The government has adopted six approaches or 6Rs (RESOLVE, RESILIENCE, RESTART, RECOVERY, REVITALISE and REFORM) to balance between the COVID-19 containment and people’s livelihood as well as the economy.
Following the reopening of sections of the economy under the Conditional Movement Control Order (CMCO) on May 4, the government is shifting gear towards a recovery mode. It is working on a short-term recovery plan to facilitate the rehabilitation of a fractured economy while preparing the 2021 Federal Budget. The Prime Minister is expected to announce the recovery plan end-May.
Recovery, Revitalise and Reform of the economy will be the focused priority in the tabling of the 2021 Budget at end-October or early November, which will outline measures and policies to revitalise and ensure a sustained economic revival over the next 12 months. The 12th Malaysia Plan (2021-2025) will chart the country’s medium- and long-term strategic directions.
It is to be expected that many households would have depleted savings or incurred debt, and would rebuild savings and, hence, consume less. Similarly, many firms have shut down their business; suffered cash flow problems and also need to rebuild their balance sheet before committing to invest.
The following are five key issues that domestic economy, households and businesses operating in the “low touch” economy are likely to face in the preparation of a short-term recovery plan.
1. Continued vigilance on health and safety
Communities and businesses remain wary about potential ongoing health and safety issues related to COVID-19. Everyone must maintain social discipline and responsibility to maintain social distancing and take protective measures (wearing masks, using hand sanitiser) to keep our community safe and protected until a vaccine is found. Businesses and employers must at all times comply with the Standard Operating Procedures (SOPs) to protect their employees and customers.
2. Facilitating short-term recovery process
Growth stabilisation must be on the mend. The rehabilitation phase is to stabilise domestic economic and business conditions as well as enable the economy to recover sustainably amid the ongoing containment of COVID-19.
It is reasonable to expect domestic consumption and business capital spending to mend gradually, accompanied by a restoration of consumers’ confidence and businesses’ sentiment.
Restoring consumer and investor confidence will be key to domestic economic recovery. This is anchored on keeping clear and consistent communication flows of the government’s economic stabilisation policies, backed by calibre leadership management. Macro-economic and political stability are essential for ensuring a conducive and predictable environment for businesses to continue operating.
Businesses and investors want the 3Cs (Clarity, Consistency and Continuity). The enforcement of SOPs must be consistent and transparent. More importantly, sufficient public and industry engagement is a must before the implementation of public policies so as to avoid policy flip-flops as these hurt businesses and worry investors.
3. Economic stabilisation and recovery
Economic stabilisation and recovery following a major shock can be a tricky and frustrating experience for government, partly because so many economic factors are out of the government’s control.
Challenges remain for businesses. The short-to medium-term challenges are deterioration of market demand, supply chain disruptions and rising operating costs. In the next three to six months, all industries will encounter obstacles restarting a smooth collaboration with suppliers, distributors and customers. Cash-flow problems and supply chain disruptions may slow efforts to get plants up and running.
Cash flow is vital for businesses’ survival and sustainability as they go through cycles of boom and bust. Many small businesses will not survive if there is insufficient cash flow to weather the storm as it takes some time to recoup the revenue loss. ACCCIM’s Quick-Take Survey shows that close to half of total companies surveyed have indicated that they need more than six months to recover their business.
The extension of financial relief and assistance to ease cash flow and operating costs can be considered. These include the Special Relief Fund; a further reduction in foreign workers’ levy or being given exemption till 2021; Accelerated Capital Allowance on the purchase of technology equipment, data solutions, ICT to support the remote office; tax relief on the purchase of personal protective equipment (PPE) and sanitisation cost; extending the special tax deduction on reduction of rental for another six months till end-December 2020. This tax rental deduction is also eligible for rental payment reduction given to large companies’ tenants.
Some form of financial grants and soft loans can be given to support micro business and start-up, including e-commerce and online businesses in the new low-touch economy. Digitisation and automation grant to help SMEs. The Malaysia Digital Economy Corporation (MDEC) and SME Corporation can collaborate and design a programme to facilitate micro and SMEs to realise the potential of digital-enabled businesses. The programmes are also to encourage small businesses to develop partnership assistance networks to expand and make visible the resources they have available to them. Smart agriculture enterprising is the way to go.
4. Enhancing consumption, income and jobs preservation
Concerned with the safety of going outside, loss or reduced income, loss of employment and the possibility of future layoffs, households and consumers would remain reluctant to spend money as usual.
To combat this, one of the ways to spur consumer confidence is through the use of both government and participating merchandisers/retailers/hotels/tour operators/-issued online consumption vouchers that provide incentives to consumers and shoppers. These vouchers can be redeemed at participating dining, shopping, travel, cultural, and recreational enterprises. Cuti-cuti Malaysia and the Buy Malaysia-made campaign must be actively promoted and encouraged through some form of tax credit and relief.
Job placement, skills training and income support programmes must be continued for the vulnerable groups. For the loss of employment of low-income workers, consideration can be given to providing extended income-support funds and training schemes to improve skills and job placement assistance based on the recovering economy and businesses.
As for self-employed persons with less income security and livelihood most badly impacted, they are harder to reach and work in diverse industries and occupations, and some form of income and training support schemes can be provided. For first-time job-seekers – a co-sharing traineeship can be considered between the government and private sectors to help these people, especially new graduates and diploma students.
5. Accelerate projects implementation
The ongoing public infrastructure projects (MRT2, LRT3 and Pan Borneo Highway), RM4-billion smaller rural and socio-economic projects cutting across the ministries and the National Fiberisation and Connectivity Plan must be accelerated.
Over the medium-term, fiscal spending on infrastructure investment in new projects should remain targeted to support domestic demand while enhancing the country’s future productive capacity.
Focus must be given to investing in “new smart infrastructure” used for high-tech, digitalisation and sustainable purposes (renewable energy, climate change, eco-green). These include, big data centres, 5G infrastructure, and charging stations for new energy vehicles (NEVs), solar energy, healthcare, defence technology, etc.
Lee Heng Guie is the Executive Director of the Socio-Economic Research Centre (SERC).