MY MPCA: Is It a RM250 Billion or RM25 Billion Stimulus for Malaysia?

Monday, 30 March 2020

Is It a RM250 Billion or RM25 Billion Stimulus for Malaysia?

The Federal Government unveiled its stimulus plan to arrest the economic downturn caused by the Covid-19 outbreak.

Many are perplexed by the numbers. On the face of it, it looks massive. But is that true?

The stimulus includes loans, loan payment deferments, rental waivers, exemptions of certain duties or taxes amongst others. The actual cash infusion is only RM25 billion. That includes the previous Government’s stimulus package announced in late February.

What is direct fiscal injection?

Well it is wage subsidies, one-off cash payments, incentives and allowances for front-line people, civil servants, e-hailing drivers and those in the B40 group. This fiscal injection portion is probably 1.65% of GDP (of RM1.51 trillion in 2019, at current prices). Where will the Government get the money? That is not clear. It could be borrowings, off-balance sheet financing, sell assets or secure another special dividend from Petronas.

Malaysia’s economy is in ICU. GDP could shrink by 2.9% in 2020, 2.4 million may lose their jobs and household incomes fall by 12% or RM95 billion. Consumer spending could drop by 11%. These are MIER’s latest estimates.

SMEs could run out of cash in 2-3 months with MCO and the pandemic. Employers need wage support and rent support not loans. If the Government can cover 60-80% of SME’s operating cost then 50% of the SMEs may not close. Datuk Michael Kang, President of SME Association of Malaysia believes closures are imminent and 4 million people are at risk of losing their jobs. SMEs contribute 40% country’s GDP and 20% of exports annually. They also provide 65% of the country’s labour force. So from manufacturing to services, the disaster could be severe.

The PM’s story of the keluarga Makcik Kiah may have some merit but nothing meaningful. Then there are the civil servants and pensioners who receive allowances, when their impact is not going to be as severe as those in the private sector – retailers, restaurant workers, tour agency guides, airline staff and a whole host of others.

How about those larger companies in trouble – Air Asia, Malindo, MAS and other smaller carriers? Pilots, cabin crew and ground staff are all impacted. The US has a USD25 billion package for its airlines and SIA is looking at S$15 billion infusion. Where are we? Rumour has it the Government is in the final stages of setting up a new state-guaranteed asset management company – Danaharta 2.0. This is to bailout troubled businesses reeling from the collapse of the economy/financial markets.

We need more clarity, transparency and accountability. Article 101 of the Constitution requires approval from Parliament. But in practice the Government will move to spend first and then table a Supply Bill later to regularise its position. Other democracies debate their stimulus packages before implementation. Could we not do the same? Or is ours an ‘optical illusion’?