First quarter stimulus crucial to economy

TOMORROW is the dawn of 2009 and unlike recent years, it is filled with trepidation and uncertainty. There is no escape from the rampant destruction caused by the bursting of the financial and consumer bubble in the US.

Of grave concern will be the first three months of next year as people look out for more Government measures to stimulate the economy in Malaysia. The effects of a RM7bil stimulus package have yet to be felt while reports say the money should be released to the various agencies from next month onwards.

Allocations are being made to stimulate private investments and the construction of schools and hospitals as well as the upgrading of police stations. However, people are now questioning if a bigger package is required in view of the latest developments, especially in the export and jobs sectors.

At this time Malaysians may even be confused about whether to spend or save.

For many years, our economy had been driven by domestic consumption and investments. With so much fear over job security, it is going to be a challenge for the Government to get people to spend and invest. At this stage, they may even be confused about whether to spend or to save.

The positive effect from lower contributions to the Employees Provident Fund is expected to kick in soon. To what extent that will help remains to be seen as many have opted to retain their original contribution.

There is spending on mega sales but is the momentum strong enough to bring up the economy? What about spending on big ticket items?

With inflation numbers and oil prices coming off, there should be more spending power. Reports indicate that the Government is looking seriously into the issue while getting traders to lower their prices.

On the investment front, there are occasional reports of small amounts being invested. Companies are reluctant to commit to large figures.

Even if they quote considerable sums of money, these are usually spread over a number of years.

That leaves us with the all important role of the Government in reviving the economy. China, which just announced a whopping US$586bil stimulus package last month, may come up with a second package as early as next month to further spur consumption. Taiwan, where the electronics sector is severely hit, has taken drastic measures to help its economy, such as giving out shopping vouchers to its people.

All over the world, people are talking of coordinated actions. If we are too slow to respond, it could appear that we are falling behind while others are streaking ahead.

We cannot just sit back and take comfort in the fact that we are less hit this round compared with the 1997 Asian financial crisis, therefore, we do not have to take such drastic action to recover.

Some feel that the direction may be clear but the plan is not moving fast enough on ground level. There are views that the delivery system has yet to catch up with the momentum since major reforms were introduced.

The feeling lingers despite efforts by the leaders to dispel that notion. Observers also point to the need for federal and state governments to work more cohesively and quickly.

People with cash are unlikely to release it until they are confident of the road ahead. Governments cannot totally shield their people from the current crisis that has the world in shock. At the very least, they can cushion the impact and work towards a soft landing.

·Senior business editor Yap Leng Kuen would like to see happier times for Malaysian consumers with a better pricing scenario and greater job security.