By Lokman Mansor

KUALA LUMPUR, MALAYSIA: The government yesterday unveiled a RM60 billion stimulus package that combined additional funding, guarantee schemes and tax incentives to spur growth and prevent the economy from slipping into a deep recession.

Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak said the large stimulus package was "unprecedented in the nation's economic history" and necessary given the worsening global economy.

The country's gross domestic product forecast for this year has also been revised downwards to between -1 per cent and 1 per cent, from 3.5 per cent earlier.

"Without these efforts, the economy faces the prospect of a deep recession," he said when presenting the second stimulus package or mini-Budget in Parliament. The first stimulus package of RM7 billion was unveiled last November.

The four thrusts of the mini-Budget are to reduce unemployment and increase employment opportunities; ease the burden on the rakyat; help the private sector; and build capacity.

The bulk of the package, some RM29 billion, would go towards helping the private sector by providing guarantee schemes that will make it easier for companies to obtain bank loans or issue bonds to finance their businesses. This would keep them in operation and indirectly ensure the welfare of their employees.

To reduce the cost of doing business, the government has also exempted levy payments to the Human Resources Development Fund for six months for employers in the textile and electrical and electronics industries with effect from Feb 1.

In addition, the levy payment rate for all employers will be cut from one per cent to 0.5 per cent for two years effective April 1.

"With this reduction, employers will save RM390 million in business costs," Najib said.

The automotive sector also got a shot in the arm, with a rebate of RM5,000 given to owners who trade in their cars of at least 10 years old for the purchase of a new Proton or Perodua vehicle.

Another RM10 billion will be directed to ease the burden on the rakyat. This would go towards subsidies to avert price increases of necessities and toll rates, increasing home ownership, and improving infrastructure.

"An allocation of RM1.95 billion is provided to build and improve facilities in 752 schools, particularly in rural areas as well as Sabah and Sarawak. RM300 million from this allocation will be used to improve facilities in government-aided religious schools, national-type Chinese and Tamil schools as well as mission schools."

Close to RM1 billion has been allocated to repair and construct roads; renovate and repair fire and rescue stations and quarters, mosques and tourist spots; and to increase coverage of electricity and water supply in rural areas.

"This will increase economic activities through the participation of small contractors and local workers in rural areas."

He said Malaysia also needed to prepare its industries and people to benefit from opportunities when the global economy recovers.

To build capacity for the future, Khazanah Nasional Bhd will receive an additional RM10 billion to invest in strategic sectors, including telecommunications, technology, tourism, agriculture, life sciences and projects related to Iskandar Malaysia.

Investment projects worth RM5 billion to be implemented on an off-Budget basis will include the new low-cost carrier terminal at the Kuala Lumpur International Airport, expansion of Penang Airport, and improving telecommunication infrastructure.

To address unemployment, the private sector has been tapped to create 63,000 training and job placement opportunities.

These cover electrical and electronics to robotics, construction, outsourcing, aviation, health and multimedia.

The government will recruit 63,000 employees to fill vacancies and serve as contract officers in various government agencies.

Double tax deduction has also been proposed for employers who hire workers retrenched from July 1 last year.

Recruitment of foreign workers will be curbed through higher levies and freezing the issuance of licences to foreign labour recruitment agencies.

The RM60 billion accounts for nearly nine per cent of the GDP. The higher expenditure will increase the government's budget deficit from 4.8 per cent to 7.6 per cent this year.

"The government is confident that the nation's fiscal policy continues to have the flexibility and capacity to accommodate the higher deficit, as the increase is temporary," Najib said, adding that the deficit would be financed from domestic sources.

The strategies and measures would also prevent the economy from slipping into deep recession.

"We cannot depend on orthodox economic 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."