Ninth Malaysia Plan projects key for RM60 billion mini budget

By Lee Wei Lian

UPDATED

KUALA LUMPUR, March 10 - Business analysts reacted favorably to the announcement that RM8.4 billion worth of projects in the Ninth Malaysia Plan (9MP) will be brought forward under the RM60 billion mini budget announced this afternoon by deputy prime minister Datuk Seri Najib Razak.

The size of the mini budget was larger than the market expected and the construction, auto and banking sector are expected to be impacted the most by the budget.

However, there was disappointment that there were no income or corporate tax cuts and that the projects to be accelerated were not specified.

Chris Eng, head of research at OSK Research sees the construction sector benefiting, as will the national auto makers thanks to discounts of RM5,000 offered to car owners who trade in their old cars for Proton or Perodua vehicles.

He points out however, that banks may face cash flow issues due to a deferment of housing loan payments for one year offered to retrenched workers.

"Generally, demand for consumption will benefit," he says. "But I would have liked to see more direct measures to help the man on the street such as income tax cuts or cash coupons."

He said he was disappointed that there was no tax cuts at both the corporate and individual level and that the RM2 billion allocated to reduce unemployment was "a bit small."

Mak Hoy Ken, senior analyst with Ambank Research says that he was not expecting any large new projects but the key to the success of the mini budget will be in bringing forward delayed projects in the 9MP such as the expansion of the LRT system.

"As long as they resume previously stalled projects under the 9MP, that will help fight recession," he said. "A resumption of a few cornerstone projects will have a big multiplier effect."

He expressed concern however, that the projects were not specified in the budget. "There is a lack of details," he said.

One analyst however, was disappointed that the budget appeared to be aimed at cushioning the impact from the economic slowdown and that no new projects were announced. "I don't see it stimulating domestic demand," the analyst, who declined to be named said.

"We sensed that the government was cognizant that they have to elevate hardships," says Mak. "That's why we did not expect any new big projects."

Real Estate and Housing Developers' Association Malaysia (Rehda) president Ng Seing Liong said he felt let down that proposals for a reduction of stamp duty and a grant for first time house buyers were not incorporated into the mini budget.

He notes however, that the tax relief granted for housing loan interest paid is a positive first step.

"It is important whether the RM60 billion can translate fast into a multiplier effect," he adds. "The poor should be given money fast."

Teh Chi Chang, Economic Advisor to the DAP Secretary General, says that implementation is crucial to the success of the budget. "I hope the government implements this quickly and efficiently," he said.

"Don't let it just be a big number but six months later, only a tiny portion is delivered."