Following is the full transcript of the interview with Deputy Prime Minister Datuk Seri Najib Tun Razak during the special programme

Wednesday, November 5, 2008

Interview with Najib (transcript)
Following is the full transcript of the interview with Deputy Prime Minister Datuk Seri Najib Tun Razak during the special programme on “Pelan Rancangan Fiskal” to be aired by RTM over Channel Two at 9pm tonight.The interviewers are Dr Mahani Zainal Abidin, Director-General of the Institute of Strategic and International Studies Malaysia, Gan Ai Leng, TV3’s Assistant News Editor for Business and Sayed Munawar Sayed Mustar, RTM moderator.Q: What is the basic philosophy to the stimulus package tabled yesterday?A: We want to give a stimulus to the economy in an economic climate that faces pressure from external economies. The right step is to provide the stimulus and not to slash expenditure. That is why the government decided that we provide the boost in the form of the fiscal stimulus package and we identified two criteria, that is, we must spend on projects that have major multiplier effects and secondly, we must increase the people’s income or protect the people’s well-being. So, it is not accurate when we say that this physical stimulus package is given to the industries only. Because when we give to the construction sector, we build houses. Who reaps the profit? We build low and medium-cost houses including 12,000 units under the Hardcore Poor Assistance Programme. Surely the hardcore poor will benefit and secondly, small contractors at district level will also benefit. With this, the money in circulation in the domestic economy will become more vigorous.Q: Datuk Seri it looks like the government has introduced measures to expand the economy by giving the stimulus direct to the people. Is this the only option available or why we didn’t use other options such as increasing exports and so on?A: Actually, during the 1997 crisis, the crisis is known as the“Asian Financial Crisis”. It means the economies in advanced countries in the West did not face a crisis and can accept increased exports from Asian countries. But this time around, it is the reverse because the cause of the crisis came from developed countries such as the United States and Europe.Hence, their capacity to make orders for additional exports was limited and in fact, will deteriorate. So, the export recovery is not an option for us to adopt. The best option to the government’s thinking is to determine the domestic consumption is stepped up. If we manage to increase domestic consumption, it means we can ensure that there is still momentum in the domestic economy and can achieve reasonable economic growth. Not as high as this year.This year, we expect five percent. Next year, I have announced the new projection yesterday, that is, 3.5 percent. This is a reasonable and realistic achievement.Q: Datuk Seri, is the RM7 billion stimulus package adequate to ride through the increasingly serious global financial meltdown?A: We must have a balance. We cannot allow a very high government fiscal deficit. That is why in our calculation, if we maintain the deficit at 4.8 percent where this year it is an acceptable level under the standard or international benchmark and does not give a negative impact to our rating, to our currency or ringgit. Although we add further, maybe RM10 billion or RM12 billion, it will have an impact on the government’s fiscal deficit. Hence, because of that the way we chose is to retain the deficit at 4.8 percent, but we can provide a RM7 billion capital injection to the country’s economy.Q: When talking about the RM7 billion just now sourced from subsidy savings and we know the subsidy savings fluctuates depending on the current commodity prices. How if the market price determines whether the savings are more or less from RM7 billion?A: We have assumed the fuel price to be around US$80 a barrel. So, this is a reasonable assumption for next year. Hence, we feel optimistic that what we have projected can defend our stimulus package.Q: Datuk Seri, the government has forecast that the economic growth for next year will be 3.5 percent. But there are other projections that are much lower.From where is the Malaysian economic strength to grow at 3.5 percent.A: For the basis of our confidence, we look at this year. This year, nobody has denied that we can achieve a five percent growth. If we achieve five percent growth this year, it means our economy still has the momentum to carry to next year. When we top up with this fiscal stimulus package, it means its government intervention. Then the 3.5 percent growth is achievable.Q: What is Datuk Seri’s view on UBS, Europe’s biggest banking group, that the country’s Gross Domestic Product growth is expected to be zero next year? A: They also can make mistakes too. They failed to predict the major problems in the United States and Europe, for instance. The government is still confident that the 3.5 percent target is attainable with the fiscal stimulus package tabled yesterday, on condition nothing extraordinary happens in the external economy. If there is one with a very strong pressure, that is another story. But in the current situation that we can see, the situation is