The slew of economic news - both global and national - in the last few weeks is very depressing. Every economy is affected by the deepening economic disaster facing the world.

The international business media reports that China's exports fell in November for the first time in seven years with every sign that the workshop of the world faces a major slow-down. Just three weeks ago Japan became the latest major economy to fall into recession.

The news from the US is no better. President-elect Barack Obama is talking of a $800 billion stimulus package and maybe one twice as big while inheriting a massive budget deficit from George W Bush.

A recent World Bank report notes that global oil demand will collapse in 2009, the high commodity prices seen earlier this year will be a thing of the past and world demand for raw materials will fall. The report concludes that the global economy faces "the worst recession since the Great Depression".

For its part, the Asian Development Bank has downgraded next year's growth figures in the Asian region from 7.2 per cent to 5.8 percent in October - the slowest in the last eight years. Even these figures may prove over-optimistic.

While the exact severity and extent of the economic crisis is yet to be determined it is abundantly clear that the world faces the possibility of a catastrophic downturn in its economic wellbeing. It is a crisis that will shape the fortunes of a whole generation.

Domestic news equally depressing

The fact of the world's major economies entering an economic tailspin has enormous implications for Malaysia. That much should be obvious. Our employment creation, exports, revenue, business confidence and sustainability depend very much on what happens in the global economy.

The Malaysian Institute for Economic Research (MIER) has indicated that unemployment will increase from 3.5 percent in 2008 to 4.5 percent in 2009. These figures are historically high and could potentially be much higher as the full extent of the crisis kicks in.

Even the normally cautious MIER pundits reckon that the country is quite likely to experience a real recession next year.

Minister of International Trade and Industry Muhyiddin Yassin told the local media in early November that the country's exports to the US decreased by 9.3 percent between January and September 2008. The crucial electrical and electronic sector alone registered a 14.6 percent decrease, the largest fall of any export sector to the US.

The deeper implications for the wider economy should be equally apparent. The industry accounts for some 43 percent of total employment in the manufacturing sector and contributes 62 percent of total manufactured exports.

Electronics companies, especially US-owned factories such as Intel and Motorola are reducing overtime work and are planning production shutdowns in the coming weeks. The profits of these companies are enormous pressure.

Unisem, the country's second-largest listed semiconductor assembler, posted a second quarter profit decline.

malaysia poor indian community poverty 230807 A drop in global demand for electrical and electronics goods, and a deep-seated crisis of profitability, have negative consequences for employment, the survival of small and medium industries and the health of the economy as a whole.

It also exposes the level of vulnerability of the economy - especially manufacturing - to foreign demand.

Even primary commodities are not immune to the economic malaise. Palm oil sales decreased in the same period while exports dropped for the first time in 15 months.

The dramatic downturn in global oil prices will have a deleterious knock-on effect on government revenues.

In short, we live in depressing times. But as in any crisis there are opportunities to look afresh at what can be done to turn things around.

Stimulus or rescue measures

In the face of such widespread devastation governments and central banks have been forced to act, sometimes admitting (against their instincts) that market solutions are not always best.

For example, as part of a much larger package the Australian government distributed about A$8.7 billion (RM18.9 billion) in cash to families and pensioners to boost confidence, improve retail sales, protect jobs and stall further contraction of the economy.

In a similar vein, the Japanese government announced an US$43.8 billion raft of emergency measures for its already recessionary economy. It involves funds for tax cuts for home owners, business making capital investment and grants to local government with the aim of creating jobs.

Last month, China proposed to inject US$586 billion in a massive effort to avert a more serious slowdown in its economy. The package is the largest economic stimulus programme ever undertaken by the Chinese government.

However, such responses - which at least demonstrate a willingness to grasp the enormity of what is happening to the global economy - are not going to avert disaster by themselves.

As a recent World Bank report warned, the kinds of stimulus packages proposed by Australia, Japan and even China will have only the limited impact. They can only cushion these economies against the full impact of the crisis but cannot compensate for the collapse in external demand.

Specifically, the fiscal and monetary stimulus measures announced so far cannot be expected to compensate fully for lost output as exports have collapsed, along with domestic investment and consumption in many economies. Much more needs to be done.

Malaysia 's response to the crisis

Certainly the challenge for Malaysia going into 2009 is critical. Primary resources will no longer fetch high prices. Domestic demand growth will drop. New investment by local and foreign firms will be limited. That much is clear.

Recession or not, a serious downturn is in the making. The question for Malaysia (as for other countries) is how to reduce the severity and decrease the length of the crisis.

How do we cushion the economy from the full impact of the global crisis? But more than this, do we have the foresight and political leadership to initiate long-term structural changes that are most definitely needed to recreate sustainable development?

To be blunt about it, the government's response to the crisis has been both slow and lacklustre. One example illustrates the point. In October Minister of Human Resources Minister, Dr S Subramaniam, told Parliament that his ministry was in the process of studying the setting up of a retrenchment fund.

factory workers sweatshops 090107 shoes The study would take another six months after which a decision would be made. By the end of November the minister was forced to admit that the fund would not be set up in time to face the "human resource crisis" that is now inevitable. And that was that.

What is abundantly clear as the country enters tough times is that, the government does not have a coherent policy to mitigate the loss of jobs, livelihoods and human suffering.

There are no social safety nets to protect workers - whether in the service or manufacturing sectors. Still less is there a system of social protection for other vulnerable and marginalised groups. It is obvious that those who already face poverty (or live on the edge of it) will be hit extraordinarily hard in the days ahead.

With this social safety net seriously compromised, we can expect a rapid and deep process of impoverishment to take effect as the downturn unfolds. Government inertia threatens to turn the economic crisis in to a full blown social crisis.

Retrenchment fund needed

It should be obvious to everyone that some drastic steps need to be taken. As an urgent priority the government should commit to a RM3 billion retrenchment fund as an immediate initiative to mitigate the negative multiplier effect of job losses.

This would at least create a modicum of confidence in the business community, workers and people at large.

Just as importantly, the retrenchment fund would alleviate human suffering. Among other things, it could provide or expand unemployment benefits including food stamps or vouchers to neutralise the income losses of unemployed workers and vulnerable groups.

By putting money into the hands of these groups, retrenched workers would still be able to pay their mortgages and rents and keep their homes, continue buying consumer goods, boosting demand in the sector and subsequently in the capital goods sector.

A workers' retraining programme should be part of the package. This is a win-win situation for all stakeholders.

Instead the people have been subjected to a policy that is simply too little and too late. The timing of the government's RM7 billion stimulus package scheduled for implementation in early 2009 clearly does not seem to reflect the required urgency.

More worrying still is the government's apparent complacency. Second Finance Minister Nor Mohamed Yakcop suggests that the package is "adequate to sustain economic growth during the current economic situation".

This is patently not true. In reality, the RM7 billion should merely be the first step in a much larger and imaginative set of policies to deal with the enormity of the problem facing the people and the economy.

In short, what is needed is a bold new vision to take the country through the hard times and build a sustainable future.

One can't help feeling that for the government it is business as usual. With their short-term, blinkered interests on the line Umno and its ministers are busy campaigning for the forthcoming March 2009 party elections and jockeying for position.

They play the race and religion cards in order to stoke populist sentiment and win cheap votes. In the meantime, the political masters are fiddling while the economy burns.

This is a prescription for disaster. The people of Malaysia deserve much, much better.

CHARLES SANTIAGO is DAP member of Parliament for Klang. Malaysiakini welcomes contributions from MPs from both sides of the House.