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Can KL's spend, spend, spend policy save economy?

There is selective spending but job confidence is low. It is likely that the recession could be worse this time

By Brendan Pereira
MALAYSIA CORRESPONDENT

KUALA LUMPUR - The economic slowdown wears two different faces in Malaysia.

It is the look of despair for Mr Zulkifli Mohamad, a production supervisor in Penang until two months ago, when falling demand for semi-conductors and the relocation of his American employers to China combined to make him one of the country's 34,502 jobless.

With Malaysia's engines of growth over the past decade - electronics and manufacturing - stuttering in the wake of the global recession, the Kedah-born man sounded resigned when he said: 'This is going to be a difficult time.'

Confidence about employment is extremely low.

Almost 60 per cent of respondents surveyed recently by recruitment website JobStreet.com felt it would be difficult to get a job - the lowest level since the survey began after the 1997 Asian crisis.

For optimism and confidence, fast forward to the sales launch of two-storey link houses in the middle-class suburb of Subang Jaya, where 1,800 people are on tenterhooks.

The only question on their minds: Will one of the 381 houses being balloted be theirs?

Applause rings out as housewife Madam Bibi Jasmin Shah Omar's name is called.

She will pay nearly RM300,000 (S$135,000) for her second home. Yet she looks chuffed.

'I feel very lucky. This is for investment.'

Mr K.C. Chong, sales director at Tan & Tan Developments, says: 'Property is still considered the best investment for accumulation of wealth.'

More than than half of its 85 units of million-ringgit houses at Sierramas have been taken up since the soft-launch in October.

Robust sales at selected property developments and a 25-per-cent jump in motor-vehicle sales over last year are driving the government to believe that it can keep the economy from slipping into a recession by getting Malaysians to spend, spend and spend.

The cycle works like this: Increased consumer spending will tell retailers, restaurants and hotels to raise their inventory from wholesalers.

Wholesalers will buy more from manufacturers, who in turn, will raise production levels. More jobs will be created and economic growth rates will increase.

Malaysia's economy contracted by 1.3 per cent in the third quarter, worse than analysts' forecast of a 0.5-per-cent contraction.

Dr Zainal Aznam Yusof, a National Economic Action Council member, thinks there are mildly encouraging signs.

He noted that private consumption grew at a slightly faster rate of 2.1 per cent in the third quarter, compared with 1.6 per cent in the second quarter.

But checks show that although car sales are up, retail outlets, entertainment outlets and eateries all report slower-than-usual business.

At a seafood restaurant in the middle-class suburb of Bangsar, business is down 20 per cent.

At the Kuala Lumpur International Airport, shop tenants are asking for a sharp cut in rental charges. The reason: slow business.

Interior decorator David Chin said: 'People have money and they are spending. But they are only picking what they consider to be good buys.'

In a recent report, Goldman Sachs said it believed that the next six months would confirm that Malaysia's recession this time would be deeper than that of 1998, when 83,000 people lost jobs.

It pointed out that the 1997/98 period represented a pause in the export boom, while today's exports were contracting significantly.

But what about the consumption story?