on a downward trend and not so serious, we can still achieve 3.5 percent.Q: In other words, the proposed stimulate is not exotic but depended on current situation, will we respond positively to whatever happens?.A: Yes. we still have the flexibility to make adjustments.Q: Datuk Seri, say if the situation becomes extraordinary. Does the government have the capacity to further increase the deficit by not worrying or to shake up the economy.A: We still have a bit of capacity. But I want to try to retain the deficit at 4.8 percent although during the financial crisis before we went to the extent of 5.6 percent in government deficit. Meaning, if the deficit reaches 5.6 percent a year, it will not pose much of pressure to our economy or to our currency value or our rating value but as far as possible we want to maintain at 4.8 percent.Q: The government has repeatedly said the Malaysian economy remains strong and will not be in recession whether this year or next year. Is the government too optimistic?A: No. If we are too optimistic, we will not have done the stimulus plan and this fiscal stimulus. We know our economy will receive the heat and side effects but not as serious as some other countries because we have strong basic fundamentals. Our economy has the fundamentals in terms of diversity, well-diversified economy and our financial system including our banking system has good liquidity.Q: Although many of the measures introduced are for a short-term period, there are also medium-term measures announced yesterday such as liberalisation.How are we to see this as many people say these problems are short-term, why we also need to introduce the liberalisation measure and also other measures?A: The government feels medium-term measures are also important to provide confidence for foreign investors on the opportunities and probably they will invest and though they make take time to decide to invest, we give them the signal that we will continue to uphold what is said to be market-friendly policies. Hence, we are giving the world a very clear signal, to the world market that Malaysia is a very suitable place for them to invest whether in the form of foreign direct investment (FDI) or in the form of capital market.That is why we have to table the liberalisation measures continuously.Q: Datuk Seri, the MIER had said recently the Malaysian economy is expected to face a recession in the second or third quarter next year. Do you agree with such projections?A: We must defend that Malaysia will not face a recession next year. God willing, we still can. If say technical recession, it means two consecutive quarters of negative economic growth. We don’t see this will happen next year except something very extraordinary happens to the external economy.Q: In our observation over the last 10 years Datuk Seri, there were too many skeptical views but eventually we have proven that whatever functions introduced by the government had shown results. If we go to specifics on stimulus sectors announced yesterday. The RM1.5 billion for FDI stimulation. Under the global economic crisis situation we have allocated RM1.5 billion to generate FDI revenue. So, what is our target after the United States generate revenue from the FDI. So, what is our target after the United States overcomes the crisis whilst the United States is among our biggest trade partner. What is our RM1.5 billion target to woo FDIs.A: We have succeeded even before to woo renowned companies such as Dell, Hewlett Packard, Syntium and others. This means whether in the ICT field, data centre, set up a data centre or in the aerospace field, in the solar energy field and so. These are industries that can provide high impact to the country’s economy in terms of investment value, in terms of technology, in terms of number of jobs and also at knowlegde workers level.This what we really need. If we don’t do something, they will invest in another country. Usually they come to us, they ask what Malaysia can offer and they without any hesitation tell us they have received offers from another country. If we want their investment, we need to provide additional packages or customise incentives to them above the usual package that we offer.So, they see us that we can offer better packages, more special. So, they will invest in our country and that is what we want. We should not forget every year about 100,000 graduates enter the job market. They want jobs, we cannot have unemployment problems among graduates, This will burden our country.So, such measures are necessary and must be done by the government.Q: The competition space at the global level is becoming narrow. So, is the RM1.5 billion sufficient to atrract attention?A: In the meantime, if the need arises, we will increase the amount, but I feel it is enough for next year.Q: But Datuk Seri, the government will also review corridor development and mega projects. Will this influence FDI inflow?A: We are only reviewing projects that have very high import content.For instance, the purchase of helicopters for the armed forces and the police.We will wait for a while. But other projects eventhough big but have an impact on the economy of our country, we will continue. For example, for the Kuantan Port, we feel