March 18 (Bloomberg) — Malaysia has the capacity to fund an unprecedented 60 billion-ringgit ($16 billion) stimulus package unveiled this month to shield the economy from falling foreign investment amid the global recession, Finance Minister Najib Razak said.
“Some may say this is too much,” Najib, who is also deputy prime minister, wrote in the Wall Street Journal today.
“Given the magnitude of the still-evolving global crisis, I am convinced the risk isn’t that we do too much, but that we don’t do enough.”
Foreign investment in Malaysia may fall by 50 percent to 26 billion ringgit in 2009, adding pressure on the government to replace dwindling private capital and invest in the country, Najib wrote. The country’s low foreign-debt levels, large international reserves and “ample” banking liquidity will allow the government to fund its spending, he said.
“Stimulus packages should not be about resorting to popular policies or handing out cash,” said Najib, who is due to replace Abdullah Ahmad Badawi as prime minister later this month. “And they should not target one group or area, but benefit the whole country.”
Malaysia is one of the most trade-dependent economies in the world, with the ratio of foreign trade to gross domestic product exceeding 200 percent, the highest after Hong Kong and Singapore, Najib wrote.
“We will use the current downturn to forge a new economic model that puts knowledge first,” he said. The government will work “to spread mutual tolerance and respect between genders, cultures, races, religions and nations. We will champion inclusiveness, not just because it is a foundation for political stability and economic growth, but because it is right.”
International Trade and Industry Minister Muhyiddin Yassin said last month the government would ease rules forcing foreign companies in the Southeast Asian nation to allocate equity to the majority ethnic Malays to counter the global slowdown.
Under the countryâ€™s so-called New Economic Policy, non- Malaysian companies must reserve 30 percent of their equity for so-called indigenous investors, and ethnic Malays get preferential treatment in government contracts, home ownership and other areas.
Source : Bloomberg