Commentary - Time to cut the fat and waste

The economic downturn should be an opportunity to re-examine the New Economic Policy, government procurement, the pricing system and the system of subsidies.

Two by-elections for Malaysians right after the political drama in Perak. And let’s not forget the two other by-elections in Permatang Pauh and Kuala Terengganu.

I don’t think many Malaysians are looking forward to the prospect of the two by-elections. The rising political temperature is draining our energy from more pressing concerns such as the economic crisis.

The storm clouds are gathering fast and the Government, private sector and individual Malaysians should be in a state of readiness for what could be a very challenging time for the Malaysian economy.

So, how should we respond? By being bold and brave. Deputy Prime Minister Datuk Seri Najib Tun Razak has said that the Government is ready to unveil a mini-budget soon.

It’s termed a mini budget rather than a stimulus package because it is not just providing allocations that can generate growth but incentives would have to be included.

If the RM7bil stimulus package in Novem­ber was aimed at boosting domestic demands and perking up the construction sector, it is hoped that the mini-budget will focus on reducing the cost of doing business in Malay­sia and making some structural changes to the economy.

Making sacrifices

Malaysia’s Industrial Production Index is down and so are the country’s exports. This is a sure sign that the manufacturing sector is hurting and jobs are at risk.

To preempt any mass retrenchment, the Government should consider allowing employers to reduce their contribution to the EPF and suspend their payments to some funds, including the Human Resource Development Fund.

These savings will boost the reserves of companies and small and medium-sized enterprises, allowing them to keep retrenchment to a minimum.

We can already hear the unions baying for blood but the reality is very simple – jobs are going to be lost during this crunch time and everyone has got to be on the same page to ensure that unemployment numbers are kept down.

If this means suspending some of the employers’ contributions for a period of time, so be it. Workers should also be prepared to make some sacrifices. Some companies have already started asking their workers to work fewer days in the month. This is the result of a drop-off in demand for goods and services.

It’s simple. The United States and Europe no longer have the capacity to consume more goods; they just can’t afford it.

That means Malaysian factories are no longer required to produce more. Factories have no choice but to cut down production and reduce expenditure to save jobs.

It is possible that more companies in Malay­sia would have to shorten working hours and cut down on overtime. All in the name of keeping businesses going and keeping people on the payroll.

The priority of the Government has to be to save jobs. The goal of boosting domestic demands and keeping consumption at healthy levels will come to naught if Malaysians are out of work.

The mini-budget should also focus on spreading funds to projects which can be implemented speedily and easily. Building medium-cost houses and other major infrastructure has significant multiplier effect but all these take time to take off the ground. Land has to be acquired, approvals obtained and obstacles overcome.

In short, it will take some time before the funds from the Govern­ment get to the developer or contractor.

Treating the malady

As an alternative, the Government should focus on maintenance and repair of schools, maintenance of government flats and replacement of water pipes. Money can be disbursed faster and the spillover effects will also be felt faster.

The fact that school boards of management can now decide on their contractors is in the right direction.

That would result in fewer complaints of shoddy work, over-priced jobs and contract jobs that are dominated by one race.

But it is hoped that the mini-budget will not just be about pump-priming and short-term measures. Businessmen, foreign investors and analysts agree that Malaysia’s attractiveness as a place to invest and do business has been eroded by structural problems.

So the Government should view the economic downturn as an opportunity to re-examine all the assumptions and policies which have underpinned the Malaysian economy all these years. This includes the New Economic Policy, government procurement, the pricing system and the system of subsidies.

Nothing can be sacred in these unprecedented times. This is the time to cut the fat, eradicate waste and boost productivity without having to worry about offending the sacred cows, dead wood and Little Napoleons.