that the new berth wharfs must be built because they upgrade the port’s capacity and it is good for the East Coast Economic Corridor (ECER).This we must implement.Q: Datuk Seri, as what Datuk Seri is aware, oil palm price has dropped sharply and we hear a lot of complaints. From this stimulus package what can oil plam smallholders expect?A: I have announced several new measures taken by the government. Among them fertilizer price has been reduced with the abolition of the five percent import duty. Fertilizer manufacturers have agreed to reduce the price of most of the fertilizers needed by smallholders by 15 percent immediately.Secondly, from February next year, we will start to implement blending, (metal ester), meaning five percent oil palm in the form (miletr ester), we blend with diesel, starting with government departments. We will also revive replanting for which a RM200 million fund has been announced by the prime minister recently and besides that we have asked the Plantation Industries and Commodities Minister (Datuk Peter Chin Fah Kui) to discuss with his Indonesian counterpart because if Malaysia and Indonesia can reach an understanding in this matter, we can map out new strategies, most importantly to reduce palm oil stock as currently the stock is quite high.Q: While Datuk Mahani raised the oil plam issue, if possible I want to to go further a bit. Felda may have a guarantee mechanism of 1,000 minimum but 70 percent of the oil palm commodity is produced by smallholders and the stimulus seen is in terms of fertilizer and weedkillers.Maybe there are other plans to help oil palm smallholders?A: We will try to stabilise oil palm prices because for Felda settlers it comes from internal source, from Felda itself. The savings made all this while, I was told the settlers have been told not to spend to the point of no savings. I said there must be some savings at all times because we don’t know what will happen in future.So, this well thought-out measure will give protection during situations like this.Q: Datuk Seri, on government projects, the government plans to implement open tenders and restricted tenders. Are you confident Bumiputera contractors who were protected by the government all this while can afford to compete openly?A: Yes, some Bumiputera companies have high capabilities.They can compete and there are also tenders that we limit to Bumiputera companies only but most importantly they need to compete, there must be elements of business because when we have elements of competition, we have two benefit.One benefit in terms of the government, we get value for money and the award of tenders is more transparent. Secondly, we can build the capacity among Bumiputera contractors for them to be independent and they will have the resilience in future if they go through the competitive process.Q: Datuk Seri, usually the problem we hear is about implementation. The government has indeed taken many measures and enacted policies. Though they were announced in the stimulus package yesterday including setting up a new unit. How the unit can ensure the measures can be implemented quickly and efficiently?A: There are three stages we can implement this.First, I announced the latest measure to create a project management unit.The unit will report directly to the finance minister. Secondly, we must strengthen the Implementation Coordination Unit (ICU) because the ICU is the one which will monitor implementation of development projects. Thirdly, at the Cabinet level, ministries responsible to implement the projects will be asked by the prime minister and me to ensure they monitored implementation of programmes and projects under their charge.Q: Usually we hear complaints about payment or approvals from the Finance Ministry. Can this be overcome?A: When we have this unit, we will ensure distribution of allocations are made according to schedule. Actually, payments to contractors in 14 days have been met to more than 95 percent, sometimes up to 98 percent are paid in two weeks.Problems arose recently due to the hike in prices of building materials.Contractors have fixed the prices but when the prices go up sharply, they say if they continue with the project, they will incur losses. There are also contractors who after winning the tender, they surrender the tender. We issued a circular recently saying that we can make adjustments to the contract price and the projects are being continued by the respective contractors.Q: Datuk Seri, yesterday you mentioned about providing assurance in terms of jobs, and about unemployment. That there will be no termination, specifically of those in the civil service. Yesterday, Datuk Seri gave guarantee and it looks like under the stimulus (package), training will be given for graduates but what of the big number of contract workers in the public sector.A: Yes, indeed I have given the assurance that there will be absolutely no termination among contract officers. This is the government’s stand and that is why in terms of corporating expenditure, our government has kept it at RM154 billion and that is why I find it very strange that the Opposition in their alternative budget are quoting RM130 billion, a contraction by RM24 billion.What about the effects