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Malaysian Stimulus Program Aims to Boost Economy - 2003-05-21

Malaysia has unveiled a stimulus program to help the country's economy recover from Severe Acute Respiratory Syndrome.

Malaysian Prime Minister Mahathir Mohamad announced nearly $2 billion worth of assistance for the country's drooping economy.

The spending program is to be partially funded by the government, with Malaysia's Bank Negara and other finance institutions making up the rest. The package includes 90 measures touching on virtually all aspects of economic activity.

But its immediate goal, in Dr. Mahathir's words, "is to get more people to visit Malaysia." The program provides $263 million in relief for tourism-related businesses. It slashes utility bills and taxes for hotels, restaurants, and taxis.

More broadly, the plan reduces mandatory contributions to pension funds and liberalizes international investment rules to attract capital.

Prime Minister Mahathir also announced a long-expected cut in a key interest rate of half a percentage point, to 4.5 percent.

The Malaysian government originally feared that the war in Iraq would hurt the economy. But the war barely affected Malaysia. Instead, the spread of Severe Acute Respiratory Syndrome in Asia proved to be devastating, especially for tourism.

The Malaysian Hotel Association estimates hotels lost $13 million in the first half of May. Occupancy rates have plunged 25 percent from the year before.

The health damage done by SARS is less dramatic - Malaysia has reported just eight probable cases of SARS, and two deaths. The potentially deadly disease has infected nearly 8,000 people around the world since late last year, most of them in China and Hong Kong.

The Malaysian stimulus package also pays tribute to medical workers confronting SARS. Doctors and medical workers will receive cash bonuses of up to $100 a month until the outbreak is over.