Economists welcome stimulus package for Sabah but warn against overlap with federal aid

People wander about the popular Gaya Street market in Kota Kinabalu, Sabah. Economists say the aim of economic stimulus packages is to ensure that people continue to spend despite ongoing crises.

KOTA KINABALU: Economists in Sabah have welcomed the state’s plan for an economic stimulus package of its own to cushion the impact of the Covid-19 crisis, but warn that assistance must be injected in key areas if it is to be effective.

Sabah UiTM’s Firdausi Suffian and Universiti Malaysia Sabah’s Rafiq Idris said the state’s programme must complement the RM20 billion economic package announced by former prime minister Dr Mahathir Mohamad last month.

Firdausi, a political economist, said the idea behind a stimulus package was to ensure that people would still spend their money despite an ongoing crisis such as that caused by the pandemic.

“When we are in a crisis, the key is to make sure the economy is moving and ensure spending is still happening. Even if the government helps (by way of a stimulus package), if people still don’t want to spend then there is no use.

“Domestic spending is vital right now as we cannot depend on foreign spending, not anytime soon, anyway,” he told FMT.

Chief Minister Shafie Apdal said earlier this month that Sabah would announce a stimulus package of its own in April to mitigate the effects of Covid-19 and the US-China trade war

Shafie said the state needed its own package despite the federal government’s initiative.

Rafiq said it would be understandable if the state’s economic package was small due to financial limitations, adding that its resources were limited compared to those of the federal government.

“If the state plans to have fiscal economic intervention at this difficult time, the effort should be directed at areas where it can lower the burden of individuals, households or firms.

“Efforts to ease their financial cash flow management would be helpful. For example, workers or firms that are affected by the Covid-19 outbreak might be given assistance or incentives,” he said.

Firdausi said the state should zero in on key sectors such as tourism and agriculture while also assisting those in the B40 income group.

For instance, he said, SMEs in the tourism sector such as tour or event companies could do with grants from the state to provide better services.

The government could also consider providing additional loans but at low-interest rates to tourism-related businesses, he said, adding that the federal package had introduced tax exemption mechanisms for the business community.

“Sabah could play a big role in supplying food and raw material through the agriculture sector, which is close to the state’s heart, not only within the state but throughout the country.

“So funds are needed here as the economy won’t recover immediately,” Firdausi said.

He added that such efforts would be in line with the Sabah Agriculture blueprint.

To help people at the grassroots level, he said, the government could consider coming up with special discount schemes for the lower income group for the purchase of daily necessities, and even provide transportation subsidies.

“This is intended to encourage people to spend. In the federal package, they are giving cash to certain parties like taxi drivers and tourist guides – in Sabah, we can go beyond.

“We can, for example, help farmers, especially in rural areas so they have enough food and at the same time continue to work in their fields with the government assistance that is provided.”

Firdausi and Rafiq both said the state must work closely with the federal government to avoid an overlap.

If everything is planned out well between both governments, Rafiq said, the impact felt by the people would be much greater.