on the economy, effects on the officers and government servants? This is something that they should answer.Q: The suggestion by the Opposition seems to be a direct contradiction to what the other countries are doing. How could that be? If that way is followed, I believe the contraction will jeopordise our economy.A: I feel the leader of the Opposition is still trapped in the era of 1997.Which is the old IMF way of thinking. The leftovers are still in their thinking today and that is why when in the midst of facing the global crisis where the whole world should be advocating intervention measures in the form of stimulus package or an expansionary budget, the Opposition is still putting forward a contractionary budget. Yesterday, they had no answers for this issue and that is the reason for their decision to walk out of the Dewan.Q: In the stimulus package tabled by Datuk Seri yesterday, there was no stress on the social safety network for those facing the risk of losing their jobs. Will this issue be considered. A: We do not have the policy yet, and what I mentioned yesterday was a reiteration of what the Honourable Prime Minister had said in the tabling of the Budget, of a social safety network in which we have given a guarantee for those earning less than RM720 in the peninsular and a slightly higher figure of up to RM930 in Sabah. They will be given the addition from the government and this programme will be carried out towards the eradication of hardcore poverty. In terms of those who are unemployed and so on, there are no plans yet of doing anything other than ensuring that with this stimulus package there will be no termination carried out by the public and private sector. Nevertheless, we will monitor this situation.Q: The initial reaction of some parties is that this stimulus package will benefit contractors. What is Datuk Seri’s response?A: Not true. In any building project, for instance when we build a house, definitely it will have to be built by a contractor, and when a contractor builds a house, the people will benefit. Let’s say if it is a PPRT or low cost house, who will gain? The people will benefit, and the contractors will get jobs and they will give work to their workers and they will buy their building materials from the shops. And when the construction materials are bought, there is an effect to retail trade as well. When contractors receive their money, they will spend and so on. Therefore, our economy will see positive effects. This is what I say is the multiple effect.Q:Datuk Seri, are you confident that the uptrend will continue.A: I am seeing a more positive trend since we announced the fiscal stimulus package. But to say that it will continue to go up, that will be difficult because it is also closely linked to the market climate in the United States, Europe and Japan and so on. Our share market is interconnected to the world and we cannot separate the sentiments in other countries.The following is rather a micro question involving the psychology of the people who are the target of the stimulus, with the increase in car allowance to go up to RM10,000 for instance and the increased disposable income by RM60 a month for those earning in the region of RM2,000 a month. There is a feel good factor and infact the media today played up the issue giving future outlook and the advantages, citing them as salient points. But at the same time we are educating the consumers to be prudent in their spending as the irory is that the ongoing crisis is due to overspending. The message to our viewers today is that they should be able to see the most important salient points and at the same time be smart in the selection of sectors in which it will be more reasonable to spend.This crisis actually happened in the United States and Europe not because of the problem of consumers but that their financial institutions were not responsible and secondly either their regulatory system was weak or had failed to monitor carefully. This is what that caused the crisis which has been called the subprime crisis. Therefore, for us the consumers in Malaysia it is not a problem. The consumers are facing slight pressure due to the high inflation this year, at 8 - 8.5 percent. That is why the government feels responsible to increase the disposable income of the consumers.Q: The crisis this time outside the country in the US is and probably due to a decline in confidence. I see the main issue here as the returning of confidence and the government has introduced several measures to bring back the level of confidence to consumers. But what have been done to bring back the confidence of investors particularly domestic investors to invest and expand the economy.A: We will provide domestic investors the encouragement like for example the GLCs who form a major component in terms of capacity to invest and to identify large scale investments that they can undertake.For instance, I have discussed with the chief executive of Sime Darby to undertake big scale development. I have said go ahead, move as fast as possible as it will help drive the local economy. So, this message we have delivered to the GLCs and if the GLCs take the step, I believe other private companies will also see the potential in