Economic contraction: S'pore's solution, Malaysia's dissolution

Singapore govt taking the Ox by its horns, Malaysia's govt taking the Ox by its nose

The world is in the grip of a recession, with a stream of worsening news from the United States, Asia and Europe. The exceptions are only (probably) Malaysia, if the statement of opinions and confidence exuded by the Second Finance Minister and the Prime Minister are correct, and Zimbabwe, as the govt of Zimbab is printing notes in trillion denomination, and where necessary, in 100 trillion or zillion.

With all our major markets in decline, exports are falling sharply and domestic disposable incomes are shrinking fast.

The result: Singapore has had to revise its growth estimate for 2009 down to between minus 5 per cent and minus 2 per cent; and Malaysia has also revised its growth estimate from +5.5% to +1-2% (very positive projections).

To tackle the crisis, the Singapore Government had put together the $20.5 billion Resilience Package in this year's Budget. Its two special growth boosters are the $4.5 billion Jobs Credit Scheme to help subsidise companies' wage costs and the $5.8 billion Special Risk-Sharing Initiative to help ensure their access to financing. They will be funded by the reserves.

To tackle the crisis, the Malaysian Government has also put together two stimulus packages: The first stimulus package of RM7bil was announced in November 2008, and is still being rolled out in stages in the first quarter of this year; and a second stimulus package is in the pipeline, awaiting public suggestions

Our Malaysian Finance Minister and also Deputy Prime Minister, Dato' Seri Najib Tun Razak invite all Malaysians to participate in providing constructive and healthy, yet concise inputs as their personal contribution to move our nation forward. You can submit your comments on his blog: www.1malaysia.com.my or email him at najib@1malaysia.com.my.

In Singapore, PM Lee Hsien Loong said that the economic packages will help businesses to stay afloat so that they can continue to provide jobs for Singaporeans. (I am not sure whether this means those foreign labours in Singapore will be excluded; and unfortunately, Malaysia is the largest groupings of foreign labours in Singapore).

In Singapore, additional support is also given to households, with more for low- and middle-income families, he added. 'Hopefully, with some government help, Singaporeans can continue to provide for themselves and their families.”

Mr HL Lee said that while these measures will mitigate the downturn, they “will not instantly lift the economy from recession”.

“No government package can do that,” Lee said, noting that the recession is a global one. “We must expect to see exports contract, unemployment rise, and growth remain negative for more months, and perhaps for the whole year.”

So looking ahead, Singaporeans must “brace” themselves for a “challenging Year of the Ox”.

“But there is no need to be despondent,” he said. “Singapore has strengths which will let us outlast this recession. We have the resources, the programmes, and the tenacity to ride the storm.”

Said Mr Lee: “This is a major decision, which the Government has thought over very carefully.”

Singapore's reserves, he said, are a key asset for the country. “We have built them up patiently over the years so that in a critical situation, we have the wherewithal to mount a vigorous response. The present crisis is clearly such a moment.”

And when it is over, Singapore must go back to nurturing its reserves, he stressed.

"That Singapore can tap on them now – unlike most other countries – is due to its prudent habit of saving and investing its surpluses over many decades," he said.

“We must therefore maintain these critical instincts. When things return to normal, we must resume our habit of putting something aside in the reserves whenever we can. Then when we next face a serious crisis, which is bound to happen one day, we can again meet it with confidence.”

What about us, Malaysians and our resources? We have huge foreign reserves and also a huge current account deficit and off-balance sheet. We did not accured the necessary contingent surpluses over the decades, but an imprudent spending habits and an irrationally-exuberant habit of investing at the "right time" (through borrowings) and buying over companies dumped by Temasek and SIG who viewed seriously the current economic contraction by disposing some of their market-sensitive assets, while our GLCs treat the offers as opportunities to buy high and to be sold at its lows.

We are still maintaining these critical instincts. Even when the economic climate returns to normal, our habits will continue, to cast aside the need for strong national reserves and to borrow extensively to fund our spending habits by way of giving out lucrative contracts and conspicuous projects thoughtlessly creative and innovative.

Malaysia's reserves (or borrowings) are the key mobility, being dragged successfully by crony capitalism and wishful indulgence. We have built these habits up impatiently over the decades ,since the years of Mahathirism, such that in critical situations we have nowherewithal to mount and support any vigorous affirmative response; however, we can assign good causes - Act of God, Global impact, American's Sub-prime Mortgage problems and Banking Crisis - reasons beyond our fault or control (because we do not have such control nor systems capable to control).

Nonetheless, and nevertheless, we are still okay; semua okay; and I am okay too; so are some of you. Our economic problem can be attribute to Pakatan's Selangor MB Khalid Ibrahim's huge expenditure and donations to slaughter some cows during Hari Raya and getting PKNS to pay for it. It was such a big problem to Khir Toyo and Umno and Ezam's Gerak.

We are a blessed country and the people are blessed. We are okay, even when the signs and realities are contrary. So let's rejoice as it is festive season again. Gong Xi Fa Cai and a Happy New Year.

*************************************************************************************
Adapted from the original story "Singapore govt taking the Ox by its horns, The Malaysian Insider

*************************************************************************************