The importance of timing for the government's economic package


  • Business
  • Saturday, 12 Apr 2003

BY ERROL OH

THE waiting continues. It had been widely expected that the government would announce its economic package on April 7.  

Instead, on that day, Acting Prime Minister Datuk Seri Abdullah Ahmad Badawi said the details would be out only after the government was certain that the situation in Iraq would not warrant changes in Malaysia's economic strategies. 

Earlier, there had been reports that the outbreak of Severe Acute Respiratory Syndrome (SARS) had been another reason why the powers that be had wanted to hold on. That has been denied, but the mystery illness surely has not helped either. 

Dr Mohamed Ariff Abdul Kareem

The economic package – the government no longer calls it a stimulus package – had earlier been slated for unveiling in late March but this was deferred to April.  

To date, there has been no word on the new date, although Abdullah was quoted to have ruled out an announcement in April. 

The government's decision to wait for relative stability is understandable. “The government has to be absolutely sure the measures will work and that it can afford to implement them,” points out Dr Mohamed Ariff Abdul Kareem, executive director of Malaysian Institute of Economic Research (Mier). 

A pivotal factor is the objective of achieving fiscal balance by 2005. That plan may be derailed if the additional spending only widens the country's budget deficit without getting the desired results. 

Says an economist with a stockbroking firm, “It's hard for the government. If the pump-priming measures fall flat, people will say it lacks fiscal prudence. That's why it is relying on feedback from the industry, and the analysis has taken some time.” 

Nevertheless, there is growing concern that the longer we wait for the package to be finalised, the weaker will be its impact on the economy. 

Observers say the delay has had a psychological effect. Weary after the postponements, people have become less expectant. This may be a problem because strengthening the economy is also about boosting sentiments. 

As one observer points it, “You have to put the consumers in a mood to spend.” It is harder to excite folks when they have lost interest or have given up hope. 

“Delaying is actually a risk,” warns the economist with the stockbroking firm.  

“The economy has lost momentum and there is a perceived lack of policy direction. It is important that the government provides a firm indication as to what it has in mind.” 

Also, the fact that the government has taken longer than anticipated to present the package may be interpreted as a negative thing. After all, businessmen and consumers alike value speed and decisiveness. 

Mier's Ariff says there is a need to counter the negative speculation. The obvious solution is to make the announcement soon.  

“It is already the fourth month of the year. Don't forget that it takes time for these measures to have an impact on the economy.” 

This is a crucial element.  

If the package includes a burst in government spending, we cannot expect a quick fix.  

Projects have to be identified, tender bids have to be called and evaluated, and contracts have to be awarded. 

A research head with another investment house notes that the government has been talking about removing impediments so as to help the private sector to thrive.  

That basically means reducing red tape and making it easier and more profitable to conduct business in Malaysia. 

He argues that it is essential that the government be seen to be taking steps to invigorate the economy, rather than still pondering over what it ought to do. 

“You need to implement. You have to be proactive. When you're reactive, the impact of the measures will be lessened,” he says.  

“You need to keep improving all the time. That's how you build up confidence and keep the economy moving.” 

The stockbroking firm's economist says it may not be a good idea for the government to wait for more numbers to emerge so as to better assess the situation before introducing the economic package.  

“Economic data tend to be slow to come out. Sometimes, you have to rely on projections.” 

On Jan 6, Prime Minister Datuk Seri Dr Mahathir Mohamad said the government might go on another round of pump-priming this year to invigorate the economy and to brace against the ill effects of then imminent war in Iraq. 

(A RM3 billion stimulus package was introduced in March 2001. This was followed by another RM4.3 billion towards the end of the same year in the wake of the Sept 11 terrorist attacks in the United States.) 

There have been a couple of recent developments that can be regarded as part of the overall effort to ensure economic growth and to bolster capital market.  

On Jan 11, Valuecap Sdn Bhd announced that it had begun operations. Owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and Kumpulan Wang Amanah Pencen, the company said it had up to RM10 billion to invest in the Kuala Lumpur Stock Exchange (KLSE) over a period of time.  

Valuecap said its aim was to buy undervalued shares and improve market liquidity.  

On March 11, Abdullah announced 10 measures designed to enhance the Malaysian capital market. 

These included new guidelines for the listing of large companies, a reduction of stamp duty on trading on the KLSE, standardisation of board lots, mergers of government-linked companies and shorter processing time for initial public offerings. 

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
   

Did you find this article insightful?

Yes
No

Next In Business News

Netflix Stock Soars to All-Time High on Q4 Subscriber Beat, Cash Flow Guidance
Wall Street closes at record highs as earnings jump, Biden inaugurated
Malaysia Aviation Group moves forward in its restructuring exercise
Axis REIT posts lower FY20 net profit
MDEC appoints Nora Junita as new CFO
Unisem fixes price for last tranche of new shares at near record high
Petronas Dagangan drags KLCI into the red
Plenitude deal to buy Osaka hotel falls through�
Maxis recognised for eCommerce and retail solutions
Widad Business Group plans RM40b Langkawi project

Stories You'll Enjoy