For many, the figure did come as a surprise and layman like me expected lots of goodies as the term ‘Mini Budget’ was used all too regularly. For many Malaysians, the word budget by government will always raise a question, what’s in for me.
Let’s go through the key elements in the 60 Billion package through a layman’s worldview and perception.
Reactions in bold
Highlights of RM60b stimulus plan (reactions in bold)
• RM15 billion fiscal injection;
Have no clue how this affects man on the street.
• RM25 billion guarantee funds;
Only employers benefit in a way to save their businesses. This may not necessarily mean that the employers will retain their employees.
• RM10 billion equity investments;
Again, not sure how does this directly help normal ‘Rakyat’
• RM7 billion private finance initiative and off-budget projects;
New LCCT at KLIA, upgrade of Penang, Airport, electricity for rural areas, broadband centres. New LCCT Airport development may have some multiplier effect on a broad scale; otherwise the rest of the initiatives may only benefit people in the locality.
• RM3 billion tax incentives;
These are beneficial to troubled employers and not employees. Everyone knows that taxes are for those whose income is taxable, what about those who are not. Benefits to employers may not necessarily translate to retaining of staff, their pay, allowances or overtime.
• Unemployment rate in 2009 to jump to 4.5 per cent from 3.7 per cent in 2008;
Despite all the measures above, the government still thinks unemployment rate will go higher. That tells me that the government is conceding that they are unable to stop retrenchment from happening.
• RM700 million allocated to create 163,000 new jobs;
This is related to job creation, training and re-training by government and GLC’s. I wonder how GLCs are going to bear the cost when they themselves are struggling to contain their overheads. As for government, they keep saying jobs are available but many do not know where, what position etc. More information would be helpful.
• House buyers given tax relief on interest paid on housing loans up to RM10,000 a year for three years;
How many people in the medium and low income group are going to buy houses now and how these incentives will help?
• Additional RM200 million for public low-cost housing scheme for low-income earners;
Sure it does help in terms of creating multiplier effect but not much detail available on how this will be implemented. Open tenders are welcomed but not restricted tenders made available to Class F contractors from ‘you know who’ will restrict the beneficiary to a select few. If people are jobless, how are they expected to buy or rent these houses except of course if they are available for free for a certain period.
• RM1.6 billion fund to promote investments;
No clue what is it this all about although they say it is related to projects under the 9th Malaysian Plan. I thought projects under the 9th malaysian plan has been budgetted for already!
• RM200 million to repair and maintain roads and drains;
The allocation is certainly low considering the condition of drains and roads in the country. A lucky draw may be required to determine which town or city would benefit from this.
• RM150 million for renovation, maintenance and repairs to welfare homes, fire and rescue stations, firemen living quarters and public toilets in mosques,suraus and tourist spots;
No complaints here, but where are these funds going?
• Government to issue syariah-compliant Savings Bonds amounting to RM5 billion this year;
This is for people who has money to spare, what about those who don’t. It may well end up benefiting the rich so that they can be richer!
• RM1.95 billion to build and upgrade facilities in 752 schools, particularly in rural areas, Sabah and Sarawak of which RM300 million will be used to improve facilities in government-aided religious schools, Chinese and Tamil schools and mission schools;
We have heard enough on allocation for schools from 2009 budget and the 7 Billion package last year and also through mock cheques paraded by BN during by-elections. Until today, no one appears to know which schools are benefiting from the allocation.
• RM230 million allocated to increase electricity supply coverage and water supply in rural areas particularly in Sabah and Sarawak.
It’s about time that BN please the East Malaysians
• RM350 million allocated for rural road construction.
• Retrenched workers’ tax-exempt compensation raised to RM10,000 for each year of service from RM6,000 previously;
Again, this is mainly targeted at retrenched workers whose income is taxable. Nothing for groups who are not taxable.
• To raise windfall profit levy on oil palm to RM2,500 per tonne for Peninsular Malaysia and to RM3,000 per tonne for Sabah and Sarawak;
It helps our plantation conglomerates and not necessarily translates into benefits for their workers.
• To raise state investment firm Khazanah Nasional’s investment funds by RM10 billion.
I can safely say that Khazanah will pick up more stocks from performing companies and I wonder how that benefits the public in the short term. It may help to prop up KLSE, but hey, the layman doesn’t care less.
• Effective April 1, levy payment rate to be reduced to 0.5 per cent from one per cent for all employees for a two-year period;
This helps employers and not necessarily translates into benefits for their workers. Moreover the sum is quite small.
• Additional RM200 million for the Automotive Development Fund;
Not much detail were provided, therefore it would not be wrong to assume that this will go to Proton to help them from going under, yet again.
• Government to assist in the auto scrapping scheme for Proton and Perodua-- a discount of
RM5,000 will be given to car owners who trade in their cars which are at least 10 years old to buy new Proton and Perodua cars;
Another lifeline for Proton, but how many people are going to buy or change cars at a time where income is diminished and loans are hard to get!
• Malaysia Airports Holdings Bhd to build and operate a new low-cost airport at the Kuala Lumpur International Airport estimated to cost RM2 billion;
• RM250 million to expand Penang International Airport;
• A 50 per cent rebate on landing charges will be given for two years effective April 1 to all airlines that operate from Malaysia.
Discount on landing charges may only help to stem losses faced by MAS, Air Asia and other airlines operating from KLIA. I wonder how these airlines would get the rebates if the plane doesn’t take off at all due to cut in flights and demand.
For the man in the street, this mini budget is a disappointment. I personally cannot see how most of the measures would help man in the street.
For a financial experts and armchair analysts (majority of whom have been proven wrong many times over) , it may sound good to prop up the stock market and help listed companies but the government have to realise that majority Malaysians are employed in non-listed companies.
When what is needed most at this stage is spending, government is encouraging people to save!
Most employment opportunities are created by or through government agencies and GLC’s. This will only weight down their own budget and bottom lines. As it is most GLCs are struggling to manage their cost and have downgraded their revenue prospects for this year.
As for tax relief for employers who recruit retrenched employees, it may only work very much later in the year or next year when the situation improves. Again, tax exemptions can only be claimed the next year. What about the current year where the employer will still have to pay salaries etc. This may pose cash flow problems and at the moment, not many are employing in the first place.
Training and SME entrepreneur development programs will take time to realise its objectives.
Whatever happened to suggestions that would immediately help the man in the street such as temporary tax reduction for individuals, reduction of employers EPF contribution, reduction of sales tax, duties for vehicles and abolition or reduction of tolls, further subsidy of transportation, lower electricity, cooking oil and even petrol.
The government also did not say where the 60 Billion would come from and how does this fit into the 7 Billion package, 2009 budget and also the 9th Malaysia Plan.
There are also no implementation timeline provided or even indicated. With 3 quarters left to go, time is of essence and if the government and civil servants are not serious in implmenting some critical projects, we might as well, like Singapore, admit that we are in recession. Let's not be in denial.
By the way, what happened to the 7 billion package. This is where the problem lies. Nice to announce, what about implementation and who are the beneficiaries. Can the government be transparent and list down projects in detail; who where what?
It would at least give the rakyat some confidence. Releasing statement that 80% of the funds have been disbursed is remains just that, a statement. Nowadays, statements are no longer adequate, show us the money!
In summary, these measures are not going to help us stem the recession at all. I foresee that Malaysia will slip into recession in the second quarter itself. Want to bet?