Malaysia Budget 2009 revised with additional measures

Finance Minister Datuk Seri Najib Tun Razak, in announcing the RM7 billion stimulus package which he termed as a policy response to the crisis, said the Government was adopting an expansionary policy and extraordinary times require extraordinary measures.

Najib said the additional economic measures announced was “not a new budget” as the development and the operating expenditures remained the same. The extra RM7 billion package is actually pinched from the RM7bil savings from the fuel subsidy which was based on the global oil price of US$70 (RM206) per barrel.

The opposition group Pakatan Rakyat meanwhile stated that none of the budgetary proposals amounting to a RM7 billion injection have been tabled in the House. DAP Adviser Lim Kit Siang added, “Every sen of government allocation must be approved by Parliament. So this RM7bil injection must be approved by Parliament but the amendments were not presented before the House".

Related posts:
* Malaysia 2009 Budget Summary - Good and Bad
* MALAYSIA 2009 BUDGET HIGHLIGHTS: The Poor become poorer

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From the Star

RM7bil spending

KUALA LUMPUR: A total of RM7bil will be spent by the Government in its stimulus package to boost the country’s economy in the face of the global financial crisis.

Finance Minister Datuk Seri Najib Tun Razak, in announcing the package which he termed as a policy response to the crisis, said the Government was adopting an expansionary policy.

The money is to be spent on a wide range of projects, from the LRT to repairing of houses belonging to the poor.

Among the major announcements in Najib’s winding-up reply in Parliament yesterday were:
* Gross Domestic Product (GDP) this year expected to be at least 5% while the GDP for next year is estimated to be 3.5%.
* The inflation rate expected to drop next year to between 3% and 4%, provided crude oil prices continued to fall.
* Contributors allowed to reduce their EPF contribution by three percentage points to 8%, so that they will have more money to spend.
* Civil servant car loans increased by RM10,000.
* Religious, missionary, Chinese and Tamil schools to get RM200mil as aid.
* Open tender system will be practised in the sale of government land and in government procurement.

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Najib: Government to adopt open tender system

PETALING JAYA: Open tenders to ensure transparency and value for money as well as to generate more income will be the way forward for the Government.

Deputy Prime Minister Datuk Seri Najib Tun Razak said the Government would ensure that a large portion of government procurement would be via open and restricted tenders.

“Procurement for bumiputra contracts will also be awarded via ‘competitive bidding’ among bumiputra companies,” he added.

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From TheStar

A window of spending opportunity
COMMENT
By P. GUNASEGARAM

In a global downturn, the confidence factor is all-important, so the Government has chosen to spend in its RM7bil stimulus package.

WHAT do you do when you want to spend – but not too much – to keep confidence up and to make up for the restraint in expenditure when people turn cautious?

If you want to be prudent you spend from your savings, otherwise you borrow.

The Government has done it through savings – oil prices have fallen, which means that it does not have to spend as much as it anticipated in subsidies for oil and related products. This can be diverted to other areas without increasing Budget expenditure.

That’s precisely what the Government chose to do in its RM7bil stimulus package announced by Finance Minister Datuk Seri Najib Tun Razak in Parliament yesterday.

It’s a smart way to go, but doesn’t government revenue go down when the oil price goes down because we are a net exporter of oil?

Well, if you thought you caught Najib out, no you did not. You see, the national oil corporation, Petronas, pays out dividends to the Government based on the previous year’s earnings.

In 2009, the dividends the Government gets from wholly-owned Petronas will be based on 2008 earnings.

That will be high because for most of 2008, oil prices were at record levels.

But a year further out in 2010, and if oil prices remain at these levels, government revenue from oil would shrink. And what is it going to do then?

Well, it can only hope that by that time the major part of the crisis would be over and that the private sector would have regained some confidence and begun to spend more.

In which case, it may be possible for the Government then to cut back its expenditure.

If confidence still remains low, implying that the world economy has not recovered sufficiently from the problems that it has been through, then it will be a time to tighten the belt, grit the teeth and bear the pain.

What the oil price drop and the still buoyant revenues from Petronas in 2008 have given the Government is a window of opportunity to step up spending in selected areas to have maximum impact on the economy in terms of income and activity generation.

Because that window will close a year down, the Government should and has taken the opportunity to help shore up confidence by taking up some of the slack that may appear in spending. That will help keep growth up for next year.

In a global downturn, the confidence factor is all-important, even if Malaysia is relatively insulated.

The very apprehension of the future can produce bad times when too much caution chokes off economic activity and brings things to a crawl in a self-fulfilling prophecy.

The measures that the Government has undertaken recognises that there is a problem which needs action and soon.

As Najib said in a briefing to editors: “We are not in denial. Otherwise, why would we announce these measures?”

But new ways of doing things have to be examined. The plan to raise revenue by selling government land through tenders must be welcomed.

But the Government should seriously consider adding value by breaking up the parcels and selling smaller pieces to maximise value.

Voluntary cuts in Employees Provident Fund contributions have been tried before.

The three-percentage-point cut proposed is not something we are in favour of because it will reduce the eventual retirement benefits of those who will probably need it the most.

It would have been better to reduce taxes where possible so that consumers can get more bangs for the same buck.

Still, that cut is only for two years and therefore the long-term impact may not be too adverse on retirement savings.

All said, there is little to fault the package and a lot to praise in terms of helping to mitigate the fall-out from a crumbling global economy following the financial meltdown in the US and Europe.

That’s however for the short term. As the conversation with editors drifted to Obama and McCain and how open the US was and how it would recover quickly because it was so open, Najib made an observation.

“Any society which is open tends to do well. The only way Malaysia can move forward is to be more open.”

It would be interesting to see what the Finance Minister and the future Prime Minister will do in the longer term to help secure Malaysia’s place in the future and in the world.

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From The Star

HMs elated by generous allocation for schools

PETALING JAYA: The Government’s RM7bil stimulus package has given all national-type and government-aided schools a reason to cheer.

An allocation of RM200mil will be evenly distributed to SJK(T), SJK(C), religious and mission schools with each school type receiving RM50mil.

When contacted, Education director-general Datuk Alimuddin Mohd Dom said that the move would improve Malaysian education as many schools would benefit.

“The allocation is meant primarily for schools to upgrade their infrastructure and furniture,” he said.

“On top of that, the allocation can also help schools improve their teaching and learning tools.”

His view was shared by the National Union of the Teaching Profession president Hashim Adnan, also the principal of SK Sungai Ramai – a religious school in Air Tawar, Perak.

“It is a good move by the Government as many schools lack proper infrastructure and the allocation will enable these schools to upgrade their old and damaged buildings,” he said.

Meanwhile, principals from various school lauded the move in the interest of fairness.

“It is very fair that all national schools will get the same amount,” said SJK(C) Salak South, Kuala Lumpur, principal Lim Choy Kim.

“My school is in need of upgrades and repairs and the allocation can really help improve learning conditions,” said Lim.

Likewise, SJK(T) Thamboosamy Pillai, Kuala Lumpur, principal Vanaja Seenivasagam said the equal allocation was fantastic and hoped that it would help ease the shortage of classrooms, and pay for the repair of the dilapidated roof and rewiring.

While some already have a wish list, SK Methodist ACS, Seremban, principal Wong Mei Peng was just happy to hear the news.

“This allocation is really what I need,” she said.

“Mission schools have been waiting for a long time for this, and I’m happy with the Government’s move.

“Maybe now I can solve my school’s termite problems once and for all,” she said.