The coronavirus has not only cost of billions of ringgit in losses for the Malaysian economy but also forced many to restructure their business or even close shop.
A pressing issue for many is financial liquidity, says Ndiame Diop, the World Bank country director for Brunei, Malaysia, Philippines and Thailand.
“The pandemic has caused many demand and supply shocks among firms operating in Malaysia. This affects firms’ capacity to employ workers and has lowered their liquidity constraints as buffers dry up due to the prolong impact of the movement controls,” he says, pointing to a study by the World Bank in February.
“Based on the Business Pulse Survey conducted in February 2021 by the World Bank, it was found that Malaysian firms face pressing liquidity constraints.
“Regional comparisons suggest that Malaysian firms have less cash in hand on average at 4.9 months compared to peers in Indonesia (9.5 months) and Vietnam (5.9 months) to sustain their operations. Any initiatives to address these pressing liquidity constraints is definitely a welcome move.”
He adds, “As we point out in our Malaysia Economic Monitor launched last month, clear and accessible support programmes will be critical to provide relief to firms in the immediate term. This includes the extension of conditional wage subsidies and expediting approvals and disbursements for existing loans.”
Besides the full range of stimulus packages to support the economy, another aspect that will encourage a quicker, more sustained recovery would be the clear implementation of SOPs for businesses, as well as a re-look at the classification of essential and non-essential industries which may hamper the efficient functioning of current supply chains, Diop adds further.
Crucially, he stresses, it is imperative for the vaccination programme to have sufficient reach in order for economic activities to be carried out safely and for prolonged economic lockdowns to be avoided.
“Adverse effects of economic closures have already been widely felt, most damaging for businesses that do not have sufficient financial buffers to carry them through, forcing some to shut down operations altogether,” he notes.
The other main area that economy-wide policies try to address is the additional support to the healthcare sector, especially in terms of frontline compensation, says Diop.
“In Singapore, for example, public healthcare workers received pay rises and China implemented an income tax exemption on overtime and benefits in kind.”
Prof Mahendhiran S. Nair of Sunway University agrees that it is vital for us intensify vaccine rollout further to get herd immunity in order to progress towards economic recovery.
“Next we should give priority to workers getting the vaccines – get the big employers to assist on this. The more of them are vaccinated, the quicker they can get back to work and revive our economy,” he says.
Prof Mahendhiran says we also need to push for the development of the local supply chains to support local industries and to mitigate disruptions to the external supply chains.
He adds, as the government is the biggest buyer and service provider, it must source out from the local market first before reverting to external markets.
Opportunity in adversity
Diop believes that while the most urgent need today is to provide relief to the private sector, the crisis could be used as an opportunity to recalibrate small and medium-sized enterprise (SME) programmes to respond to the current needs of the firms.
“Covid-19 has changed the way private sector functions and firms operate. For example, the wave of digitalisation has been accelerated in the private sector due to lockdowns as a result of Covid-19.
“To facilitate private sector recovery, short-term policies to re-calibrate existing programmes towards current firm needs such as increasing digital capabilities and skills, in addition to developing an enabling framework that provides more efficient and inclusive financial services, especially for SMEs are crucial.
“These industry support programmes especially for SMEs should be aligned to the strategic level goals as highlighted in the newly launched Malaysia Digital Economy Blueprint and National Fourth Industrial Revolution Policy,” he says.
Prof Mahendhiran feels more needs to be done to push the digitalisation of SMEs.
“The government needs to increase the financial incentives, other financial support and capability development programmes to adopt new digital technologies and tools to become less labour intensive. Greater support and mentorship also need to be provided to micro and SMEs in the digitalisation process,” he says.
Dr Yeah Kim Leng, also of Sunway University, opines that the government can boost recovery through a short-term resuscitation thrust that is synchronised with a medium to long-term restructuring and economic acceleration plan centred on digital transformation, “green growth” and the United Nations’ Sustainable Development Goals.
