Mixed reactions to Malaysia's ICT stimulus

Government's US$16.2 billion "mini-budget" won't be sufficient to shield vendors from effects of recession, says country's national IT association Pikom.
Written by Lee Min Keong, Contributor

KUALA LUMPUR--Malaysia's new 60 billion ringgit (US$16.2 billion) stimulus package may promise good tidings for the local IT sector, but the country's national ICT association Pikom says it lacks a big-bang impact needed to shield the industry from the recession.

Pikom Chairman David Wong Nan Fay described the government's second stimulus plan, dubbed "the mini-budget", as a step in the right direction. He said Pikom's call to make broadband more efficient and easily accessible has been answered via a 3 billion ringgit (US$813 million) cut from the mini-budget, allocated to state-fund Khazanah Nasional to establish a subsidiary to facilitate and improve broadband infrastructure.

Additionally, 2.4 billion ringgit (US$651 million) has also been provided to the MCMC (Malaysian Communications and Multimedia Commission) to facilitate broadband community centers and provide basic telephony services in rural areas.

"This will certainly help in achieving the [target to reach] 50 percent Internet penetration rate by end-2010, and acculturate the citizens to adopt e-commerce and drive demand for the content industry--both key elements of a knowledge-based economy," Wong said in a statement.

He also lauded the government's initiative to encourage companies to employ retrenched workers by giving them double tax incentives.

"We see this benefiting SSO (shared services and outsourcing) companies as they gear themselves to recruit 300,000 workers by 2012," Wong added. This, he added, was in line with Pikom's agenda to reduce unemployment and increase employment opportunities, especially in the ICT industry.

The association also viewed positively the move to ensure open tenders for the majority of government projects. The practice of direct negotiations, instead of an open-tender system for government procurement, has been a source of much public discontent and complaints against the government.

Wong said: "This will encourage competitive bids and strengthen the value-for-money concept in government procurement and tenders.

"We strongly support the government's call to use ePerolehan to enhance in transparency in the management of government contracts. This is certainly seen as a step forward in leveraging technology for better results, efficiency and productivity," he added. The ePerolehan system is the electronic procurement system widely used by Malaysian ministries and government agencies for government procurement activities and processes.

Wong warned the toughest impact of the economic downturn may manifest itself between third and fourth quarters of 2009. "And depending on how much worse things can get, the government may need to come up with further pump-priming measures," he said.

No boost to consumer spending
While Pikom viewed the latest stimulus plan as more comprehensive than an earlier stimulus package, it said the mini-budget seemed to lack a "big-bang impact", said Wong. "It does not address the short-term needs immediately, especially with regard to putting more money into the people's pockets to immediately boost consumer spending," he said. "The need to focus on domestic demand is important and urgent in order to stimulate growth."

The Malaysian government announced its first stimulus package worth 7 billion ringgit (US$1.9 billion) last November, but this was criticized as inadequate to cushion an economy tipping into recession.

In a belated response, the second stimulus package announced by Finance Minister Najib Razak in parliament Tuesday was aimed at softening the impact of the global recession by stimulating demand in Malaysia's export-driven economy.

The local economy may contract up to 1 percent this year, down from an earlier 3.5 percent growth estimate, said Najib, who is also the country's deputy prime minister. The 60 billion ringgit package would be spent over the next two years, and accounts for 9 percent of GDP (gross domestic product).

Since announcing the government's latest stimulus plan, Najib has had to fend off criticism of its efficacy from both opposition lawmakers as well as from his own ruling coalition, Barisan Nasional (BN).

"The mini-budget should have emphasized improving productivity and acquiring technological capability to remain competitive, rather than being a fiscal expansionary policy," said Koh Tsu Koon, president of Gerakan, a BN component party. "Over the long term, if our productivity is not improved, the expansionary policy may have implications on inflationary pressure," the former Penang chief minister said in a statement.

Meanwhile, Minister of Science, Technology and Innovation Maximus Ongkili said total IT spending would be affected by the current economic slowdown. ICT companies were now anticipating slower, if not falling demand, for their products and services, Ongkili said at a forum here Thursday.

"We are concerned about the impact of the financial crisis on our ICT industry. That is why I have asked my ministry to form a special task force to monitor the impact of the financial crisis," he said.

Lee Min Keong is a freelance IT writer based in Malaysia.

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