Govt’s move to defer, cancel projects sends wrong message, says group

 

Malaysia had to pay Singapore RM320 million in compensation when it cancelled the Kuala Lumpur-Singapore High-Speed Rail project. (Bernama pic)

PETALING JAYA: An association of contractors has voiced uneasiness over a minister’s statement that the government intends to defer or cancel new projects to allow it to channel funds to welfare programmes.

“It sends the wrong message” to investors and the stock market, said Malaysian Bumiputera Contractors Association secretary-general Zaharani Yusof Omar.

He was commenting on a news report which quoted economic affairs minister Mustapa Mohamed as saying the government wanted to cut down on public expenditure by cancelling or deferring projects to enable more funds to be allocated for welfare programmes.

Zaharani said Mustapa seemed to have forgotten that the economy was recovering from the Covid-19 pandemic and his announcement would deter foreign direct investment and have a negative effect on the stock market.

“The big projects should go on in a sustainable manner as postponing or cancelling them will have a big multiplier effect,” he told FMT.

He also said Mustapa appeared to have contradicted finance minister Tengku Zafrul Aziz, who had said the International Monetary Fund was optimistic about Malaysia’s growth prospects and was confident the country’s gross domestic product would increase by 5.75% this year.

But economist Shankaran Nambiar of the Malaysian Institute of Economic Research described Mustapa’s announcement as “pragmatic” in view of the consequences on lifting or relaxing subsidies.

He said Malaysia was in a “tight fiscal position” and the announcement was an acknowledgement that the country had to be careful with the state of its finances.

It showed a strong commitment towards ensuring that the people’s welfare was given priority, Nambiar told FMT.

“This is not the time to toy around with discontent, given the state of inflation and the rising cost of living.

“The calculation, I suppose, is that we need to keep consumer spending going in the short term, and that it has to be done at the cost of pulling back on investments that will not take off immediately. That is the trade-off.

“The assumption is that you need to take care of the present set of circumstances, and we can revisit the projects once the present tide is over,” he said.

Last month, Tengku Zafrul said government subsidies on consumer necessities were projected to hit an all-time high of RM77.3 billion this year.

Of the amount, RM51 billion is for essential supplies such as petrol, diesel, cooking oil, flour and electricity.

Another economist, Barjoyai Bardai of Universiti Tun Abdul Razak, said the policy makers’ intentions were well-placed, but added that they should not be thinking about improving the people’s welfare at the cost of economic development.

He said a sharpened focus on targeted subsidies would help those most in need.

He also said policy makers should also be working on how to increase household income by boosting productivity and implementing reskilling and retraining programmes.

Both Nambiar and Barjoyai pointed out the risks of penalties and other costs the government might have to incur as a result of deferring or cancelling projects.

A key example is the Kuala Lumpur-Singapore High-Speed Rail project, which was axed on Jan 1, 2021. As a result, Malaysia had to pay Singapore RM320 million in compensation, an obligation under the bilateral agreement. - FMT