11:02 am - Too late for stimulus package !

By David Chance and Razak Ahmad
KUALA LUMPUR, March 12 (Reuters) - Malaysia's huge budget
spend may be one of the biggest in the world relative to the size
of the economy but the political woes of the country's incoming
premier may have limited its effectiveness.
Of the 60 billion ringgit ($16.3 billion) figure announced by
Deputy Prime Minister Najib Razak on Tuesday, just 17-18 billion
ringgit is new federal funding and that is spread over two years.
(For a full story click on [ID:nKLR411807])
While that will ease concerns of a massive slew of bond
issues to finance the deficit, it does not guarantee a quick
boost to a country which is the third most dependent in Asia on
exports relative to gross domestic product (GDP).
The budget, which political and economic analysts say is
short on details and transparency, may also do lasting damage to
Najib who is due to take power at the end of March.
"He's got a lot of political issues which have preoccupied
him and there's been an inadequate amount of attention on the
severity of the economic crisis," said Terence Gomez, professor
at the University of Malaya economics and administration faculty.
Malaysian exports plunged 28 percent in January, leaving the
country of 27 million people teetering on the edge of its worst
economic performance since the Asian crisis a decade ago.
While the economy was tanking, critics charge that Najib
spent too much time politicking ahead of March polls in the
United Malays National Organisation (UMNO), the main party in the
National Front coalition that has ruled Malaysia for 51 years.
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In February, Najib was busy plotting a putsch to take control
of the northwestern state of Perak from the opposition, a move
that would have seen him emerge as a winner for a government that
is still reeling from big election losses a year ago.
That move misfired when the opposition People's Alliance
dissolved the state assembly and the state is now in limbo.
Recently, more lurid details have emerged in Malaysia's
online media of the killing of a Mongolian model. Najib has
repeatedly denied involvement and there is no direct evidence
linking him to it, but the issue has damaged his credibility.
And on April 7, Najib will face a crucial electoral test with
a parliamentary by-election and three state seat by-elections.
"Publicly, his image has taken a major battering after what
happened in Perak, first of all, and subsequently the further
disclosures on the killing of the Mongolian lady, so he's really
going out on a limb here trying to redeem himself," said Gomez.

MUTED MARKET RESPONSE
Although the spending measures planned by countries in
response to the global economic slowdown are not directly
comparable and cover different time periods, Malaysia's equals
nine percent of GDP, second to China's announced 12 percent.
While government-backed newspapers in Malaysia hailed the
package, with the New Straits Times splashing "Transfusion!"
across its front page, market enthusiasm was limited.
Malaysia's main index <.KLSE> fell 0.6 percent on Wednesday,
compared with a 1.3 percent gain in neighbouring Singapore.
While other governments have put money into the pockets of
the consumer, there was no such cheer in Malaysia.
"As the much hoped-for tax cuts failed to materialise, the
direct relief for the man on the street seems limited," Chris
Eng, head of research at Malaysian investment bank OSK wrote in a
report published on Wednesday.
Bond markets, spared a slew of new issuance, also failed to
rally with yields on the benchmark 10-year issue
stuck near Tuesday's closing levels at 4.2 percent.
"We think the package will probably cushion, but cannot
prevent a recession. The worst case scenario for the fiscal
deficit has been averted for now, but further slippage remains a
risk," Citibank economist Wei Zheng Kit said in a report.
Kit estimates there will be bond issues of 92 billion ringgit
on a gross basis this year to finance the budget deficit which
the government now forecasts will be 7.6 percent of GDP.
Having failed to reassure markets, Najib also faced more
political pressure from the opposition on Wednesday.
"As far as the package is concerned, it is business as usual,
no commitment to reforms or strengthening institutional
governance," opposition leader Anwar Ibrahim, a former finance
minister and deputy prime minister, told a news conference.
($1 = 3.690 Malaysian Ringgit)
(Editing by Sugita Katyal)
((david.chance@thomsonreuters.com; +603 2333 8033; Reuters
messaging david.chance.reuters.com@reuters.net; bureau email
areuters@gmail.com))
Keywords: MALAYSIA BUDGET/