Wednesday, March 11, 2009

RM60bn? Not!

The newspapers today headline the RM60bn total 'package'.

It's not really that big. First of all, RM7bn of that RM60bn is due to “off-budget projects” and private finance initiatives (PFIs). “Off-budget” projects by definition are not undertaken by the government. What it did was corral certain projects done by GLCs (government-linked corporations), such as the RM2bn LCCT, into this package to help create the nice big headline number. Similarly, PFIs are led by the private sector. They are not new spending.

That leaves us with RM53bn. Still a fairly large number. But really, only a small fraction of that is likely to benefit the rakyat directly and immediately. Here's where the big money goes:

1)RM10bn to Khazanah to fund investments “over a two year period”. This is not going to help the rakyat today. Khazanah's record, by the way, is hardly exemplary. I challenge you to name 3 successes at Khazanah under its much-vaunted new leadership since 2004. Telekom continues to burn money overseas while providing Malaysians with sub-par services; Proton is still dependent on protectionist policies, consider the losses at Silterra; Malaysia Airports' LCCT is a disgrace …
2)RM25bn for guarantee funds, under which the government guarantees loans to encourage banks to lend. A good idea, which I had blogged on. But here is the rub. SME (small and medium-scale enterprises) get only RM5bn worth of guarantees. That's not even 4% of the total c. RM130bn loans outstanding. Bonds, ie debt issued by large corporations, get the largest chunk - RM15bn in total. And the balance RM5bn goes to loans for “Industry Restructuring”. Also, bear in mind this is not real spending – the government is liable only if the borrowers default.

Which takes us down to the real, direct government spend totalling RM18b (60-7-10-25=18). Bear in mind though – that's over two years. So it's only RM9bn per year. A drop in the ocean. But we're in trouble and we'll take whatever there is. Transparent and fast execution will help.

But the government did did not break down in detail how the monies will be spent. The record isn't comforting. As of to-date, just RM1bn of the RM7bn first stimulus package announced in Nov has been spent, according to our Finance Minister.

We are in a recession. Speed is of the essence. And so is maximising the effectiveness of government spending. How hard can it be for the BN government to put on a website the details of the various projects? For example, if it is a bridge project, please name the description of the bridge, the location, the person awarded to, the contract sum, the contract period and henceforth ...

Click here for more from Tony Pua and Jeff Ooi.


Anonymous said...

Can't help but think that this is an initiative to repay the cronies after the impending change of guard. I am sure DAP could track down who are the chief beneficiaries of the budget.

Anonymous said...

Malaysia is essentially an exporting economy. The growth engines had been exporting, FDI and to some extent govt spending (when they are not squirreled into some cronies' pocket). I am not sure how the present stimulus would help if US, EU and Japan are doing so poorly. Realistically, if US doesn't pull out of the recession, whatever Malaysia does would have little impact.

The current stimulus appears to be convenient excuse for political spending at a time of uncertainty.