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STS: Can KL's spend, spend, spend policy save economy?
By Brendan Pereira
5/12/2001 12:43 am Wed
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
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
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
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 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
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
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 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
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?
Goldman Sachs' take: It believes the consumption story will dissipate over the next six months as the growth of new jobs slows sharply, affecting household income and inflation.