“The short-term plan includes various strategies and measures to revive small businesses and medium to large enterprises hard hit by the pandemic. It will be necessary to fast track and expand public investment in infrastructure projects such as roads, railways, ports, telecommunications, water and sewerage as well as in foundation-setting sectors such as education, health and the environment.
“Those that have strong multiplier effects could be prioritised for quick roll-out,” he says.
Revitalising tourism, F&B and other services
The other major recovery thrust could focus on efforts to attract and retain high value foreign direct investment especially in technology and skills-intensive manufacturing and service industries, says Dr Yeah.
“The critical initiatives encompass federal-to-state-to-local authority (whole of government) approach to enhance the country’s investment environment through more efficient and intensive government facilitation and support.”
Prime Minister Tan Sri Muhyiddin Yassin last week told Parliament that the government will announce the continuation of the National Recovery Plan (PPN) and fine-tune other economic recovery measures during the tabling of the 12th Malaysia Plan (12MP) and Budget 2022.
The 12MP is expected to be tabled in Dewan Rakyat on Sept 20, followed by Budget 2022 on Oct 29, local news agency Bernama reported.
“I would like to inform that Budget 2022 will focus on three key areas, namely the agenda to drive economic recovery, rebuilding country’s resilience and catalysing reforms – or Recovery, Resilience and Reform.
“Towards this end, special focus will be given on efforts to revive the affected sectors, such as tourism, improve the capability of the public healthcare system as well as the social protection scope, and boost the digital economy to strengthen the nation’s competitiveness in facing the new normal globally,” he was quoted as saying at the ministers’ briefing session in the Special Meeting of the Third Session of the 14th Parliament last Monday.
Under the economy stimulus package, overall, the Malaysian government’s assistance covered key sectors such as tourism, food, healthcare and other sectors such as small- scale projects (contracts for G1 to G4 contractors) and Sukuk Prihatin (minimum RM500), according to the Finance Ministry’s Unit for the Implementation and Coordination of National Agencies on the Economic Stimulus Package (Laksana).
In its recent comparative analysis of government assistance, Laksana suggested that other initiatives which Malaysia could consider are a 50% subsidy on Covid-19 tests for tourists to boost tourism, restaurant revitalisation fund for their food and beverage sector players, and reimbursement of accommodation providers for their lost bookings due to Covid-19 for the entire lockdown period.
Diop suggests the necessity of also subsidising Covid-19 tests for workers, especially in certain sectors such as tourism, F&B and retail that have been hard hit.
“Key containment measures, including mass testing and contact tracing can be a challenge to implement as we see this not just in Malaysia but in many other countries in the region. In Malaysia, Covid-19 tests for all employees to be borne by employers and may add to the financial burdens of many employers, especially SMEs or in certain sectors such as tourism, F&B and retail that have been hard hit.
“Malaysia can pursue measures and initiatives to revive Tourism and F&B with sustainability and resilience in mind. The crisis also offers such an opportunity to kickstart these sectors on the right developmental track,” he says.
With increased vaccination rates in Malaysia, he adds, measures could be taken to implement travel bubbles with other countries that are fully vaccinated, similar to the EU countries’ vaccine passport initiatives where people that are vaccinated are exempted from 14 days quarantine rules.
Ultimately, he stresses, the recovery of these sectors will depend on how well the Covid-19 pandemic is contained.
“Although many policy initiatives are directed at revitalising the tourism sector, undoubtedly the sector bearing the brunt of the pandemic fallout, the success of these measures will also largely depend on how well the Covid-19 pandemic is contained, especially as borders open for tourism activities,” he says, highlighting the Thailand tourism sandbox currently being implemented in Phuket.
“The Thailand tourism sandbox in Phuket has shown this to be a challenge and attempts to jump start tourism activities around the world have proven risky with the detection of Covid-positive cases when travel restrictions are lifted, even within a country.
“The measures of vouchers, testing subsidies, accommodation subsidies will be beneficial in boosting tourism activities but only after sufficient containment of the virus is achieved in order for these initiatives to work optimally,” Diop notes.