Media Statement by Research for Social Advancement (REFSA) Economics Team on 12 July 2021
On July 3, 2021, the government imposed an EMCO in many parts of the Klang Valley. While the intention is to curb the rise in cases, the country has already been in a difficult lockdown for over a month under the existing FMCO. Since June, economic activity in sectors deemed nonessential, along with movement more broadly, has come to a standstill, affecting livelihoods, our supply chains and investor confidence. Yet cases have not come down in Malaysia’s economic centres, suggesting that the FMCO and NRP have not been effective.
The EMCO goes to show that the country still lacks a solid strategy to effectively control and manage the pandemic, with a continued reliance on misguided lockdowns that have been a lose-lose situation for lives and livelihoods.
As part of a comprehensive strategy moving forward, REFSA’s Projek Muhibah is introducing 10 strategies to address the socio-economic challenges caused by the pandemic. The first strategy, released in late June, covered the need for a systematic system for mass detection and containment. The next two strategies by Dr Ong Kian Ming, Frederik Paulus and Jaideep Singh are stated below.
Strategy 2: Opening up sectors responsibly using science and data and enhanced SOPs
In strategy 2, we emphasise that the FMCO is simply buying time and does not constitute a sustainable solution while the four-phase NRP is not a clear pandemic exit strategy. We call for a move towards SOPs that are dynamic rather than static in nature, which are to be updated regularly with inputs from stakeholders and data from the field. In addition, SOPs should be tailored in accordance with the risk of transmission and existing composition of clusters for the sector and industry in question. To achieve this, there needs to be a two pronged approach:
- Selective reopening of sectors. A one-size-fits-all approach will not do the country any favours. It is time to move past the arbitrary distinction between the ‘essential’ minority and ‘nonessential’ majority of businesses and focus instead on pandemic-proofing spaces:
- Gradually reopen sectors with low transmission incidence (e.g. involving outdoor spaces) using MySejahtera check-ins and tracing data;
- Update SOPs to account for indoor quality in line with scientific evidence that COVID-19 transmission is airborne. For example, Belgium calls for CO2 content in indoor spaces not to exceed 1200 ppm;
- Private-public cooperation is crucial in drafting SOPs for business premises/workplaces to ensure practicality and effectiveness;
- Phases 2 and 3 of the NRP should include efforts to allow sectors to reopen creatively, and eliminate the distinction between essential and non-essential sectors: with effective SOPs, no economic sector should be deemed too risky to open;
- Introduce cautious reopening to travel, with consideration of travel bubbles that limit the interaction between individuals;
- Reopen schools in stages based on the substitutability between home-based and classroom-based learning, with strict SOPs for school-going children as was the case in Portugal and the UK.
- Comprehensive, consistent and dynamic application of SOPs. Portugal’s Lockdown Easing Plan in early 2021 is a useful case study as it provided clear guidelines at every stage, with emphasis on minimising indoor activity and crowding while balancing the needs of businesses:
- Consistent enforcement of SOPs – double standard treatment should not happen;
- Comprehensive decision making – ensure key stakeholders are consulted and avoid constant U-turns and flip flops;
- Adjust SOPs dynamically in accordance with the vaccination rate and the fluid nature of the crisis.
Strategy 3: Continued and targeted economic assistance to employers and employees
Even if a lockdown manages to keep transmission under control (which has not been the case), it cannot be deemed a success if it destroys livelihoods in the process. Since February 2020, the government has introduced nine stimulus packages totalling RM530 billion to assist affected households and businesses.
Though credit should be given for the introduction of the packages in terms of establishing processes, precedents and structures that will be useful for planning, we maintain that the packages remain insufficient, given the extent and duration of the lockdown. The critique of these various assistance programmes can be summarised according to the following points:
- The majority of the allocation in these programmes are not direct fiscal spending but are funds sourced from deferred payments (via the loan moratoriums), loan guarantees and facilities (provided by government agencies and Bank Negara Malaysia) and individuals via EPF. Direct fiscal spending only totals RM87.6 billion or 16.5% across the nine packages.
- The amount of support given to businesses, especially SMEs in the hardest hit sectors such as tourism, travel and retail, is grossly insufficient. Most measures, e.g. the Wage Subsidy Programme and Loan Guarantee Scheme, are either too onerous for companies or unlikely to transform their cash position.
- The amount of support given to individuals and families, especially for those in the informal sector, is grossly insufficient. The amount of the Bantuan Prihatin Rakyat payouts, for example, is relatively small.
Our recommendations to overcome these gaps are the following:
- Raise the arbitrary debt to GDP ratio and the interest service ratio of 15% of the total budget to a higher level for at least 5 years during this COVID crisis period and through the economic recovery period when the pandemic is under control.
- Increase the level of spending especially direct cash injections to individuals and small business owners who have been worse hit by this pandemic.
- Find “out of the box” ways to increase revenue collection in ways which would not hurt small businesses and individuals, e.g. via KWAN, MoF Inc or through a windfall tax.
- Enhance social protection especially for those in the informal and gig sectors. Provide full payment, and subsequently a 50% subsidy, for informal and gig workers to subscribe to EIS.
The existing modus operandi of sweeping lockdowns together with poor communication of SOPs and insufficient assistance for vulnerable households has turned the pandemic into a worrying economic and mental health crisis. Moving forward, the country needs both sensible SOPs and adequate economic support – coupled with the rise in vaccination rates – to ensure we are headed in the right direction before more lives and livelihoods are lost.
– Published in The Sun Daily on 13 July 2021.
Previous strategies of #ProjekMuhibah:
In #ProjekMuhibah Strategy 1, we highlighted the importance of controlling the spread of the virus, with what many public health experts and policy makers have advocated for – the FTTIS+V framework.
In #ProjekMuhibah Strategy 2, we highlight the importance of opening up economic sectors responsibly based on science and data-enhanced Standard Operating Procedures (SOPs). There is a need to develop a more proactive approach so businesses can operate as close to normalcy as possible, whilst we combat the virus.