Malaysia sets aside $1.9b to counter SARS outbreak
Malaysia sets aside $1.9b to counter SARS outbreak
M.Jegathesan, Agence France-Presse, Malaysia
Prime Minister Mahathir Mohamad on Wednesday unveiled a 7.3
billion ringgit (US$1.92 billion) stimulus package to mitigate
the impact of SARS and revive a sluggish economy.
Mahathir said the package, comprising 90 measures, was
"necessary to stimulate the economy and to lift confidence",
boost foreign investment, raise competitiveness and mobilize new
sources of growth.
Among the wide-ranging measures were a one billion ringgit
relief fund and tax breaks for the tourism sector, liberalization
of foreign investment rules and various loan programs to help
troubled traders.
In a live television broadcast, Mahathir also announced a
widely expected 50 basis points cut in the central bank's key
interest rate, the intervention rate, to 4.5 percent.
The rate cut, the first in two years, immediately led to lower
lending rates for businesses, the central bank said separately.
To boost consumer spending, he said employee contributions to
the state pension fund would be cut by two percentage points to
nine percent for a year from June and civil servants would get a
half-month bonus.
For the next six months, hotels' monthly electricity bills
will be cut by five percent and road tax for taxis slashed by
half.
There will be a suspension of tax installment payments for
travel agents and an exemption of service tax for hotels and
restaurants to soften the blow of SARS.
To encourage health workers involved in the fight against
SARS, the premier announced a 400 ringgit special monthly bonus
for doctors and 200 ringgit for other medical staff until the
epidemic is wiped out.
Some one billion ringgit will be injected into a food fund and
various grants set up for poor fishermen, farmers and small- and
medium-sized industries.
To woo foreign investors, pioneer status and investment tax
breaks will be extended and full income tax exemption given to
operational headquarters while investment regulations will also
be relaxed to attract more foreign firms to list on the stock
exchange.
Tax breaks and low lending rates are also being given to
encourage home ownership and to reduce a glut in residential
properties.
The package will cost the government some 800 million ringgit
in lost revenue each year but Mahathir said Malaysia was "cash
rich" and need not borrow or issue bonds to raise funds.
Funds will be internally generated with 1.7 billion ringgit
coming direct from the government's budget, two billion from the
central bank and 3.6 billion from other development financial
institutions, he said.
"With this package, we hope to achieve the (2003) growth
target of 4.5 percent. The effects of SARS is much less than
previously anticipated but we have to get more people to visit
Malaysia," the premier said.
Malaysia has cut its official economic growth forecast to 4.5
percent this year from 6.0-6.5 percent as a result of SARS.
The stimulus package, which has been delayed successively
since March, is the country's third off-budget spending program
since 2001.
For their part, economists warned that it may be inadequate to
undo the damage that SARS had wreaked on the services sector,
which accounts for 57 percent of gross domestic product.
"The package is a short-term relief, in particular to the
travel industry. Without these incentives, we may witness massive
layoffs," said Azrul Azwar, economist with MIDF Sisma Securities.
"But it may not be able to sustain 4.5 percent growth for
2003. The government hopes the situation will return to normal in
six months but the damage due to SARS has been done already," he
said, putting this year's growth at just 3.3 percent.