MARCH 6 — The government yesterday tabled a RM10 billion allocation as part of the proposed second economic stimulus package. It was read out by Deputy Finance Minister Datuk Kong Cho Ha.
The RM10 billion allocation is evenly split, with RM5 billion going towards operational expenditure and the rest allocated for development expenditure.
On the outset, the amount allocated for the mini-Budget is going to be hotly debated in the next few weeks. Another more important aspect of the Budget which needs scrutiny is its uses. It is not sufficient for the government to merely state its intention to spend the money on operational and development without going into the details.
Of late we have heard some very unscrupulous suggestions which include reducing employers' EPF contribution from 12 per cent to 8 per cent or lower. This suggestion does not augur well for the country. More than 70 per cent of EPF contributors have agreed to accept a reduction in their EPF contribution from 11 per cent to 8 per cent. Malaysians do not save enough and many do have a retirement fund to last them in their old age. More than 12 per cent of all Malaysians do not make any personal savings from their monthly income. About half save less than 10 per cent of their monthly income in addition to the EPF contribution. This shows the importance of keeping the EPF saving rates untouched.
Then again, there is a double whammy for the economy if Malaysians start to save more now at a time when there is a need to prop up local demand and consumption. Hence, the economic stimulus package must be precise and accurate in helping to address the consumption dilemma. At the moment, some figures from the industry are pointing to a dramatic slowdown in consumption. A check with certain retailers in KL and Penang showed a contraction of more than 40 per cent after Chinese New Year.
Correspondingly, exports in January 2009 were valued at RM38.3 billion, a drop of 27.8 per cent from January 2008, the Statistics Department said in a statement today. Total imports fell by 32 per cent to RM29.47 billion from a year ago. This is a clear measurement of domestic demand in the country.
In the next quarter, export figures may even fall lower. About 36 per cent of exports are electronics and electrical products. This sector will experience serious contraction in the next few months. The export figures were registered from last year's end orders and new orders from the Q1 are expected to slow down between 30 per cent and 40 per cent.
Malaysia's problem remains acute. We need to achieve a higher level of domestic consumption but the economic structure is export-led. Hence, salaries are kept low and industries continue to depend on low-skilled and cheap foreign labour. With deteriorating exports to our main markets such as Singapore, the US, Japan, Europe, China and South Korea, our domestic market cannot be relied on to support the local economy. Our economic structure is not geared towards meeting the needs of local consumers.
Next, the government is again drumming up its intention to deport foreign labour. Like previously, this action is a short-term policy to address the current economic dilemma. Deporting low-cost foreign labour is a good thing but it is useless if the government does not help to fix the economic structure. Jobs vacated by these foreign workers cannot be immediately filled by our local workforce. These jobs are dirty, dangerous and demeaning. Many of these foreign workers are paid paltry salaries, live in inhumane conditions and are not covered by any medical insurance. Not many local workers are willing to accept similar terms.
If fact, local companies using predominantly foreign workers would prefer to close shop than to be made to hire local workers. These businesses just cannot survive paying higher salaries without proper restructuring to their operational process and management capacity.
Here is where the government should intervene in the new stimulus package. It should try to make some of these jobs in the construction and agricultural sectors better paying and allow for an adjustment of businesses to move up the industrial value chain. Construction and agricultural methods can be made more high-tech, efficient and flexible.
The use of high-technology, e.g. pre-fab construction method, can allow companies to train and utilise better skilled local workers. Construction can focus on design and quality rather only on cost. The implication of using low-skilled workers in the construction industry is quite evident. Many buildings and infrastructure were found to be defective barely a few years and sometimes months into their completion.
The dependence on low-skilled labour is a disincentive for companies to invest in better technology, training and work processes. Since 1991, the country has envisioned to become a fully developed country by 2020. The country's bold and broad knowledge-based development blueprint is not going to be fully realised if this trend continues.
Hence, it is not just the size that matters. The second stimulus must be targeted at changing the economic structure for the better. A number of local analysts have called for a comprehensive strategy to manage the economic crisis. This strategy should drive the country to improve its inventiveness, human resource development and reinvent its industrial development.
We do not have more RM10 billion to throw around. It is time for the government to put in some serious thought into ensuring that this country will ride out this economic storm better and become more competitive. Otherwise, we would be staring at the back of more competitors running ahead of us.
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