updated version In a bid to cushion the effects of the economic slowdown in the United States, the government will launch a series of economic stimuli which includes a reduction of workers' contribution to the Employees Provident Fund (EPF) to nine percent from the current 11 percent of their salaries.

Prime Minister Dr Mahathir Mohamad told a press conference today that the new policy will take effect from April 1 and will be in force for one year.

He added that the economic downturn in the US, Malaysia's biggest export market, is expected to have an adverse impact on Malaysia's exports and growth prospects.

Under these circumstances, the government has to take pre-emptive measures to ensure that the growth momentum is sustained, he said.

"The growth estimates are being revised and the details will be announced when Bank Negara releases its annual report on March 28 (tomorrow)," said Mahathir.

Official growth is expected to be revised downwards from the current estimate of seven percent. According to the prime minister, the new estimate is likely to fall between four and six percent.

Mahathir said given the anticipated slump in export growth in the light of a US slowdown, domestic demand has to be strengthened to drive growth.

The two percent cut in the employees' EPF contribution will put RM360 and RM720 a year in the pocket of those earning a salary of RM1,500 and RM3,000 respectively.

In the 2001 Budget, higher tax rebates have already been given to the low- and middle-income groups, amounting to some RM434 million to encourage consumption, he said.

But he announced a number of additional measures.

"To encourage the greater use of credit cards, the tax of RM50 on credit cards introduced in 1997 will be abolished," he said.

Furthermore, to promote the sales of passenger cars, government employees will now be eligible for car loans every five years instead of the present seven years. They will also be eligible for car loans on completion of one year of service, instead of the present three years.

Additional RM3 billion

In addition to the RM28.8 billion already approved under Budget 2001, the government will increase the fiscal stimulus by about RM3 billion, which is expected to increase gross domestic product (GDP) growth by 1.1 percentage point.

The new projects that have been identified for immediate implementation include four universities in Perlis, Melaka, Pahang and Negeri Sembilan amounting to RM1.6 billion, 193 community colleges in all parliamentary constituencies amounting to RM900 million, and 200 single session schools amounting to RM2 billion.

In addition, 6,600 units of housing quarters for the Malaysian Armed Forces in Kuala Lumpur amounting to RM1.5 billion, of which RM400 million will be spent this year, and oil palm replanting subsidies and special assistance to rubber smallholders will be implemented soon.

To reduce the property overhang, Mahathir said the changes will be made with regard to the Foreign Investment Committee's rules and regulations pertaining to foreign equity as well as property and asset acquisition by foreigners.

"This is to provide a more liberal environment for foreign investors and the inflows of FDI (foreign direct investment)," he said, adding that an announcement on the changes will be made very soon.

To help reduce excess stocks in the property market, in particular residential units, incentives provided during the Housing Campaign will be reinstated for this year with immediate effect, which include the exemption of stamp duty, waiver of processing fee and higher margin of financing.

"To discourage further addition in property stocks, local authorities will be directed not to approve any new construction of office and commercial space in view of the existing large property overhang."

Mahathir added that given the need to ensure a continued environment of predictability and certainty, the government will continue to maintain the ringgit peg.

The government will also undertake the earlier implementation of major infrastructure and utilities projects, including the Bakun hydro-electric power project, and assist in the implementation of the Pulau Bunting coal power generation project as well as the Pelabuhan Tanjung Pelepas, Johor, and Westport projects, Mahathir said.

Power to ministries

He said that the Finance Ministry has delegated its power to the ministries to enable their tender committee to approve tenders of up to RM30 million and up to RM50 million for selected statutory authorities and government companies.

"For restricted tenders, ministries can approve contracts not exceeding RM20 million and for procurement based on price quotations of up to RM200,000, and six selected ministries can approve the procurement of capital equipment up to RM15 million," he added.

To maintain an accommodative monetary policy, financial institutions are required to achieve an annual loan growth of eight percent, he said.

To improve the access to financing for small- and medium-size enterprises, the Food for Fund (3F) will be increased by RM300 million to RM1.3 billion, the New Entrepreneur Fund (NEF) will be raised by RM250 million to RM1.5 billion, and the Small and Medium-size Industries Fund (SMI) will be doubled to RM400 million, and a new Entrepreneur Rehabilitation and Development Fund of RM500 million will be set up.

"The lending rate to borrowers for 3F will be lowered to 3.75 percent, that for the NEF to 5.5 percent and SMI Fund to 5.5 percent," he said.

Mahathir said that in the event that the slowdown in the US economy is sharper than anticipated, the government is prepared to undertake further measures, including bringing forward the implementation of selected projects approved under the Eighth Malaysia Plan.

"Government departments and agencies are required to prepare a package of projects that can be implemented immediately if additional stimulus becomes necessary."