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Last Updated: Wednesday, 21 May, 2003, 09:20 GMT 10:20 UK
Malaysia unveils Sars aid package
Alteration to shop window in Malaysian capital
Malaysia has cut its growth forecast because of Sars
Malaysia has detailed a $1.92bn (1.17bn) stimulus package to offset the damage of Sars and revive the country's sluggish economy.

Malaysian Prime Minister Mahathir Mohamad said the 7.3bn ringgit package, comprising 90 measures, was "necessary to stimulate the economy and to lift confidence".

Measures include a 1bn ringgit relief fund and tax breaks for the tourism sector, liberalisation of foreign investment rules and new funds to help traders.

The flu-like Severe Acute Respiratory Syndrome has killed about 662 people worldwide and infected more than 7,800 people - mostly in Asia - since it emerged in southern China in November.

Two people have died of the disease in Malaysia, which has been chosen as the venue of a two-day global forum on Sars on 17 June.

Pay bonuses

The stimulus package, delayed successively since March, is the country's third off-budget spending programme since 2001.

Mr Mahathir also announced a widely expected cut in the central bank's key interest rate - the intervention rate - of 50 basis points to 4.5%.

To boost consumer spending, he said employees' contribution to the state pension fund would be cut by two percentage points to 9% for a year from June and civil servants would get a half-month bonus.

For the next six months, hotels' monthly electricity bills would be cut by 5%, road tax for taxis halved and there would be an exemption of service tax for hotels and restaurants to soften the impact of Sars.

To encourage health workers involved in the fight against the disease, there would be a 400 ringgit special monthly bonus for doctors and 200 ringgit for other medical staff until the epidemic is wiped out.

The premier said funds would be internally generated, with 1.7bn ringgit from the government's budget, 2bn from the central bank and 3.6bn from other development financial institutions.

Malaysia has cut its official economic growth forecast to 4.5% this year from 6.0-6.5% as a result of Sars.

Declining dollar

Meanwhile Dr Mahathir urged Malaysian business to become less reliant on the declining dollar and do business in the Euro instead.

"We are concerned about the declining value of the dollar since we are being paid in dollars for our exports," he said.

"The US economy is weakening. They have a lot of problems. Foreign capital is not coming into the US. They [US] are overspending. Arabs are not happy with the US. They are pulling out their funds.

However he said there would be no imminent change to the pegging of the Malaysian Ringgit to the US currency at the rate of RM3.80 to the dollar.

Malaysia fixed its dollar exchange rate in 1998 in the wake of the East Asian economic crisis.


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