A portion of Malaysia’s MYR7bn economic stimulus package earmarked for Defence Ministry

July 27, 2009 - PRLog -- We have revised down our 2009 growth forecast for Malaysia from 3.1% to 1.4% after the latest industrial production data revealed that factory output contracted at its fastest pace in seven years in November. Moreover, with the global economy unlikely to pick up until the first half of 2010, we have also revised down our 2010 growth forecast from 4.6% to 3.2%. While planned fiscal stimulus and anticipated interest rate cuts (we are expecting Bank Negara Malaysia (BNM) to follow up its 25bps interest rate reduction on November 24 2008 with a total of 50bps worth of cuts in 2009) should help to keep growth propped up in 2009, we do not believe that they will be enough to protect the economy from a weakening external environment and its knock-on effects on private consumption and investment.

Defence Minister Datuk Seri Abdullah Ahmad Badawi has indicated that a portion of Malaysia's MYR7bn economic stimulus package would go to the Defence Ministry for additional development projects. Major defence procurements at the start of 2009 included two contracts totalling MYR603mn with two companies supplying parts and components to the Royal Malaysian Navy (RMN) for five years.

It was also announced at the start of 2009 that the country's first submarine, a French-made Scorpeneclass KD Abdul Rahman, is scheduled for delivery in July 2009. The Sepanggar Naval base, a 190ha naval base project costing MYR636mn, is also scheduled to be completed in July. The submarine will be housed at the new naval base. A second submarine KD Tun Abdul Razak, is expected to arrive at the end of the year.

In February 2009 the Malaysian government announced that military assets and resources of ASEAN member countries would be used in tackling non-traditional threats such as providing natural disaster relief and curbing crime in border areas such as human and drug-trafficking. Malaysian Prime Minister Datuk Seri Abdullah Ahmad Badawi said such assistance, however, would only be provided after the country affected by the natural disasters, such as the cyclone or tsunami, requested it. He said agreement on the use of the military assets was a follow-up to the decision of the ASEAN Defence Ministers' Meeting (ADMM) in Kuala Lumpur in 2005 which called on the defence sector to also participate in the realisation of ASEAN's goal of forming a regional community that was happy, peaceful, safe and stable.

We continue to expect that the Malaysian government will increase defence spending by 4% annually, in real terms, over the coming years. Absolute increases will depend in part on how the country's economy fares in the face of the global financial crisis.

http://www.companiesandmarkets.com/r.ashx?id=5771120N783555

# # #

Browse thousands of market research reports covering major markets, companies and countries. Www.companiesandmarkets.com is a central source of market research reports from the world’s leading analysts and report publishers.