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Plan For Action

National Economic Recovery Plan
Chapter 3

Contents





For national economic recovery, Malaysia will need to focus on the objectives and key areas for action that will stabilise the market, strengthen economic fundamentals, as well as address the socio-economic agenda and the sectors adversely affected by the economic crisis. The main thrust of the Recovery Plan are encapsulated in the following six objectives:

Six Objectives of the Recovery Plan

  1. Stabilising the Ringgit
  2. Restoring the Ringgit
  3. Maintaining Financial Market Stability
  4. Stranghtening Economic Fundamentals
  5. Continuing the Equity and Socio-economic Agenda
  6. Restoring adversely affected Sectors

The chapters that follow will elaborate on the six objectives and the actions required for their achievement. A summary of the objectives and measures is shown in the chart entitled, Plan for Action.

Chapter 4 deals with market stabilisation issues and addresses the first three objectives. The countryís economic crisis was set off by the ringgit depreciation and the precipitous fall of KLSE. Private consumption and investment slump as a result of increasing pessimism and uncertainty as well as falling income. Businesses face rising losses and debts, and the time is no longer opportune for them to turn to the stockmarket to raise capital for new investment and debt retirement. Banks are burdened with increasing non-performing loans as a result of business failures. In addition, the volatility of the ringgit complicates business decisions and increases the risk of losses due to forex fluctuations. In order to address these issues, the Chapter proposes the line of actions required to stabilise the ringgit and shore up market confidence. The Chapter also proposes measures to strengthen the financial system, including preserving the integrity of the banking system, improving the capital market, and developing the private debt securities market.

Although Malaysia has generally strong economic fundamentals, there are particular areas that need attention. There are indications that the rapid economic growth in the nineties was fuelled by high but less productive use of capital. During this period, the countryís current account remained in the deficit. In addition, when faced with an economic crisis of this nature, it is important to control inflationary pressures and raise labour competitiveness. The Government has to walk the narrow path of judiciously adopting appropriate fiscal and monetary policy that conduce to price and currency stability, while promoting business activities with public spending and sufficient credit growth. Chapter 5 addresses these issues and proposes some lines of actions to strengthen the countryís economic fundamentals. The Chapter corresponds with the fourth objective.

The equity and socio-economic agenda, the fifth objective, is taken up in Chapter 6. The economic crisis has badly affected household income, employment opportunities, and Bumiputera share ownership. As less Malaysians go overseas for studies, there is the need to expand tertiary education to satisfy the surge in local demand. State corporations and cooperatives have to be revamped in order to be more focussed in their activities. Furthermore, the commitment to preserve the environment should continue despite the pressures of reduced financial resources in the public and private sectors.

Chapter 7 focuses on the actions required to revitalise the sectors badly affected by the crisis. In addressing the sixth objective, the twelve sectors considered are those most vulnerable to the currency and stock market crises. Many of the sectors are affected by ringgit depreciation, poor stockmarket performance, financing problems, high interest rates, and economic slowdown.

In the final Chapter, the issues on the implementation of the Recovery Plan are raised. The success of the Recovery Plan hinges on effective interagency coordination and cooperation as well as decisive action in carrying out the recommendations.






Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Back to Contents Page