investing in the country.The question of interest rate I will leave it to Bank Negara to decide as I want to defend the credibility of Bank Negara in the issue of ascertaining the interest rate. Bank Negara’s stance on interest rate is that there is no need to bring down the rate at the moment but we still have the option should we be headed for an economic recession. We still have a monetary policy that we can put in place. Q: In your opinion Datuk Seri, with the inflation rate slowly averaging, is it reasonable for Bank Negara to bring down the interest rate from the current 3.5 percent now.A: Bank Negara as at this point sees no reason to change the interest rate.Therefore it is good that we have specific options that we can exercise should the situation change. Q: One of our cores in the stimulus package is to increase the level of disposable income. Therefore, what has been given is to provide more income to those with salaries. The EPF money as well as those working with the government.For those self employed, isn’t there anything...I cannot see clearly the measures that could increase their disposable income (laughter). A: Actually there is, in this package. The Micro Credit for hawkers and small traders, we have increased the fund by RM200 million through Bank Negara which means the access to the micro credit has been expanded. Also the Amanah Ikhtiar Malaysia programme in the urban areas has been expanded. We have therefore given consideration to the small traders under our programme. Besides that, farmers and fishermen have their programmes which have been announced through the Ministry of Agriculture and Agro-Based Industry. These programmes are ongoing. This is an addition. Q: It is a priority now for the government to increase the level of disposable income. But looking at the current situation, is Datuk Seri confident that the Malaysian people will also spend. A: I hope, meaning that if there is a positive sentiment when the people know that the government cares and the government is planning a fiscal plan, I hope that in terms of sentiments, the feelings are more positive. On the other hand, if there is no stimulus package, they might be asking what the government plans to do. That could be a more negative sentiment. I hope therefore to see that hope in the share market will be up too. Today, I don’t know. Last three days it was up, which means that the outlook sentiment has been more positive, and that means the people will be spending as usual.Q: I feel what is very important here is the role of the banking sector.Because many banks are more cautious, not wanting to expand, and being careful, how do we ensure that they are providing the access for the small and medium industry to get loans for their working capital.A: Truth is, according to figures, the credit for SMEs has increased generally. We have also created specific units in Bank Negara, therefore if SMEs have problems in terms of loans, they can use advisories in Bank Negara and they can be given assistance in terms of getting loans and so on.Q: The effects of the slowdown in economy is expected to continue until 2010. Is the government confident that the stimulus package announced yesterday will be able to overcome and face the continuing challenges.A: Yes. It means we should do all that we can possibly do, that we are capable of doing, so that the real economy, our real economy is not jeopordised until there is..economic recession. We want to avoid an economic recession. God willing, in 2009 we will record a growth of 3.5 percent.Q: I am attracted to several items in the package, 15 sectors have been given the stimulus. And if we look at it previously, the sector of transportation had also come under focus with the benefit being given directly to the users. At one stage before, the group fund to empower public transportation was RM500 million but most of it was spent on permits for taxis while what really needed to be given attention was the mass transportation system which will benefit the majority of people. But if it is maybe already there in this stimulus, Datuk Seri, the details of what will be spent, as there are many who are still worried with the level of cost now. Public transportation?A: In terms of public transportation, we had allocated RM500 million under this fiscal stimulus package to improve the LRT system immediately as well as for bus services. This means that what we need to spend immediately we will do so. But the mass urban transportation system still has weaknesses and many of them can be solved only with the existence of one single authority. The Public Transportation Commission. That will be the body which will see into the needs in this town in a more holistic and comprehensive manner.Q: So there is no intention to channel the RM500 million into the commission?A: No, no.Q: Datuk Seri, there is one more concern. Graduates who are out and the ones recently out, every year we see 80,000 almost 100,000. So, is the stimulus package going to provide sufficient training to prepare them potentially to get employed.A: Yes. We cannot give guarantee to all graduates who are coming out. But the move that we are making now which we announced yesterday, the graduate employability scheme, involving