First Stimulus Package

First Stimulus Package • November 2008 • RM7B (USD1.9B) • Financed from savings by subsidy reduction • Most spending going into construction projects questions regarding speed and efficiency of implementation • Rest in health and education • Deemed insufficient to counter the

Second Stimulus Package • Amount: RM60B (USD16B) • Duration: 2 Years • Particulars    

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RM15B for fiscal injection RM25 to guarantee funds RM10B for equity investment RM7B for private finance initiative (PFI) and off-budget projects ▪ RM3B for tax incentives

Second Stimulus Package Creation of 163,000 jobs Special package for retrenched workers Tax relief to new house buyers Issue of government bonds to increase the income of the people • Strengthening of microcredit schemes • Working capital guarantee scheme for small businesses • Creation of Financial Guarantee Institution for helping big businesses • • • •

Criticism • Direct Spending only 25% (RM15B) • Speed and efficiency of implementation and potential leakages • Fiscal deficit likely to rise to an unhealthy 7.6% •

Other initiatives • Since February 2009: OPR and SRR down to 2% and 1% respectively (from 3.5% and 4% respectively in November 2008) • April 2009: 27 services sub-sectors liberalized to foreign investors – Computer and related services, health and social services, tourism, transportation, recreation, business services, shipping

• June 2009: removal of 30% Bumiputra equity requirement for newly listed companies • Continue the practice of pegging the local pump price to world oil price efficient resource allocation due to reduced government interference 

Current Situation • According to the Q2 ’09 reports – GDP growth (-3.9% YoY) – Services sector positive growth – Manufacturing sector only slightly negative – Moderation of export contraction (19.8%) – Deflation still continues – Consumer Sentiment and Business Conditions Indices have settled above the 100 points mark

Conclusion • The road to recovery is very bumpy and uneven • Recovery is made more difficult due to the fact that all the economies are interlocked so closely that recovery of any country requires recovery of the whole world economy • Dependence on external sector and commodities have impeded the recovery of Malaysia • Country needs to diversify the export basket and promote domestic

References • Archives of Malaysian Institute of Economic Research: Economic reports: October 09, July 2009, April 2009, February 2009 • http ://en.wikipedia.org/wiki/Bumiputera_(Malaysia ) • 2009 Economic Stimulus Packages in the U.S and Asia: Report by California-Asia Business Council • Malaysia current global economic crisis and role of monetary financial policy by R. Thillainathan • Speech by Yab Dato’ Sri Mohd. Najib Tun Abdul Razak Deputy Prime Minister and Minister of Finance in introducing the