The Projects

Now on some specific programs outlined by Najib. Training and job placement programs of the type described by him are woefully inadequate. Those retrenched and displaced are in need of immediate assistance.

Malaysia lacks a safety net program of unemployment benefits as is the case in most industrial economies. Thus workers lack a cushion. The nation’s labor laws are skewed towards safeguarding employers as evidenced by the meager protections afforded to laid off workers.

It is also significant that both legal and illegal workers continue to flow into Malaysia – largely to permit employers to gain from cheap labor.

It is pertinent to question the Government as to why some of the resources being expended are not being set aside to launch a scheme that would provide income support to those laid off, or those who have seen a precipitous fall in income because of a fall in commodity prices. Equally, it can be asked why no program is being developed to aid those who are laid off with assistance in meeting their housing loan commitments.

These measures proposed under the various training schemes are palliatives and lack an imaginative attempt to address the key issue of assuring an income to those who fall victim to what has been termed the Great Recession. Displaced workers or those new entrants into the job market need to be assisted directly.

Training is and cannot be the first recourse. While such an effort may be appropriate in a time of cyclical upheaval, in a recession of the type now confronting Malaysia a vastly different approach is needed – one channeling resources to sustain incomes and support consumption. Read the rest of this entry »

How Did WE Get Here? An Alternative View

Najib in his speech to the House briefly reviewed recent economic developments. This review was selective and must be rebutted.

Contrary to his view, the danger signals were already there in mid 2008 when the budget for the current year was presented. However, the Government remained in a state of denial and continued to assert that Malaysia would not be affected by the global meltdown.

Ministers and the Governor of Bank Negara continued in parrot fashion to mouth the mantra of the economy attaining a growth rate of 3.5% in 2009 despite mounting evidence of declining industrial production, a fall in exports, lower commodity prices, sharp falls in FDI and growing evidence of capital flight.

On the global scene alarm was being expressed and country after country was taking measures. The two Finance Ministers remained sanguine and repeatedly provided the mainstream media with sound bites indicating that Malaysia was miraculously immune from global trends. They propounded the so-called theory of immunity via the notion of “decoupling”.

Despite these protestations, which rang hollow, the markets took due note and lowered the risk ratings. Yet, the euphoric expressions of growth continued to be mouthed relentlessly. Najib is thus stretching credibility by suggesting that it was only late in the 4th Quarter that there were “negative” developments. Read the rest of this entry »

The Second Package: An Overview

Najib, Minister of Finance and Prime Minister in waiting and his officials have much to account for. They have continued to be in a state of denial and inaction even as the global economy was entering what the Managing Director of the IMF has termed the Great Recession.

It would appear that Najib has finally been jolted into action. The preparation of the Second Stimulus Package appears to have been done in a rather haphazard manner with little consultation or input from the various stakeholders.

Najib must take personal responsibility and will be held accountable for what is a flawed instrument to meet the challenges confronting the nation. He has put together a Stimulus package of RM 60 billion, a package of unprecedented size in Malaysian history.

The package of measures he has revealed has been largely met by a yawn; the markets are unconvinced by the scope of the package. The KL Bursa fell by O.6 percent on the first day of trading. That is a clear signal that the package is viewed with a large degree of disapproval.

There is considerable skepticism on several counts. First and foremost there is the question about the size of the package, considered unwieldy. Second there are concerns that the package of measures does not address the immediate impact of the recession on employment, income levels and the pain inflicted on vulnerable groups. The measures proposed are seen as having an impact only in the medium term. Read the rest of this entry »

What is now being labeled the Great Recession began in mid 2007 as the sub-prime fiasco in the United States began to unfold. The economic slowdown gained momentum in 2008. As the gathering, storm clouds gathered over the horizon, Governments began to react and take counter recessionary measures.

The Barisan Government for its part remained in a state of denial. Ministers dismissed with some arrogance the notion that the Malaysian economy would succumb to the global slowdown. They argued rather smugly that Malaysia enjoyed a certain immunity as it had decoupled from the global economy. Despite the key economic indicators pointing to a weakening in terms of industrial output, declines in FDI flows, lower exports and indications of capital flight, they continued to forecast robust growth.

The markets for their part made their own assessments and lowered the ratings. The Budget for 2009 presented in August was based on unrealistic and rosy assumptions of growth and buoyant commodity prices, especially of petroleum, and the Government announced a humongous increase in spending both on the recurrent and development budgets. An increase of RM 20 billion was unprecedented. Read the rest of this entry »

Najib knows best
With the announcement of a huge stimulus package, Malaysia’s next leader shows that he’s no economic reformer..

Asian Wall Street Journal
11.3.09

The man slated to take over Malaysia’s government later this month hasn’t said much about his economic philosophy. But with the announcement of a 60 ringgit ($16 billion) stimulus package yesterday, one thing is clear: Najib Razak is no free-market reformer.

Mr. Najib, who is currently deputy prime minister, called yesterday’s package “unprecedented in the nation’s history.” For an expenditure of roughly 9% of 2008’s GDP over two years, that’s no exaggeration. Malaysia will raise debt to fund this largesse. The fiscal deficit is now projected to reach a whopping 7.6% of GDP, up from 4.8%.

Malaysia is following in the fiscal footsteps of the U.S., Australia and Japan, but that doesn’t make it smart. The “stimulus” from all this spending will likely be limited. Most of the money will be spent on loan guarantees, infrastructure and public-sector expansion, rather than on tax cuts that could stimulate productive growth. State-owned investment company Khazanah, for instance, will be handed 10 billion ringgit. Pet projects such as “green investments” and the state-run auto maker will also see cash handouts. The government itself will hire 63,000 workers.

This is effectively a restatement of Malaysia’s old, government-knows-best policies. It’s the opposite of what Malaysia really needs, which is to ditch this thinking and shift to a business climate that encourages private investment and entrepreneurship. The government predicts GDP could shrink 1% this year. Read the rest of this entry »