GLCs, including GLCs owned by Khazanah and PNB means that 12,000 will be given the training opportunity for the next two years.If there is a need, we will increase. But it is a scheme. We also hope that other parties, the private sector will also carry out their own schemes and also other government bodies such as Bank Negara will also be able to help unemployed graduates including in the speeding up of the process of intake by government departments. As the faster the vacancies are filled up in the public sector, the further it will help reduce the problem among graduates.Q: Will such a programme receive a good response.A: It can still be improved. In terms of facilities that we are offering and the efforts taken to promote the programme. One of the measures that will give an impact to the real estate sector is the one that I announced yesterday when the government agreed to relax the rules of the FIC (Foreign Investment Committee). Where if foreign investors want to own any property for their own use, and which costs more than RM500,000, there is no need for them to get approval from the FIC. These are the measures to drive the real estate sector.Q: Like I said earlier in the discussion, we also have allocation for a question related to politics. Also, Datuk Seri had mentioned about the unprecedented tabling, then we had discussed contractionary and expansionary.Yesterday, we also saw a rejection by the Opposition party.A: Their excuse is not credible. They said the reason why they went out was because I did not allow them to express their say. In fact, earlier in my speech I had said that I will allow them to express but to allow me to complete the tabling first as it was important and I did not want to confuse them in the Dewan. If there had been interruptions from too many people, I would not be able to give a clear picture within the specified time. I would continue to be disturbed by members interrupting to seek clarification and make all sorts of disturbances.So what I wanted was to really complete the tabling, then give the Opposition leader and other respected members from the Opposition party the chance. But they were not patient, and I do not know the real reason but I feel that there is a huge possibility that they do not have an alternative that will convince the people. And they saw that our package is a fiscal stimulus package that will help in economic growth, take care of the well being of the people while their alternative budget will be contractionary as it will cut operation expenditure by RM24 billion. Not a small figure but big and the end result certainly will bring our economy to recession next near. It therefore appeared that it was difficult for them to defend their stand.Q: It has been said that often what Datuk Seri had presented as facts were lies. That they were not reliable. Yesterday, Datuk Seri had also mentioned this.A: They are indeed facts that we had studied, what we had studied in detail and that which we can defend. Because if as a government we do not have credibility, the international bodies will certainly come after us.Q: Datuk Seri, our programme is being watched by families across Malaysia.There are those who consider the package as a windfall and there are those who think that there is nothing. We have also questioned. But from your personal viewpoint, what does it mean.A: It means the government cares deeply and is not taking a laissez-faire attitude, meaning washing its hands. It means we are taking steps to intervene, proactive steps so that the negative effects are not experienced by our country and it does not burden the people whether in terms of doubtful income or work wise. In terms of unemployment or lost work opportunities. Although I do not deny that there are effects, such as our commodity prices that have come down and so on.. there are effects and possibly there are some sectors that feel that their incomes have been affected but if there is no intervention from the government, if this fiscal stimulus package is not there, this will certainly worsen the situation faced by the country.Q: Datuk Seri, is it your opinion that next year will be more difficult and that we will make a recovery in 2010?A: It is difficult for me to form an opinion, I do not carry a crystal ball but we have told the people that next year will not be as good as this year.This is an admission, meaning we are being realistic. We are not in denial and we hope that with the strength in the domestic economy of our country, we will still be able to stay up and if the external economy recovers, there is possibility that 2010 will be better than 2009.Q: There are only weeks to 2009, what is Datuk Seri’s advice to Malaysians, continue to cooperate with the government in facing the global uncertainty?A: It is of utmost importance that we are able to ensure that there is a spirit of solidarity among all groups. Between the people and the government, the NGO and the government, labour unions with government, political parties including opposition party should come together to overcome the effects of the global financial crisis because I believe that if we the solidarity we have is really strong, it will be easier to fight this global crisis.— BERNAMA