CORRECTING HEADLINE BRACING FOR THE FINANCIAL TSUNAMI

A commentary by Wong Chun Wai, which appeared in the Star, Malaysia's
leading English daily. Wong is Group Chief Editor of the Star.

It's the hardest time now for heads of governments everywhere as they
grapple with the financial storm.

From bankrupt businessmen to retrenched workers to opportunistic
politicians, the Prime Minister's job can only get harder.

For Najib Razak, who is taking over the helm soon, it is no different.

When Finance Ministry and other government officials sat down in late
January to put together the mini-Budget, they were guided by one principle -
look at policy responses which would address the nature of the crisis
effectively.

They knew that giving cash handouts or dishing money around would grab the
headlines and help score political points but ultimately would not tackle the
three main underlying issues facing the slowing Malaysian economy -
retrenchments, flow of credit to businesses and stimulating investments.

No one in the world has a clear picture when the global economy will recover
and how long the malaise in demand will last. The Government has accepted that
it needs to have fiscal flexibility to deal with what could be a long drawn-out
slowdown.

Taking these into considerations and the fact that the country's Budget
deficit still has to be managed responsibly, the Government put together the
RM60 billion (US$16.2 billion) mini-Budget.

By and large, the response to the package which was announced in Parliament
by Najib Tuesday, has been positive.

Economists say the mini-Budget will help mitigate the impact of the global
recession on the Malaysian economy.

They also note that the size of the mini-Budget seemed big enough to avert a
much deeper and more prolonged recession, as well as to prevent massive job
losses.

Large chunks of the money are going towards maximising job retention and
benefiting the low-income group, and also helping businesses access funds
through government guarantees.

Schools, for example now get to hire their own contractors to do renovation
works instead of having to depend on the Public Works Department, as in the
past, which had resulted in sloppy work and malpractices.

At a briefing on the mini-Budget Monday, Najib joked that the Chinese
schools had been the most efficient in the use of these funds, adding that all
schools, from Indian to missionary schools, would benefit.

As expected, the Opposition and some critics have attempted to puncture the
euphoria and have labelled the mini-Budget as inadequate, saying that the RM60
billion package was not as large as it appeared, as the fiscal injection from it
amounted to only RM15bil (US$4.1bil)

In Malaysia's case, the response was dictated by the nature of the crisis
faced by the country, in particular the lower export growth, tighter credit flow
by banks and the need to stimulate private investments to stimulate growth. In
this instance, the move is to get the private sector to generate growth.

To ensure that the number of jobless Malaysians is kept to minimum, RM15
billion will be used on training and job creation. And while some countries have
opted to give their citizens cash payments, there is no need for Malaysia to do
so as this is already being done through subsidies.

In addition, several of the programmes in the mini-Budget involve cash
transfers either directly or indirectly. For example, training programmes will
involve the payment of allowance to trainees,

A key focus of the mini-Budget is to ensure that businesses, small and big,
have access to credit. That is why the credit guarantee scheme could be pivotal
to the overall health of the economy and ability of Malaysia to bounce back
quickly.

Among the plans would be the setting up of a Working Capital Guarantee
Scheme totaling RM5 billion (US$1.35 billion) to provide working capital to
companies with shareholder equity below RM20 million (US$5.4 million).

Also on the plate is an Industry Restructuring Guarantee Fund Scheme
totalling RM5 billon for loans to increase productivity and value-added
activities, as well as the application of green technology.

When all is said and done, the mini-Budget is a laser-guided strategy by the
Government to tackle impediments and problems in the Malaysian economy.

The Government could have thrown more money around but it would have been
irresponsible. While there is less focus among governments around the world on
keeping a tight leash on budget deficit during these difficult times, Malaysia
cannot afford to adopt a cavalier approach to how we manage our finances.

Given the uncertainty over the extent and duration of the global crisis, it
would be dangerous for any government to use all the bullets in the chamber at
once.

Najib was asked by editors whether there would be a need for a third
stimulus package. The truth is no one can answer the question as we brace for
the financial tsunami.

(Najib Razak, 55, has been Malaysia's Deputy Prime Minister since Jan 7,
2004. He is currently Deputy President of the United Malays National
Organisation (UMNO), Malaysia's largest political party and a founding member of
the Barisan Nasional (National Front) coalition, which has been the country's
ruling political party since Malaysia gained independence in 1957.

Najib is slated to succeed Abdullah Ahmad Badawi to be Malaysia's next Prime
Minister once the latter steps down during the UMNO General Assembly scheduled
this month).
-- BERNAMA