Govt confident of positive economic growth by 4Q

Source: The Star Online (YAP LENG KUEN)

PUTRAJAYA: Project implementation under the stimulus packages is on track and the Government is confident that by the fourth quarter, the economy may see some positive growth and some recovery by early next year.

“The impact of the first stimulus package can already be seen. In the first quarter of 2009, the construction sector was the only sector that registered a small positive growth while the rest of the sectors contracted,’’ Finance Ministry secretary-general Tan Sri Dr Wan Abdul Aziz Wan Abdullah told StarBiz.

The Government has allocated RM67bil to fund two stimulus packages that are aimed at stimulating the economy and building long-term capacity.

The first package amounted to RM7bil while the second totalled RM60bil.

The significantly larger second stimulus package accounts for 9% of gross domestic product (GDP). With the additional expenditure, the fiscal deficit is expected to increase to 7.6% this year compared with 4.8% in 2008 and 3.2% in 2007.

The Government had budget surpluses for five years (1993-1997) before the Asian financial crisis in 1997/98, when the economy was expanding rapidly with the private sector driving growth.

“We are committed to fiscal consolidation when the economy recovers and is on a firmer footing,’’ Aziz said. “We are taking measures to strengthen Government finances, reduce debt and broaden our revenue base so as to reduce dependence on resource-based commodities.”

Among some of the measures being considered are:

● improvement in efficiency and quality of spending through competitive bidding to obtain value-for-money;

● cutting back on discretionary expenditure;

● restructuring subsidies to ensure that they remain well targeted;

● further improvement in tax collection through productivity gains in tax administration; and

● new ways to monetise Government assets which include land, buildings and facilities.

On the implementation of the stimulus packages, Aziz said improvements were already seen through various measures and mechanisms put in place to expedite and track the progress of the projects.

“Several rules and regulations have been relaxed, largely relating to the award of contracts and procurement of services,’’ he said. Among these are:

● the limit for procurement of goods and services through quotation is now increased from RM200,000 to RM500,000;

● class F contractors awarded projects under the stimulus package are now eligible to apply for payment to commence work amounting up to 10% of the contract value or a maximum of RM20,000, whichever is lower;

● the authority to appoint consultants and approve consultancy fees has been delegated to procurement boards and quotation committees at the respective ministries and agencies. This is related to development projects, studies pertaining to physical and non-physical projects as well as environment and land surveys works; and

● the tender advertisement period has been shortened to 14 from 21 days previously.

A Project Management Unit (PMU) was set up at the finance ministry to manage the day-to-day operational issues of project implementation, while a technical committee chaired by Aziz himself meets weekly to ensure the smooth implementation of the stimulus packages.

The PMU reports fortnightly to the Economic Council which is chaired by the Prime Minister to track the progress of the implementation of programmes and projects. “The impact of both stimulus packages is expected to be felt in the third and fourth quarters of the year,” Aziz added.

“Data from the PMU indicate that the current pace of project implementation is on track and according to our expectations. The second package only commenced on March 10 and only RM1.6bil has been spent. Once we have gone through the project preparation stage, the award of contracts can begin.

“It takes three to four months to complete this stage. Once we have cleared the preliminary stages and projects are on the ground, we are confident that by the fourth quarter, we may see more positive growth and some recovery by early next year,’’ Aziz said.

Under the second package, the fiscal injection of RM15bil is divided into operating and development expenditure of RM5bil each for this year and a further RM5bil for development expenditure next year.

On the current economic situation, Aziz said: “Notwithstanding the continued decline in world trade, we have seen in recent months some signs of improvement especially in the slower pace of decline in global industrial output and firmer commodity prices.’’

Despite some of these encouraging signs, global trade is expected to remain fragile and being a globally integrated economy, Malaysia’s exports will remain sluggish.

Amid the increased uncertainties in the external environment, the domestic economy is likely to improve in the last quarter and register a mild recovery next year, supported by the two stimulus packages and monetary easing.