MARCH 10 — Its the now that matters.
Although the mini Budget surprised everyone with its size and duration, it fell short of major structural changes to the Malaysian economy.
Sure, there was some vague references to tweaking the Foreign Investment Committee (FIC) rules, but the focus was on the short term. There was no big overhaul of policies that hamper investments or spur entrepreneurs in the long run, that restructure the economy for a trading world vastly different from the past.
Gleaning through the mini-Budget, incoming prime minister Datuk Seri Najib Abdul Razak’s main thrust was to save jobs, create jobs and ensure the government will continue its heavy subsidy policies and even price controls.
Amongst others, the Finance Minister proposed RM674 million in subsidies to avert price rises in necessities such as sugar, bread and wheat flour.
“Without these subsidies, the price of sugar will increase RM0.47 per kilogramme, wheat flour RM0.60 per kilogramme and a 400-gramme loaf of bread by RM0.26,” Najib said.
He also pointedly proposed to provide RM480 million to ensure toll rates remain as they are, following a flap late last month over mandatory increases in toll charges at several highways.
All in all, the government will allocate RM27.9 billion for subsidies in 2009, which is just under half of the entire stimulus package. In 2008, the allocation for subsidies was RM34.1 billion or 22 per cent of the operating expenditure.
The thing is, although the subsidies and price controls distort the economy, the government cannot afford to remove the social safety nets now. Especially when the focus is on keeping jobs and the confidence levels up at a time when everything is going south.
Nothing saps confidence like the loss of jobs and the government is going all out, like in 1982 during the Operasi Isi Penuh when the recession prompted then prime minister Tun Dr Mahathir Mohamad to fill the civil service.
Najib is not doing anything different weeks before taking over.
While the civil service is bloated at 1.2 million people, he has proposed to recruit 63,000 more to fill vacancies and serve as contract officers, including 4,500 as census enumerators for the national census due next year.
Despite the efforts, Najib readily admitted that the unemployment rate for 2009 will rise to 4.5 percent compared with 3.7 percent last year.
But Najib and the Barisan Nasional are counting on the mini-Budget to fix the symptoms first rather than cure the ills that ail the national economy. Fixing the economy that hits a bump every decade takes more than a patch-up job.
Najib must know that. Now.