RM7bn stimulus plan – effective only if execution is transparent

I am among those who still don’t understand Budget 2009 as presented by the BN government; and I certainly believe its forecasts and base assumptions are way too optimistic. However, the BN is the federal government with a comfortable majority in parliament, so the Budget will be passed. And I may, happily, be proven wrong and the world and Malaysian economy will rebound sharply next year.

So let’s focus on the Budget, and specifically, the RM7bn stimulus plan announced last week by Finance Minister Datuk Seri Najib Razak. A leading investment research house put it succinctly: “.. based on past experience … economic packages introduced by the government have not been effective in preventing the economy from rapidly slowing.”

Let’s look at the plan again, starting with the bits I like.

1) RM1.6bn is allocated to various small scale projects – village roads and community halls, repairing schools …. Excellent. This is the type of spending I advocate – locally oriented with maximum immediate impact to the community and local economy.

2) RM1.0bn goes to education and skills training programmes. Another excellent move. Now is a good time to retrain and improve local employee productivity.

3) RM1.0bn towards bolstering public transport and better facilities for our men-in-uniform. Again, wonderful

So that’s RM3.6bn (about half the package) going to projects that should directly help Malaysians. I say should because I fear for the implementation. Take public transport for example. There have been huge allocations already in the past few years, but the system is still atrocious. Some might say it’s gotten worse, what with LRT accidents!

Taking another case, who decides which private institutions get to run the training programmes? Forgive me for being cynical, but I see many “consultants” and “advisers” already counting their fees. To maximise the impact of these programmes, I call on the BN government to make public the specific project awards and the contractors. Better yet, put the projects out on open tender. Make it easy for anyone to apply. Let’s cut out the middle-men and the “consultants” and “advisors”.

Moving on the bits I am ambivalent about, RM1.5bn is going to building low and medium-cost houses, reviving abandoned projects and increasing the number of business premises in small towns. I fully support decent, affordable housing for all. But there is also a huge overhang of unsold properties. Instead of building more and adding to the supply, how about finding a way to utilise the existing stocks? And what is this about increasing the number of business premises? Commercial property development is best led by the private sector, not government.

Finally, RM1.9bn (a quarter of the RM7.0bn) is earmarked for an investment fund to attract strategic industries and high speed broadband. Government should get out of the business of funding businesses. It’s investment record isn’t particularly good, and entrepreneurs with good ideas should be able to find capital on their own. Government’s role should be to facilitate setting-up businesses – streamline the bureaucracy and cut out the red tape. As for broadband, I would love to have broadband, but I think the cost is over-stated and Telekom, with its atrocious service record, should not be leading this.

So there you have it, only half the package has direct impact on Malaysians, if properly executed; and I would appreciate a report next year on the performance of the investment fund.