By Mohd Iswandi Kasan Anuar
KUALA LUMPUR, June 10 -- The RM35 billion National Economic Recovery Plan (Penjana) announced by the government last week broadly meets expectations, says independent and non-profit think tank Socio-Economic Research Centre (SERC).
Executive director Lee Heng Guie said the plan incorporates features of the Prihatin Economic Stimulus Package to empower people, propel business and stimulate the economy.
"All in, the total fiscal stimulus package amounts to RM295 billion or 21.1 per cent of Gross Domestic Product (GDP), of which direct fiscal injection is RM45 billion or 3.2 per cent of GDP.
"The initiatives and measures are fairly broad-based and well-targeted to help stabilise domestic economic and business conditions as well as enable the economy to recover sustainably as it emerges from the pandemic," he told Bernama.
Lee expected domestic consumption and business capital spending to mend gradually, accompanied by a restoration of consumer confidence and business sentiment.
He pointed out that a significant 'V-shaped' rebound in the domestic stock market from the lows could well serve as a barometer that investors are feeling somewhat sanguine about the prospects of domestic economic recovery.
The benchmark FTSE Bursa Malaysia KLCI is traded near the 1,575 level today.
"However, the jury is still out. The litmus test is the expiry of the six-month loans repayment moratorium in September," he said.
While the external environment still matters, Lee believes that restoring domestic consumer and investor confidence will be the key to uplifting the domestic economic recovery, stressing that the efforts must be anchored on keeping clear and consistent communication flows of the government's economic stabilisation and stimulation policies, backed by macro-economic and political stability.
On stimulating the economy, he said sector-specific support is given to tourism, manufacturing, agriculture and food, the palm oil industry, auto and property.
"We expect the medium-term recovery plan and the National Budget 2021 will focus on investing in 'new smart infrastructure' used for high-tech, digitalisation and sustainable purposes such as renewable energy, climate change and eco-green.
“These include big data centres, 5G infrastructure, and charging stations for new energy vehicles (NEVs), solar energy, healthcare and defence technology," he explained.
Lee also gave the thumps up to the provision of zero tax rate for a period of 10-15 years to lure reshoring of new investment in the manufacturing sector as well as the provision of 100 per cent Investment Tax Allowance and Special Reinvestment Allowance.
The establishment of the Project Acceleration and Coordination Unit at the Malaysian Investment Development Authority, the enhancement of the Domestic Investment Strategic Fund and fast-tracking manufacturing licence approvals for non-sensitive industries within two working days are a welcome investment facilitation, he noted.
"These investment initiatives are expected to help revitalise subdued private investment growth," he said, adding that private investment has declined by an annual rate of 2.3 per cent in the first quarter of 2020 due to the COVID-19-induced economic downturn amid weak business sentiment.
On the introduction of the COVID-19 Temporary Measures Act, Lee said the Act is deemed critical to provide temporary relief for businesses and individuals who are unable to perform their contractual obligations due to the movement control order triggered by the deadly virus.
"It is hoped that the proposed Act will be tabled for reading in the forthcoming Parliament session from July 13 to Aug 27.
“A delay in the Act will disrupt the businesses’ efforts in rehabilitating the recovery as their time and resources will be distracted and preoccupied by the potential legal disputes and heavy liabilities or penalties for non-performance of their contractual obligations," he added.
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