Ramifications of recent events portend to a growing belief of a long and pronounced US recession (at least by US standards).

How will this affect us? Some say not significantly, since our exports to US is only 16% of total exports. Our reserves exceed US$119 billion. Our banking system has only 2.5% non-performing loans and remains liquid. We have foreign direct investments, never mind if the net is negative.

That's self-denial! We will be affected severely and that, too, in the next 9-10 months. Why? Deny as we will, we are an open economy and our exports to the US, Japan, China and Europe will trend downwards – why do they need our products in a recession?

Our reserves will fall with trade deficits, capital outflows, and the ever persistent negative services account. Banks will 'slow down' credits, businesses will face lower turnover, and the job market becomes tighter.

For banks, the area that has any semblance to the US sub-prime problem is our consumer lending – credit card, car loans and the mortgage market. It is certainly more resilient than before but remains an area of concern.

What could we do? First, we need to prepare the business community, banks and the people of what could take shape by third quarter 2009 and the year 2010. Next, an economic stimulus package of RM60 billion, spread over three years, for infrastructure development – rail, roads ports, airports.

Within this package should be a stabilisation scheme for the housing, retail and small business sectors. Depositors and banks are assured of full financial support – not unlike the Irish government.

Investors/bondholders rely on new credit enhancements and support that allay any fears of a downgrade/low rating.

Further, we need to organise an Asean-East Asia/West Asia conference to seek a coordinated action on monetary policy and new flows of capital for viable projects and initiatives in the region.

Unless we prepare, plan and act now we will face a severity that dwarf the Asian Financial Crisis of '97.