(Petaling Jaya, Thursday): The Economic Adviser to the Government and executive director of the National Economic Action Council (NEAC) said yesterday that a National Economic Recovery Plan (NERP) which will outline further measures and strategies to boost the economy is almost ready.
He said that the plan, which contains proposals prepared by the NEAC will be made public once the government gives its approval.
The NEAC has taken an inordinately long time to prepare a national economic recovery plan, especially as the Prime Minister, Datuk Seri Dr. Mahathir Mohamad had said in early January that there would be economic recovery in six to 12 months while the Transport Minister and MCA President, Datuk Seri Dr. Ling Liong Sik had expected economic recovery in three months.
How can there be economic recovery in six months (let alone three
months which was impossible as the April deadline is over) if the
National Economic Action Council whose formation was announced last November
requires more than six months to draft the national economic recovery
It is clear that the NEAC requires a greater sense of urgency, especially in view of the rapid deterioration of the economic prospects for the country and the region, to the extent that what were regarded as unthinkable a few weeks ago appear to become inevitable . One example is the forecast by foreign analysts that there would be a contraction in the Malaysian gross domestic product this year - which at first was regarded as wild, alarmist and irresponsible, but is now being echoed by local economists and analysts.
Three days ago, the United Kingdom research house Independent Strategy forecast that Malaysia’s gross domestic product would shrink by 1.4 per cent this year in contrast to the government’s forecast of 2 to 3 per cent growth.
Yesterday, a financial agency report quoted a local analyst as forecasting a 1.7 per cent contraction in Malaysia's gross domestic product growth this year.
Even Daim appears to be accepting this scenario of a contractionary economy when he warned of stagflation, a state of high inflation without the corresponding increase in demand and employment, if financial institutions continue to be over-cautious in giving out loans to the private sector.
The NEAC and the Government should realise that preparing a national economic recovery plan is very different from restoring investor confidence, both local and international, as the latter will also depend on perceptions about its likely implementation.
A good case in point is the proposal for the establishment of the Asset Management Corporation (AMC) announced by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, on 20th March.
The AMC is to be modelled after the Resolution Trust Corporation (RTC) of the United States to give the country’s banks a clean bill of health and restore investors’ confidence by buying over the non-performing loans (NPLs) and assets from banks at market price and revive and later sell them at higher prices.
It has been estimated that the total NPLs in the banking system is around RM37 billion currently and is expected to rise to above RM100 billion within the next two years, and that that AMC would eventually need approximately RM40 billion.
Many questions await answer, like the source of funding for the AMC - how much funding from the governent and where this money would come from - and the kind of NPLs to be bought by the AMC.
Although Anwar had repeatedly stressed that the AMC would not be a government bail-out agency and Daim said yesterday that the government’s move to help troubled companies will be transparent and take into account the nation’s interest, both of them have not been able to allay investor skepticism about the AMC not ending up as a government bail-out agency for troubled companies which special connections.
This was the reason for the very cautious and lukewarm response of Canadian fund managers who met Anwar Ibrahim in Toronto and who said that although Anwar had clarified the questions posed by them, they need more positive signs before making stronger commitments to the markets in the region.
Senior vice president for Templeton Management Ltd Norman Boersma for instance said that although AMC is a move in the right direction, "more details are needed".
The unasked question investors want answer is whether there would be a repetition of bail-outs like that of UEM-Renong, KUB, Konsortium Perkapalan Bhd or MAS - which the government has refused to admit as bail-outs although everyone inside and outside the country regard them as bailouts.
If the National Economic Recovery Plan is to be more successful than the various measures which the government had implemented so far to deal with the worst economic crisis faced by the country, whether the October 1998 Budget, the second 1998 Budget in December or the third 1998 Budget in March this year, it should be endorsed by all Malaysians.
For this reason, DAP calls for the immediate publication of the proposed National Economic Recovery Plan drafted by the NEAC and for the convening of an emergency meeting of Parliament to debate and approve it.