Is Malaysia really prepared for the economic fallout from Covid-19?

The extension of Malaysia’s movement control order (MCO) until April 14 is absolutely necessary given the spread of Covid-19 across the country, amounting to 2,320 cases and 27 deaths (as at March 28). While we are dealing rigorously with the outbreak by restricting people’s movement, we have still not come to terms with the grim reality of the pandemic’s impact on people’s livelihoods and the economy.

The RM250bil stimulus package announced by the Prime Minister on March 27 generally comprises loan deferments, one-off cash assistance, credit facilities and rebates as well as a direct fiscal injection of RM25bil from the government.

The bulk of the package seems to target mostly the B40 group, and it has been extended to the M40 group as well. The idea seems to be to alleviate difficulties faced by people in the lower income group who are bound to face severe disruptions to livelihoods during the MCO period. Aid is also given to employees in the private sector, as well as local traders and entrepreneurs.

But it is important to note that most of these interventions are one-off payments to the people affected, at a time when the economy will most likely suffer over a prolonged period. So it is not clear how the government foresees the impact of this protracted slowdown on the people, and whether it is ready to face the actual ramifications of people losing their jobs. And this is inevitable since most businesses are not adequately protected, while not generating any real income during the MCO period.

It is unfortunate that there are still intense debates out there pushing to prioritise the people’s wellbeing over saving businesses. I feel this is irresponsible. Businesses face having no production while paying out salaries. If this bleeding continues during the extended MCO period, businesses will not be able to sustain their employees. Hence, while the people’s welfare is paramount in these circumstances and rightfully should be given top priority, the people’s economic survival is equally crucial.

The collapse of businesses of any size en masse means millions of people losing their jobs, and then struggling to put food on the table and keep a roof over their heads. This is what is missing in the stimulus package: The realisation that saving businesses is akin to protecting the welfare of the people. The package seems to treat these issues separately. What good does a one-off payment do when people lose their jobs indefinitely?

In fact, the stimulus package offers no real protection for businesses that are responsible for the wellbeing of millions of people. Deferments are merely time-saving measures – businesses still have to pay the compounded amount, with interest, once the deferment expires. With zero revenue during the deferment period, how do businesses pay mounting operational costs at the end of the deferment period?

The Malaysian Institute of Economic Research tells us that Malaysia’s GDP may shrink by about 2.9% in 2020 compared with 2019, resulting in an estimated 2.4 million people losing their jobs. Of the 2.4 million job losses, 67% will be among unskilled workers.

This is further complicated by the food supply situation. As countries around the region look inward, prioritising food supply for their people first before exporting any, Malaysia will find itself in a precarious situation as we import RM50bil in food annually. Malaysia needs to urgently invest in domestic food production. Dr Muhammed Abdul Khalid, adviser to previous Prime Minister Tun Dr Mahathir Mohamad, suggested that RM10bil be dedicated solely for domestic food production to prepare for a food crisis. At the moment, the stimulus package pledges less than RM2bil, far short of the potential cost from the disruption of food imports.

A poor and hungry nation is a recipe for chaos. I fear this will lead to a spike in crime when people are left with no choice but to steal to survive. We must not reach this stage at any cost. The government must do whatever it takes to address these two situations even if it means dipping into fiscal reserves of more than RM400bil. There would be no point in having a healthy fiscal regime when the country is in chaos.

Fiscal deficits can be dealt with when the country gets back on track after the recession. But it will take decades to build up the economy again. This is not the time to be popular, but a time for sacrifice and decisive action.

Therefore, under these circumstances, the government should reconsider focusing its package and assist businesses to keep afloat and maintain employment, or even create new jobs, just like Thailand’s 400 billion baht stimulus package that focuses on the creation of 14 million jobs, or 85% of all employment nationwide.

To keep capital inside the country and maintain the stock market, Bursa Malaysia should suspend trading for a period of time to curb panic selling. And as many businesses grind to a halt in various sectors, there is a huge surge in demand for logistics, particularly for online businesses and home deliveries, which can grow further through savings in low fuel prices. These are some of the ways in which the government can gain some financial ammunition to manage the crisis.

Our prayers go out to the heroes at the Health Ministry and other Covid-19 frontliners as well as Malaysians suffering from this disease. For those with symptoms, know that your honesty saves lives. Let’s pull through this, Malaysians. Malaysia Boleh. #MYStayHome.

FAZIL IRWAN SOM

Executive director, International Strategy Institute (ISI)

Note: ISI is a not-for-profit organisation that helps connect governments and businesses.

Link : The Star