60B Stimulus Package: Brace Yourself For Further Inflation

The government has unveiled a RM60 billion stimulus package today as it attempts to arrest the export-driven economy's slide into recession.

The RM60 billion package will be implemented over a two-year period from 2009 to 2010. Deputy premier Najib Razak, who is due to take over as prime minister at the end of this month, announced the details of the spending plan when tabling the Supplementary Supply Bill 2009, or mini budget, in Parliament. The package, which is equivalent to 9 percent of last year’s GDP, is broken down as follows:

- RM15 billion in fiscal injection

- RM25 billion in guarantee funds

- RM10 billion in equity investment

- RM7 billion for private finance initiative and off-budget projects

- RM 3 billion in tax initiatives

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No details yet but it doesn't takes an economic genius to figure out that all those stimuli stated above need funding. And where would this funding come from? Again, it is safe for me to conclude that the rakyat would eventually be burdened with rising costs of living.

Nothing new from this rotting clueless government. Not only we have to pay taxes, we basically have to pay for all their corrupted practices through lopsided pacts with the toll concessionaires,independent power producers and many others. On top of that, this government is making money out of us from fixing gasoline price at the present level.

60B stimulus package may look good in number and it does not look people friendly at all. Lets wait for the detailed breakdown. We need to worry about the implementation later. But do brace yourself for further inflationary pressure.

This stimulus package already stinks even before its implementation.

Update: Breakdown of stimulus package

RM2 bil - Reducing unemployment, increasing employment

To create a total of 163,000 training and job placement opportunities in the public and private sectors

To establish 22 JobsMalaysia Centres and upgrade 109 existing centres to facilitate access for workers and employers to obtain job placements, career counselling and information on training opportunities

Employers who employ workers retrenched from July 1 2008 be given double tax deduction on the amount of remuneration paid.

Government to recruit 63,000 staff to fill vacancies and serve as contract officers in various government agencies

To encourage more Malaysians to pursue Masters and PhD by financing tuition fees and research grants up to RM20,000 for student pursuing PhDs locally and RM10,000 for those taking Masters programme

Levy on foreign workers will be doubled for all sectors except construction, plantation and for domestic maids; the levy will be paid by the employers and not by the workers.]

RM10 bil - Easing the burden of the rakyat

To assist oil palm and rubber smallholders whose incomes have been affected due to declining commodity prices.

RM674 million in subsidies to be allocated to avert price increases of necessities, such as sugar, bread and wheat flour.

To provide RM480 million to ensure that toll rates are not increased. With these above measures, the government will allocate a sum of RM27.9 billion for subsidies in 2009.

House buyers be given tax relief on interest paid on housing loans up to RM10,000 a year for three years.

RM200 million to repair and maintain drains and roads.

RM150 million for renovation, maintenance and repairs of welfare homes, fire and rescue stations and quarters, as well as public toilets in mosques, surau and tourist spots.

RM1.95 billion to build and improve facilities in 752 schools, particularly in rural areas as well as Sabah and Sarawak, with RM300 million to be used to improve facilities in government-aided religious schools, national-type Chinese and Tamil schools as well as mission schools.

RM230 million will be provided to increase the coverage of electricity and water supply in rural areas, particularly in Sabah and Sarawak.

RM350 million will be provided for the construction of rural roads.

RM1.2 billion to be allocated in Sarawak and Sabah. This include the expansion of Sibu Airport, deepening works at Miri Port, repair and improve infrastructure damaged by floods, upgrading of schools as well as construction of Lawas Training Centre, Kota Samarahan Industrial Estate and tourism facilities.

In Sabah, among the main programmes and projects to be implemented include building of Giat Mara centres, Kota Kinabalu Electricity Transmission System, as well as upgrading of schools, roads and bridges. The government to take action to resolve issues related to health services in Queen Elizabeth Hospital, Sabah.

Existing tax exemption of RM6,000 given on retrenchment benefits be increased to RM10,000 for each completed year of service. Banks to allow retrenched workers defer the repayment of their housing loans for one year.

RM29 bil - Assisting the private sector

RM5 billion to provide working capital to companies with shareholder equity below RM20 million. The government to provide guarantee in the ratio of 80:20, that is 80% will be guaranteed by the government and 20% by the financial institutions.

To set up an Industry Restructuring Guarantee Fund Scheme totalling RM5 billion for loans to increase productivity and value-added activities, as well as the application of green technology.

Securities Commission to implement additional measures to reduce time-to-market to enable companies to raise funds in the capital market in a more efficient and cost-effective manner including doing away with approvals for rights issues by listed companies.

A new programme where permanent resident status would be considered for high-net-worth individuals bringing more than US$2 million for investments or savings in Malaysia.

RM5,000 discount to be given to car owners, who trade in their cars which are at least 10 years old, for the purchase of new Proton and Perodua cars.

RM2 billion for a new LCCT at Kuala Lumpur International Airport, which is expected to be ready in 2011.

A rebate of 50% on landing charges will be given for a period of two years effective 1 April 2009 to all airlines that operate from Malaysia. Likely to result in lower air fares.

Company’s current year losses be allowed to be carried back to the immediate preceding year. An Accelerated Capital Allowance to encourage companies to renovate and refurbish their business premises. The allowance is capped at RM100,000.

RM200 million to upgrade infrastructure in tourist spots, diversify tourism products, organise more international conferences and exhibitions in Malaysia as well as improve the homestay programme.

RM19 bil - Building capacity for the future

To promote domestic private investments, the investment funds of Khazanah Nasional Berhad will be increased by RM10 billion.

Khazanah to invest RM3 billion in the telecommunications sector, which among others, will facilitate its subsidiary to improve broadband infrastructure.

RM1.7 billion of Khazanah’s investment to go into Iskandar project for the building of infrastructure, hotels, theme parks as well as universities.

RM5 billion for 23 projects implemented on off-budget basis, including LCCT at KLIA and the expansion of Pulau Pinang Airport at an estimated cost of RM2 billion and RM250 million.

RM2.4 billion for the Malaysian Communications and Multimedia Commission to improve telecommunication infrastructure.

RM100 million to build sky bridges and covered walkways between buildings, especially in the Golden Triangle, Kuala Lumpur.

RM2 billion for private finance initiative (PFI) and public-private partnerships.

RM20 million for Radio Televisyen Malaysia to implement several projects to develop the local music industry.

All government procurements will be made through open tenders or restricted tenders, except for specific cases.

So this is the government spending program. Boom time for cronies and corruptors! How many of these are going to end up as white elephants? Many of these are open to abuses.

Another way of telling us that we are seriously in deep shit! Just like those announcement of curbing with shares and property financing before the 1997-98 financial crisis.