But we must be ready to introduce a second stimulus package, depending on how the coronavirus unfolds and the extent of the global economic slowdown, says Ramon Navaratnam.
Despite the current political turmoil, the promised stimulus package was delivered on 27 February 2020, when it might have been postponed or delayed due to the current political upheaval.
Most Malaysians and especially the small business people and big investors had wondered whether the government of the day would be able to present a credible stimulus package, adequately and on time.
This was commendable achieved.
Malaysians have been generally disillusioned with all the politicking and socioeconomic uncertainties hanging like a menacing dark cloud over us and surrounding us. The people therefore warmly welcomed this stimulus package, even if it was not up to their full expectations.
Thus, we could all say thank goodness for the initiatives and hard work of Dr Mahathir Mohamad and the former Minister of Finance Lim Guan Eng, former cabinet ministers and, of course, the permanent sivil Service, who collectively, have managed the economy and finalised the stimulus package – despite all the challenges and shenanigans that have confronted us all during these critical times.
Adequacy of the package?
The adequacy of any stimulus package will always be questioned by some who would want more fiscal and financial incentives and goodies, to get them stimulated to go stronger.
However, the current budget constraints and deficits would have imposed severe limitations on the designers of the stimulus package as to what more could have been done to counter the economic slowdown we are all now facing.
The world economic decline and the global coronavirus attack can last longer than we think. Hence we have to be very cautious in our planning and implementation of the stimulus package during these fluid times.
Thus the stimulus package that has been provided would need to be reviewed. When we have a better appreciation of the actual slowdown in the economy and when we know more of which sectors of the economy and society are most adversely affected, the government could then possibly introduce a second stimulus package.
By then, the new government could do more to improve the stimulus package where appropriate and possible.
Main ingredients of stimulus package
Firstly, the stimulus package of RM20bn is credible and adequate but only for now. It is much more that the RM8bn provided to combat Sars, but this time the package is intended to counter the domestic economic slowdown as well.
Secondly, the budget deficit is now estimated to rise to 3.4% of gross domestic product (GDP) from the original target of 3.2%. But this is understandable, as we are facing a possible economic crisis – and foreign rating agencies do better appreciate our need to do more for the poor. In fact, we might be prepared to allow the budget deficit to move up to 5% of the GDP, if the crisis continues. Could the stimulus package then increase? We might even have to borrow more in these difficult times, provided of course we better control our corruption and wastage, protectionism and inefficiencies.
Thirdly, the agriculture sector has been provided RM1bn to increase food production. This would help reduce and stabilise the cost of living. The state governments should also cooperate more by alienating more land for cultivation to those farmers and fisherfolk, who can produce higher output, to raise food supplies.
Mahathir had asked the private sector to play their part to ensure the stimulus package was successful. He is right, but he needs to invite the private sector to highlight to him the many constraints they face in undertaking more competitive business. Only then can all sectors contribute fully for our progress.
The allocation of RM2bn for working capital for small and medium-sized industries is most welcome. It would boost their capacity to fight the economic setbacks. But the facilities should be more carefully implemented to ensure that the distribution of funds is fair and based on merit and efficiency.
The minimum wage could have been increased and more unemployment allowances provided to reduce the burden of the most affected lowest income groups. This would also have been a good opportunity to put our “shared prosperity vision” to greater realisation.
More reforms needed
Overall, the stimulus package was welcome, timely and adequate for the time being.
But we must be ready to introduce a second stimulus package. This would depend on how the coronavirus unfolds and how much the world economy slows down and affects us.
Nevertheless, despite the budget constraints, we can and have to do more for the economy, which is estimated to slow down to 3.2-4.2% from the original estimate of 4.8% for 2020.
Thus the new government will have to introduce more reforms (including security and human rights) in the country and economy to make it more competitive and growth-oriented and share its prosperity more equitably. This is essential to build more national resilience and to fight socioeconomic challenges more effectively for now and in the future.
So our best wishes to Malaysia and the ‘people to overcome the many challenges with God’s help.