encourage domestic spending, calling the support from the private sectors. To raise more money, the government will have to either issue additional bond, rely on the price of natural resources such as petroleum and commodity, cut subsidies, or cause the people to pay more taxes.

This is a complex situation, as we know the price of fuel and commodity has been falling. In either way if the government is spending more than its income, causing large deficits in the long run and finds itself in difficulty to repay debt; the government will be on the blink to file for bankruptcy protection and all of us will be in deep trouble.

Back from the sample scenario above. The announced 2009 budget was the highest ever, with RM208 billion being allocated. Where does all the money come from? I bet the government was banking largely on cashing in the high price of crude oil at the time. The economics world is volatile and prone to changes especially at times like now. The fuel price has been going south ever since due to fear of a potential global recession that may reduce energy demand (and yes everyone has been wondering when will the next pump price adjustment be?).

Yes, we have been able to pull through the 97 currency crisis and the government deserved a pat on the back for its strategy in handling the crisis, but every crisis is different in nature. 97 crisis was mainly caused by massive borrowings in the form of foreign currencies by domestic corporations to plan for business expansion.

It was brilliant and inexpensive way to raise capital until the crisis emerged where USD had strengthened enormously. This time around, we see crisis where financial turmoil has started from the subprime mortgages in the developed countries.

Question is: When globalization does hit us right on the nose and our country is in economy downturn, do we have plan B? Or do we stick to the original approved budget?

The objective of spending acceleration on mega projects, is to ensure substantial amount of money being injected into the public, as one of the optional measures to counter economy downturn by the government.

The money reaching the suppliers or contractors, some in the form of corruption perhaps, will create job opportunities, pay the workers and benefit other sub-contractors. The end workers who receive their paychecks can subsequently afford to buy the necessities. That is the economic relations and capital circulation portion.

The implementation perspective however does not facilitate the prevention of white elephants from being created and fund wastage. This would require diligent planning, supervision and audit to develop quality infrastructures and projects that meet the people’s needs.

This depends on how efficient the government machinery is working. The same amount of money spent in building a public infrastructure for a purpose can have very different results, e.g. whether it is carried out in Malaysia or Singapore.