I am particularly disappointed with equity injection and introduction of more subsidies. In times when we have made strides in reforming the structure of the economy, here we are, undoing the hard fought success. The mention of equity injection reminds me: whatever happened to the RM5 billion given to ValueCap?
The taxes part is too small. The absence of mention of sales taxes is a downer. The way taxes are cut as proposed in the stimulus does not do enough to cut the cost of business. It only addresses the net profit line. Granted, I like that intertemporal tax credit but it is just came out far short than how I would do it. The idea about tax cuts should be about reducing the cost of business.
I was really encouraged upon learning that tax cuts would be included in the stimulus prior to the announcement but perhaps, I should have curbed my enthusiasm and waited for the details. The devil is the in the details and I hate the details.
I am about bordering skepticism and agnosticism about the expansion of size of civil services and GLC in terms of manpower. Granted, this is the best time to get quality people because the private sector is unable to keep talent but I fear that they will take just about everybody where there is little need for more manpower. This is especially true for GLC when their performance is tied to the market.
Bonds:
Convertible and exchangeable bonds will be exempted from mandatory rating requirements. [Full text of Datuk Seri Najib Abdul Razak’s mini-Budget speech. Via The Malaysian Insider. March 10 2009]
That is just looking for trouble. How would one price that bonds? I think, like it or not, people will rate it regardless especially in times of uncertainty. So, I am not entirely banal about this because the market will rate it.
The doubling of levy is another area that increases cost.
Levy on foreign workers will be doubled for all sectors except construction, plantation and for domestic maids. The levy will be paid by the employers and not by the workers;
I do not mind the stopping of issuance of permits to import workers because it seems that we have excess workers at the moment. But doubling the cost is not the way to help business.
The way the levy will be implemented will be of interest. It says the levy will be paid by the employers. I could think of several ways to circumvent that requirement, like paying the workers on staggered basis. You know, like have a longer probation period for the workers just to recoup the levy. I do not know the details but clearly, those who proposed this particular measure need to be mindful of elasticity and the associated incidences of tax. It is these two factors that determine who actually pay the levy, not some fiat. If they did not consider those two factors and the factors actually work against the policy, this particular policy would be looking at stark failure.
Another measure that increases cost:
Procurement of imported items will only be allowed if they cannot be sourced locally or the cost of local products are too high. The Government also encourages the private sector to give priority to local products in their procurement.
Prices and quality should be the only considerations. So, can you say protectionism?
Special mention:
Agricultural projects to be implemented include a 1,000-hectare prawn aquaculture project in Setiu, Terengganu as well as a 200-hectare modern vegetable-farming project in Cameron Highlands.
Look for Malaysian Agrifood Corporation Berhad for that. I think I will reserve further comment on that.
I do have skepticism about that though. I think I will reserve further comment on that and be professional about it.
Finally,
80. We cannot depend on orthodox economic recovery policies. We must be bold in formulating innovative approaches to deal with the crisis. This is a very challenging time for all of us. We must be ready and strong to face the challenges ahead. We must draw upon our past experience to overcome the crisis.
Just who is adopting orthodox economic recovery policies here?
It is freaking Keynesian!
