The Malaysian government announced the extension of its Movement Control Order (MCO) which sees businesses and people’s movement restricted for another 14 days until 14^th April 2020. 

The MCO extension is absolutely necessary given the steady spread of Covid-19 across the country, amounting to a total of 2320 cases and 27 deaths, putting Malaysia at no. 22 in the list of countries with Covid-19 cases (as at 28 March 2020). While we are dealing rigorously to curb the spread of the outbreak by restricting people’s movement thanks to the great work by ATM and PDRM, we have still not come to terms with the grim reality of Covid-19 and its full-scale impact on people’s livelihood and the economy.

This is the overall government stimulus package thus far:

1. 15% – 50% discount on electricity for affected businesses especially the tourism sector, and a 2% discount on electricity for all other users from 1 April to 30 September 2020, amounting to RM 1.3 billion
2. 6 months deferment of monthly income tax instalment payments for businesses in the tourism sector in the same period
3. 3 months deferment of monthly income tax instalment payments for all SMEs starting from 1 April 2020
4. RM5 billion (up from RM2 billion in earlier pledge) special relief facility in the form of working capital for Small Medium Enterprises (SMEs)
5. RM6.8 billion credit facility for all economic sectors to increase credit access for SMEs
6. RM700 million (up from RM200 million in earlier pledge) in microcredit facility to be provided to affected microentrepreneurs
7. Credit guarantee of up to RM300,000 for SMEs with business record of less than 4 years
8. Syarikat Jaminan Pembiayaan Perniagaan (SJPP) to provide guarantee schemes amounting to RM5 billion with coverage up until 80% for SMEs with credit access difficulties
9. KWSP to introduce the Employer Advisory Services (EAS) on 15 April 2020 to include options of payment deferrals, restructuring and rescheduling of employer contributions
10. Exempt payment for HRDF levy for all sectors for 6 months beginning April 2020
11. Income tax relief of up to RM1000 on expenditure related to domestic tourism
12. Reduction of EPF contribution by employees from 11% to 7% (voluntary) with a period of 9 months.
13. Permission to withdraw RM500 per month on EPF for 12 months for those below age 55
14. RM1.5 billion to be provided to the Health Ministry to purchase equipment and services
15. RM600 (up from RM400 in earlier pledge) monthly special allowance for Covid-19 frontliners (doctors, nurses etc) from 1 April 2020 until the end of this outbreak

1. RM200 monthly special allowance to the Police, Army, Customs, Immigration and related organizations from 1 April 2020 until the end of this outbreak
2. RM10 billion one-off cash handout to the B40 and M40 under the Bantuan Prihatin Nasional comprising private sector employees, farmers, fishermen, small traders and the likes in 2 instalments
3. RM3.2 billion remaining cash handout to be given under Bantuan Sara Hidup (BSH) in July 2020
4. RM270 million one-off cash payment to all tertiary education students in May 2020 amounting to RM200 each student
5. RM25 million to disadvantaged communities and senior citizens through NGOs for food, health and shelter

The stimulus package amounts to RM250 billion which comprise loan deferments, one-off cash assistance, credit facilities and rebates, and it also includes a direct fiscal injection of RM25 billion from the government. The bulk of the stimulus package seems to target mostly the B40 group and extended to the M40 group as well.

The package is mainly targeted to alleviate the difficulty faced by the lower income group who is bound to face severe disruptions to their livelihood during the MCO extension. Focus is also given to the 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 would most likely suffer over a prolonged period. So it is not clear how the government foresees the implications 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 making any real income during the period. 

It is unfortunate that there are still intense debates out there arguing that we must prioritise the wellbeing of the people, as opposed to saving businesses. I feel this is an irresponsible statement. Businesses have to suffer from no production while paying out salaries. And if this bleeding continues as a result of an extended MCO, businesses will not be able to sustain their people under employment. Hence while people’s welfare is paramount in this circumstance and rightfully should be given top priority, people’s economic survival is equally crucial. The collapse of businesses of any size en masse basically means the loss of jobs of millions of people, and thus people’s inability to put food on the table and sustain a decent living.

This is what is clearly missing in the stimulus package, namely the realisation that saving businesses is akin to protecting the welfare of the people. The stimulus package seems to treat them as separate. What good does a one-off payment do when the person loses his job indefinitely?

In fact, the stimulus package offers no real protection for businesses responsible for the wellbeing of millions of people who put food on the table for their families. Deferments are merely time-saving measures, but businesses still have to pay the compounded amount, with interest, once the deferment expires. With zero revenue made during the deferment period, how is this supposed to augur well when businesses have to pay the mounting operational cost at the end of the period?

The Malaysian Institute of Economic Research (MIER) tells us that Malaysia’s GDP may shrink by about 2.9% for 2020 compared to 2019, resulting in an estimated 2.4 million people losing their jobs due to this economic standstill. 67% of the 2.4 million job losses will be unskilled workers. In the same MIER report, projected household income may fall by 12% relative to the baseline, which totals a whopping RM95 billion, as a result of a sharp decline in consumer spending.

This is compounded by the food supply situation in the country. As countries around the region look inward, prioritising food supply for their people first before exporting out, Malaysia is about to find itself in a precarious situation as it imports a total of RM50 billion on food alone. With countries potentially cancelling its export contracts to pay attention domestically, Malaysia needs to urgently invest in domestic food production. Dr. Muhammed Abdul Khalid, adviser to the previous Prime Minister Tun Dr. Mahathir, suggested RM10 billion to be dedicated solely on domestic food production to prepare for the impending food crisis. At the moment, the stimulus package only pledged less than RM2 billion, far short of the potential cost from import disruption on food into the country.    

A poor and hungry nation are potent recipes for a country in chaos. I fear this will only lead to a spike in crimes in the country, when people are left with no choice but to steal to survive, especially from those 67% who will be laid off and have nothing to fall onto. We must not reach that stage at any cost. The Malaysian government must do whatever it takes to address these 2 situations even if it means dipping into its fiscal reserves of more than RM400 billion. 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 a broken country, with a collapsed private sector, will take decades to build up 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 to assist businesses in keeping afloat and maintaining employment, or even creating new ones, just like Thailand’s 400 billion baht stimulus package which focuses on the creation of 14 million jobs or 85% of all employment nationwide. In order to keep capital inside the country and maintain stability in 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 for the government to gain some financial ammunition to manage the crisis.

Our prayers go to the unsung heroes at KKM, Covid-19 frontliners, and fellow Malaysians suffering from this disease. For those with symptoms, know that your honesty saves lives. Let’s pull this through Malaysians. Malaysia Boleh. #stayathome

This article was published by The Star on 30 March 2020. Read more here