Stimulus package may be brought forward


  • Business
  • Thursday, 20 Mar 2003

BY JAGDEV SINGH SIDHU

THE government is expected to bring forward the announcement and implementation of its economic stimulus package should the war in Iraq break out in the next few days. 

“There is room, depending on the outbreak of war, to review the timing for releasing the growth stimulus package,'' said a source. “If war comes much earlier than expected, the package would be implemented sooner.'' 

The government was originally expected to make public its broad-ranging economic stimulus package on April 7, but the speed of events in connection with the Iraq crisis over the past few days could very well hasten the process. 

As the US-imposed deadline for Iraqi President Saddam Hussein and his sons to leave the country expires today, there would be a sense of urgency to announce and start implementing measures to counter any detrimental effects on Malaysia's economy. 

The key measures in the economic stimulus plan are being formulated by the 10 committees established to bring about structural and institutional changes to re-position the economy. The committees would look at increasing national competitiveness, improving the country's delivery system, promoting new sources of growth, encouraging domestic investment, improving efficiency and revenue collection, monitoring macroeconomic policies, and controlling the government's deficit. 

Furthermore, the committees would look at encouraging investments and tourism from new markets, spurring the agricultural sector, and improving security, especially in the transportation chain. 

The package is believed to contain measures to improve government processes and procedures to boost efficiency, especially in relation to domestic and foreign investments. 

Improving competitiveness and the delivery system of the economy is seen as important to ensure the speediness of working out the economic measures and government spending. 

Although boosting domestic consumption is important, interest rates and contributions to the Employees Provident Fund may remain unchanged. 

Some analysts argue that any reduction in Malaysia's interest rates – something the market has been expecting – could be taken as a sign of weakness, with the US Federal Reserve standing still in its short-term interest rate policy at its meeting on Tuesday. 

Rural agriculture is also expected to benefit from the economic stimulus package. 

Sources said the package would contain an element of immediate fiscal stimulus, which could depend on how long the Iraqi war lasts. However, the government is believed to be hesitant about spending vast sums of money on pure fiscal measures as it does not want to encumber its debt level further. 

The overall aim of the stimulus plan is, however, to bring about structural changes and new sources of growth for Malaysia's economy over the medium to long term without needing to spend huge sums of money. 

The source said the committees had done a lot of work on formulating the policies over the past couple of weeks and all that remained was some fine-tuning. 

“Waiting a week to 10 days to announce the stimulus measures after the outbreak of war is just too long,” the source said. 

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