Learning from the American credit crisis — Lim Sue Goan

Sometimes, I wonder whether Malaysia has become a country with most reports. There were two reports released yesterday, namely the Economic Transformation Programme (ETP) roadmap and the 2009 Auditor-General Report.

The roadmap is a continuation of the ETP that introduce the 131 entry point projects (EPPs) in detail. There are more specific details but the main goal is to transform the country into a high-income economy.

There are various plans and I am not going to evaluate them one-by-one here. I just want to share my personal experience and try to look at our economy through several small matters.

I went shopping not long ago and was approached by a bank salesperson. “Sir, would you like to apply for a credit card with no annual fees and service tax be charged? You can get a free gift and over RM100 of cash. If you change your mind, you can just cancel the card six months later.”

I have also received many calls from banks asking me if I needed a personal loan and the banks could offer me a loan with the most favourable terms.

I am wondering how the banks could have such a big amount of extra money that makes them so desperate to lend money to others when the federal government debt last year has accounted for 52.4 per cent of gross domestic product (GDP). Would it bring greater effects if the floating capital of the banks is lent to the government to stimulate economy and implement the ETP?

If there are too much money deposited in the banks, it shows that the people lack confidence in investment and are worried about economic prospects. Also, to give interest to depositors, banks must lend the money to someone to earn loan interests and maintain their profits.

However, the federal government spends money through government-linked companies and banks lend money to families and individuals instead of productive manufacturing and business owners. Will this form a credit bubble?

The household loan in Malaysia constitutes 72 per cent of the GDP and it is the second highest in Asia.

Meanwhile, the government will introduce a scheme proving first-time house buyers with household income less than RM3,000 per month a guarantee on down payment of 10 per cent for houses below RM220,000.

The ETP roadmap has many programmes encouraging consumption, including the building of at least 10 new entertainment outlets and a premium retail centre to turn Malaysia a shopping paradise.

We must learn a lesson from the American credit crisis. Once we have an economic downturn, the household income will decrease and how are we going to settle the inflated household and personal loans?

The government is pursuing Keynesianism that stimulates economic growth with expansion economic policies through increased demands.

In Europe, however, Keynesianism has been discarded. Instead, Europeon countries cut expenses and eliminate deficits to avoid falling into the abyss of bankruptcy.

I think moderation is the direction for Malaysia. We need a moderate politics, and a moderate economy. The government had taken saving measures to reduce administrative expenses last year and it is indeed hard to understand why it makes a sudden change.

The government should learn a lesson from others and its own mistakes. Take the annual Auditor-General Reports, for example. It reveals the mismanagement problems of the government agencies each year, but has anything been done to correct the weaknesses?

There is no shortcut to improve our economy and hopefully, we are on the right path. — mysinchew.com