Malaysia's Stimulus Package Will Work

By Thursday November 27th, 2008 No Comments

Regarding your editorial (“Malaysia Stocks Up,” October 24) on our recent decision to reinvest government assets in Malaysia’s economy, it might be helpful to provide some further information on that action and other efforts we are taking to prepare Malaysia for the inevitable regional aftershocks of the current global crisis:

On November 4, I introduced a 7 billion ringgit ($1.93 billion) pro-growth stimulus package to implement projects with high multiplier effects, building on the previously announced 5 billion ringgit allocation of existing investment capital to ValueCap, Malaysia’s asset management company.

The stimulus package as a whole is designed to enhance domestic growth and improve market confidence. This package ensures that a larger segment of the population will realize the benefit of productive expenditure from the government.

We anticipate no additional expenditure in implementing these measures. The larger stimulus package is entirely funded by savings on subsidies as a result of falling global oil prices. ValueCap will enhance existing assets and multiply the benefit the Employees Provident Fund already provides Malaysian workers.

To address your suggestion that parts of the stimulus package might be inappropriately managed, all measures, including ValueCap, will be supervised by Malaysia’s Project Monitoring Unit. They will report directly to me, the Minister of Finance, and I will provide regular updates and, I suspect, receive candid assessment by an active political opposition, the public and the press.

Malaysia is no stranger to this sort of scrutiny. During the last crisis, our “unorthodox” stimulus initiatives were loudly criticized and largely condemned. The current crisis, however, has reinvigorated interest in and, apparently, the validity of those initiatives.

Malaysia is well positioned for the coming economic challenge. Our financial sector is in a much healthier position today than 10 years ago. The capital adequacy ratio of banks at 8% is much higher than the minimum international requirement. Non-performing loans of all banks are at an average of 2.5%. Financial institutions have ample capital liquidity. Foreign reserves are high at $100.2 billion. The current account surplus is 15% of GDP.

Despite our confidence in the strength of Malaysia’s current fundamentals, however, we are determined to maintain our fiscal and economic policy flexibility and will continue to develop and implement less protectionist policies more appropriate to the developing global economy.

To boost local and foreign investor interest in the stock market, I announced liberalization of the 30% Bumiputera (indigenous Malaysian) shareholding requirements for companies seeking listing on the stock exchange. We also announced plans to liberalize policies to increase foreign investment in our manufacturing and construction sectors. Those sectors alone count for more than 30% of our domestic economy and will enhance domestic economic activity at several levels.

Malaysia faces many challenges — fortunately, we also have many strengths. Chief among these is our collective willingness to face our challenges head on, discuss them in an open manner and work together to develop solutions. As a nation of diverse communities we intend to emerge from our current challenges more unified, stronger and better prepared to face the challenges of the future.

Najib Razak
Deputy Prime Minister and Minister of Finance
Putrajaya, Malaysia

Source : The Wall Street Journal

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