Stimulus Package Perspectives Part 1

The latte is half full.
My good friend,a well known entrepreneur and budding tycoon, is holding court and espousing his views on what the government must focus on in the Second Stimulates Package.

• There is almost a 50% decline in wealth especially among the rich.The poor are not extremely affected as they are not exposed to the stock markets,properties and such investments.In fact,some of the poor is extremely lucky (or is it foresight?)that as they do not have any money to invest,their investment portfolios have not suffered any distress.
• Even if we are to assume that the poor have some investments,lets assume a figure of Rm 100..his loss will only be Rm 50.However,my friend with a portfolio valued at Rm 12 million have lost Rm 6m.It will be very difficult to put a case that the poor have suffered more than the rich based on those figures.Surely,even a cockeyed,SPM drop out knows that Rm 6m is much more than Rm 50.
• The poor is basically capable of maintaining their lifestyle regardless of economic cycles and financial crisis.The reason is simply because they are poor..which is acceptable in any developed society.
• However,the rich will have to give up so many necessities to survive the recession.No more first class on the whim trips to London is the least of their concern.Their bigger problem will be to tell their kids that new handphones only 4 times a year,LV is only for Mom and only 3 weekly dinner outings to Lafite/Prime now.The deprivation of such essentials will certainly affect the kids potential to contribute to society as they reach adulthood.
• It is a well known and accepted fact that consumer spending is necessary to boost the economy.It can be easily proven that even in the good times the poor have not played their role in this aspect of generating economic growth.Just a cursory review will demonstrate the absolute absence of 52 inch LCD TV,LV handbags and Ferraris in poor households.On the other hand the rich have done their duty towards consumerism...as a test..you can blindfold any of them and they can still reach Naza Showroom and Starhill.
• The property market is driven by the rich.The poor have demonstrated their unwillingness to buy properties even during the good times.Even with discounts,easy credit and low interest rates the poor have not shown any interest to buy properties in Bangsar,KLCC,Kiara.It is essential that the property market is sustained...as any impairments will have to be recognised by the banks..and that will reduce their asset values...raise NPLs...curtail available funds for them to give loans..and meet their KPIs.Obviously,this will reduce the bonus payments and have a major impact on liquidities and GDP.The poor fortunately do not have such risk.
• However the package must be fair to everyone.It is not possible for the government to compensate everyone even though the government is a responsible one.
• It is also better that monies is given DIRECT to the people and not through development schemes,negotiated contracts,JKKKKKs and such complicated and high overheads mechanisms.

The proposal ,my friend finally revealed is basically to compensate for only 50% of losses suffered and it is to be across the board...regardless of race,religion,color of the eyes ,poor or rich...
Thus my friend should get a straight cash compensation of Rm 3m and the poor will also get his fair 50% compensation.The Rm 3 m loss is as my friend forlornly accepts his contribution to nation building.
His proposal have merits as it will remove the stigma of negotiated contracts,APS,licenses and quotas as a tool for generating economic growth.

Now the latte is half empty.