Tuesday, January 27, 2009

The Next Malaysian Stimulus Package

The Next Malaysian Stimulus Package


Recently the government is announcing a second stimulus package to stimulate the economy. From what i have read in the newspaper, the size of the stimulus package could be ranging from RM 7 - 10 billion. Basically, the government is operating in a budget deficit. We are planning to rescue the economy using funds we do not have yet. In my opinion, the government will fail on what they are planning to do.

The Current Situation

The current situation that we are in is that, the people who has been buying our products all these years such as the US, Singapore, Europe, Middle East, Japan etc. doesn't have the funds to pay us. They don't have the money because all of them are in an economic crisis. The economic crisis occurs because the US has been going on a shopping spree all these years with money they do not have. They have been spending money they do not have. Therefore, their pile of debt is soaring sky high nearing USD 10 Trillion. They have been spending money from the housing bubble which does not exist. Now, the bubble has burst and everything is going down.

What does it has to do with us ?

The US, UK, Europe, Middle East, Japan, China etc. has been our biggest business partners. These are all our buyers of our major exports such as crude oil, natural gas, rubber, crude palm oil, textiles, electronics etc. If they are in recession, they will consume less resulting to lesser exports. Lesser exports results in lower income.

Besides lesser consumption, they will have less to spend on traveling. Thus it will implicate our tourism industries.

The fall of commodity prices

The price of commodity items are also falling such as crude palm oil, crude oil, rubber, copper etc. is falling very sharply. The price of crude oil is crashing from their historical all time high of USD 147 to USD 45 today, Crude oil has lose 2/3 from its peak value, and the same thing is happening to crude palm oil. Falling commodity prices means our goods are cheaper on the outside relative to our currency. Therefore, less income for us Malaysian.

The decline of the US Dollar

The value of US Dollar has been declining all these years. Some people might not agree with this statement due to the rally that the US Dollar is having at the moment. The rally in US Dollar is just temporary and the greenback will for sure in a free fall state after the factors leading to the temporary rally ends.

The decline of the US Dollar will make the Americans poorer than they are now. They will have problem affording our products and services. Thus leading to lesser consumption.


I would like to conclude that the current economic crisis is not originating here. It's a domino effect originating from the US. The US debt ridden economy has burst and we are also suffering the aftereffects. Currently, the US Government is trying to resuscitate their economy by injecting more cash into the market. It is that because they still believe that by throwing money at people is going to solve their problems. However, as I have mentioned earlier. The US economy has been thriving on debt. How the hell that giving more loans will solve their problem ? Hell no. The act of the US Government is like trying to put out a fire by splashing more kerosene.

The act of Malaysian government to stimulate the economy by helping companies which is badly hit due to the recession in the US, Europe and etc. is like trying to resuscitate the dead.

What we need to do

1. We need to stop depending on the US and European economy. We need to find new market. However this needs time. Economic coorporation between Islamic countries is a good move to stimulate the economy.

2. We Malaysian need to use more local products. We need to consume less and save more. We need to import less in terms of electronic products, cloths, petrol, rice, wheat etc. We need to consume less to balance it with our imports. We are already on a fiscal budget deficit. If we do not control our imports, we will suffer from trade deficit also.

3. We must start producing goods that we import such as dairy products, rice, vegetables. The government must encourage farmers to start growing consumable crops and not just cash crops such as rubber and palm oil. The cost of importing consumable crops such as rice will rise too. If we are unable to produce our own food to consume, our import bill will rise pretty soon.

4. We need to let the economic slowdown take its turn. We are suffering this setback due to the unsustainable growth in the current global market. We must see this downturn as a correction phase in the economy. We need to help those affected with the downturn. However, injecting money to these company will not help them much. The money will only help them to pay their workers salary. Without business, they will not be able to sustain. The will have to come back for more funds later on. It is better for us to let them bust and put the funds into better use which have more economic values.

5. We need the government to be transparent on how the stimulus package is being used and where it is channeled.


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