Summary of 2nd Stimulus Package

Post up the summary of mini budget which announced on 10 March from the deputy prime mister also finance mister, Dato' Seri Najib Razak's blog. Meanwhile, i could not see any direct effect which helps reduce individual from suffering in the economic crisis through this mini budget. It looks like nothing to do with you if you are not going to buy a new house or getting a new car. People may think they can have a reduction in income tax or reduction of housing loan interest for all (old or new buyer)... However, there are not included in this 2nd launched mini budget.

The only thing that i can benefit from this budget is by enroll in the local-U or other 4 college which is stated on list, by taking up a Master or Profesor Degree Course. After deduction of the scholarship provided by government, i still need to think about where to get a lump sum for my 2 to 3 years school fees and living fees. There is a same problem goes to the RM5000 rebate for people who sells out an old car (above 10 years old) and buy a new Proton or Perodua. For those who just finish paying car loan, are you going to get yourself into a debtor again? If people own an old car and he has enough cashflow for car purchasing, it may be benefited. Otherwise, those who don't have money to buy a car or worried about their car loan, they still suffer in pain. Hence, most of the individual can 'see' the money going out from this RM60 billion mini budget, but we are not really get involved and using it. Expert said this is a long term stimulus package where you can't see the effect shortly. Okay, we just look forward and see how the thing is going on.

• The Mini Budget of RM60 billion, the biggest ever stimulus package unveiled by the government, accounting for 9 per cent of the GNP will be implemented over two years – 2009 and 2010.
• Of the total:

1. RM15 billion is fiscal injection,
2. RM25 billion guaranteed fund
3. RM10 billion equity
4. RM7 billion PFI and Off-budget
5. RM3 billion in tax incentives

• This is in addition to the RM7 billion first stimulus package announced on Nov 4, 2008 and the RM206 billion budgeted for 2009.
• The Mini Budget or the second stimulus package has been necessitated by the worsening of the global economy. The IMF has revised its forecast for the world economy downwards from 2.2 per cent to 0.5 per cent for 2009.
• Many countries are already in recession. The US is forecast to register negative 1.6 per cent growth this year; UK negative 2.8 per cent; Japan negative 2.6 per cent.
• South Korea, Taiwan and Singapore are already in recession and the forecast for this year is negative – South Korea (-4 per cent), Taiwan (-4 per cent) and Singapore (-4.9 per cent). Singapore’s Minister Mentor Lee Kuan Yew is reported that the island state’s economy could record a -10 per cent.
• India and China, will see their growth moderate to 6.7 per cent and 5.1 per cent respectively – positive growth but considerably slower.
• Malaysia’s growth in 2009 will be between -1 per cent to positive 1 per cent. This is down from the 3.5 per cent forecast earlier which is not sustainable due to the deteriorating global economy.

• Four factors contribute to the slower growth:

1.	Malaysia’s open and trade dependent economy affected by the decline in global demand. In January, for example, exports fell 27.8 per cent.(Malaysia highly trade dependent trade as ration to GDP to the tune of 200 per cent)
2.	Commodity prices declined sharply especially oil and gas and palm oil.
3.	Foreign Drect investment (FDI) flows expected to decline by almost 50 per cent – RM26 billion in 2009 against RM51 billion in 2008, and
4.	Fall in the stock market which has a negative impact on the services sector and adversely affects consumer and investor sentiments.

• With the increased stimulus package, the budget deficit will rise to 7.6 per cent in 2009, an increase from 4.8 per cent. It is still lower than the high of 16 per cent recorded in 1982. High liquidity in the domestic market will help finance the deficit and it will not crowd out the private sector.

• Four main budget strategies:

1.	Reduce unemployment and increase job opportunities (RM2 billion allocation from the RM60 billion)
2.	Reduce the rakyat’s burden and impact on the vulnerable (RM10 billion)
3.	Assist the private sector (RM29 billion), and
4.	Build capacity for future growth (RM19 billion)

• Implementing the strategies:-

-	163,000 training and job opportunities in both public and private sector. Training programmes to be implemented by government agencies, the private sector including GLCs and private training institutions.
-	Eight different training programmes have been identified.
-	Tax exempt for companies that employ workers who have been retrenched including those whose services were terminated via VSS
-	Government to recruit 63,000 employees and contract workers
-	Opportunities for higher education with financial assistance
-	Reducing dependence on foreign labour

• Reducing the rakyat’s burden and impact on the vulnerable:

-	Government committed to eradicating hard core poverty by 2010.
-	Government subsidy totals RM34.1 billion or 22 per cent of operating expenditure in 2008. Of this RM18.1 billion is oil subsidy, RM6 billion in the form of assistance for students, the vulnerable and poor, RM3 billion in food subsidy and RM7 billion other forms of assistance.
-	Government allocated RM674 million in subsidy to check price increase of essential food items, e.g. bread, sugar and flour and another RM480 million to prevent a hike in toll rates.
-	Without government subsidy sugar price would be higher by 47 sen a kilo; flour 60 sen a kilo higher and bread 26 sen higher for a 400 gramme loaf.
-	Government set aside RM27.9 billion in 2009 for various subsidies.
-	Assist house buyers with tax relief on interest payment
-	Improving public infrastructure
-	Enhancing and improving education facilities, including the national, Chinese, Tamil and mission schools
-	Micro credit facilities for fishermen and farmers
-	RM5 billion savings bond (syariah based) with 5 per cent return a year, payable every quarter. Minimum investment of RM5,000 and maximum of RM50,000.

• Assisting private sector in facing the crisis:

-	RM5 billion fund for working capital guaranteed by government
-	Fund to assist companies to restructure and promote green technology
-	Easier access to capital market – SC to reduce time-to-market and assist companies to raise funds more efficiently and cost effectively. SC to introduce six different measures for this purpose.
-	Reducing cost of doing business
-	Attracting High Net Worth individuals and professionals
-	Support for the automotive and aviation industries and boost for tourism industry.

• Building capacity for future growth:

-	RM5 billion restructuring fund – Government guarantee for those companies who embark to increase their productivity, high value added and application of green technology. Maximum loan of RM50 million over 10 years.
-	Additional RM10 billion available to Khazanah for investments over two years in domestic industries with high impact and to generate new employment
-	Off budget projects valued at RM5 billion identified including LCCT at KLIA, Penang Airport expansion, High Speed broadband and covered walkway in golden triangle.
-	PFI: The government to assist private sector and provide the “tipping point” for private sector initiative.
-	Liberalising services sector to attract more investments, expertise and strengthen competitiveness of the sector which currently accounts for 55 per cent of GNP and has potential to increase contribution to 70 per cent as in developed nations.
-	FIC to adopt more liberal approach to attract more foreign investments. Government working on new guidelines for FIC.
-	Strengthen and stress on “value for money” in government procurement. ePerolehan to be encouraged to enhance transparency in management of government procurement

• Conclusion:

-	Comprehensive strategies and measures in the package
-	Cannot rely on orthodox policies. Government committed to innovative policies to deal with global crisis.
-	Malaysia’s banking and financial sector is strong and not affected by the global financial crisis and therefore able to support and finance the stimulus package.
-	Lessons learnt from the 1997-1998 crisis strengthened the corporate sector which is in a better and stronger position to face the crisis.
-	It will be a deep and prolonged global recession. All must join forces – including those across the aisle and the private sector – to put the nation on a stronger economic footing.