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:
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
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.
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.