Government unveils economic stimulus package

By YAP LENG KUEN AND JANE RITIKOS

Highlights of the Stimulus Package  

PUTRAJAYA: The much-awaited economic stimulus package, which was unveiled by Datuk Seri Dr Mahathir Mohamad yesterday, has four main strategies and 90 measures and aims to generate economic activities by mobilising domestic sources of growth, boosting consumption and encouraging investments. 

The RM8.1bil growth plan, according to the Prime Minister, is to help Malaysians mitigate the impact of the Severe Acute Respiratory Syndrome (SARS) outbreak, the Iraq war and lethargic world economic conditions. 

It will comprise an allocation of RM7.3bil, of which RM1.7bil will come from the Government budget, RM2bil from Bank Negara, while development financial institutions will provide RM3.6bil. 

The provision of incentives and tax exemptions will result in a loss of RM800mil a year for the Government. 

Dr Mahathir, who is also Finance Minister, said the Government’s economic growth forecast for this year was maintained at 4.5%. 

INCENTIVES:Dr Mahathir announcing the economic stimulus package at his office in Putrajaya yesterday.

The SARS-hit sectors received a major boost with incentives directed at the tour, travel and restaurant businesses. Besides a RM1bil Special Relief Guarantee Facility to assist operators in the tourism industry, the Government is helping out with discounts in electricity bills for hotel owners, road tax for taxis and exemption from service tax in the case of hotels and restaurants. 

On when he expected to see improvement in the situation, Dr Mahathir said: “It takes a bit of time to see the maximum relief effect. It may take up to three months to see confidence returning, especially in the tourism industry.” 

To encourage more domestic spending, Dr Mahathir announced a half-month bonus for civil servants and asked profitable government-owned companies to do the same. He also reduced employees’ contribution to EPF from 11% to 9% for a year from June 1. 

Banks will also play a proactive role in helping to spur consumption, especially by lowering their lending rates, restructuring loans of SARS-affected employees and encouraging investments by small and medium enterprises (SMEs). 

To develop the SMEs as a major catalyst for growth, the Government is setting up a RM500mil Micro Credit Scheme. Many other funds are being set up for retraining of new graduates, investment in new technology and promotion of Malaysian brands.  

“We have lots of funds but people complain we don’t have access. Banks have said they have filled the lending quota for SMEs but there is still a lot of demand. Therefore, a lot of people resort to moneylenders and get into trouble,” Dr Mahathir said.  

Incentives for low and medium-cost housing are one of the measures to reduce the gap between “those that have and those that have less.”  

Under the “Home Ownership for the People” (HOPE) project, the Government will be granting subsidies, interest-free loans, cash payment and tax relief especially for first-time and new housebuyers. 

Syarikat Perumahan Negara Bhd will build an additional 150,000 low and medium-cost homes with priority given to single mothers to purchase them. 

To provide greater flexibility on foreign equity participation, the Foreign Investment Committee (FIC) guidelines will be further liberalised; so will equity conditions for companies, especially foreign ones, seeking listing on the KLSE. 

Besides looking into the cost of doing business, the Government has come up with incentives aimed at improving competitiveness. They involve pioneer status, investment tax allowance and tax incentives for companies doing international trading as well as for hypermarkets and direct-selling companies exporting locally-produced goods. 

Measures to enhance human resource development include greater flexibility in hiring foreign workers with automatic approvals for highly-skilled workers where no local expertise is available. 

On how the Government will fund its portion, Dr Mahathir said it can bear up to RM1.7bil and banks are expected to raise funds via issue of bonds which, he hopes, will be subscribed by cash-rich funds and organisations. 

On the effectiveness of the package, he hopes everyone will support it and that the unions will not protest against the measures.  

Full speech (in Bahasa Malaysia)

From the website of the PM's Office

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