A think-tank requested for assurance from the Treasury that Malaysia's economy will hold if United States suffer from a possible recession.

This was raised by Institute of Strategic and International Studies Malaysia (ISIS) director-general Professor Dr Mahani Zainal Abidin ( photo ) at the post-Budget 2008 panel discussion held in Kuala Lumpur today.

Mahani - who said the Budget 2008 projections were based on US' economic growth - had asked secretary-general of the Treasury Dr Wan Abdul Aziz Wan Abdullah for some "comfort".

"The (budget) projections are based on US economy growing at 2.8 percent. What if the subprime problem were more severe?

"What if the US economy goes into recession? What would be the Plan B for the economy? Perhaps Datuk can give us some comfort that everything is going to be all right?" she said to the audience tickled by her request.

The subprime issue refers to a segment of borrowers who have a history of default which causes credit problems including disappearing liquidity in the global financial market. This would result in a collapse in the financial markets.

Wan Abdul Aziz ( photo ) admitted that Malaysia would be affected by global recession but said the impact would not be so severe because of the country's strong fundamentals and growth.

Malaysia's projected growth rate for the next year is at 6 to 6.5 percent, 0.5 percent more than last years'.

Gap in education

Mahani also urged the government to address the problem with school dropouts and under-performing students as part of the national strategy to build a knowledge economy.

"The incentive so far are the two extremes, one is the lower schools and another is the higher education end but there [are] those who fall in between.

"Student who fail SPM or secured only two credits have nowhere to go, they cannot pursue higher education because they don't qualify.

"I hope the government in the next budget would address this issue because Malaysia can never be a developed country if we don't upgrade the whole scheme of the population and in particular those people who fall into this gap," she said.

The academician added that this resulted in more unskilled workers living in urban areas to suffer from urban poverty.

She also said that the civil service should be restructured and delivery needs to be improved.

About 140 people attended this discussion jointly organised by Malaysia Economy Association, Faculty of Economics and Administration, University of Malaya and the Asian Strategy and Leadership Institute.

Other panellists included Faculty of Economics and Administration, University Malaya dean Professor Dr Norma Mansor and Federation of Malaysian Manufacturers president Yong Poh Kon.