From Murray Hunter

Over the last week, political pundits have been reporting on the events after Yang di-Pertuan Agong Sultan Abdullah Sultan Ahmad Shah began calling up political leaders, one by one, for meetings.

With each meeting, there have been various proposals about how Malaysia should be governed in the short term and stories about who will step aside for whom, although some of these stories were deliberately misleading to confuse the people.

In the middle of this week, Malay rulers are holding a special meeting. This meeting will not solve the crisis, but is expected to frame the modus operandi the King will use to come to a decision. It will be a decision many are not privy to.

Any formula for a solution to Malaysia’s current political problem at this stage is only speculation.

However, no matter what solution is reached, what parties and personalities govern, whether it be by Emergency decree or subject to the scrutiny of Parliament, the nation’s problems will remain the same.

After the dust settles later this week, the new government, if there is to be one, must focus on governing and solving the country’s immediate issues.

What requires urgent action by the government?

There has been a general feeling by the business community, and much of the general public, that attention on what needs to be done in the economy has been disrupted through political infighting.

The current situation, midway through 2021, is critical to the very survival of hundreds of thousands of micro-enterprises and SMEs, with the continuation of the lockdown. They contribute 39.9% to the GDP and employ 7.1 million people, 58.4% of the total workforce, and many more within the informal sector.

There are lessons to be heeded from the same situation 12 months ago when the country was under a similar movement control order (MCO). Insufficient funds went to households to directly increase consumption.

Groups, such as civil servants received relief payments, but many from the informal sector missed out. Allowing individuals to access their Employees Provide Fund savings and handout packages at that time did little to ward off hardship.

With an extended MCO, direct cash handouts to those households that need assistance will be necessary to prevent more families going deeply into poverty. The government, at its current level of foreign debt, still has latitude to borrow offshore so that funds can be allocated to generate consumption and increase liquidity within the economy.

There are three immediate inter-related problem areas which must be immediately addressed to save the country from a pending inimitable disaster.

This means kickstarting the economy so people can live without dipping into their savings, rely on handouts or go into debt. This is interrelated with growing unemployment and the dramatic increase in the under-employed who are unable to make ends meet.

While awaiting a solution to the previous two problems, cash needs to be injected into households and create economic demand at the grassroots level to drive business.

Although economists predict a modest 6% GDP growth rate this year, an extended MCO will erode this.

This figure doesn’t take into account the contributions from the informal sector, which supports many people and has been severely hit by the MCO, receiving very little assistance.

According to an Informal Sector Workforce Survey, this affects 17.4% of the total workforce in Malaysia, where 620,000 have lost their source of work and are unpaid. Wage subsidies have excluded this group, which in addition has dependents to provide for.

An extended MCO will worsen this and could even tilt the economy into recession. Businesses which still remain operational will have severe liquidity problems.

Assistance is needed to lever micro-enterprises and SMEs into buoyant liquidity, first to survive, then to take advantage of a recovery.

There needs to be a drastic increase in lending to ease the business liquidity crisis. The government must assist by providing funds for more than 900,000 SMEs, using their political leverage over the banking sector, much of which is owned by government-linked companies.

There should be a debt moratorium, and schemes where government guarantees are put in place for SME proprietors who have little or no collateral. The counterintuitive practice of banks in restricting lending when the lending risk is high, due to the poor economic environment, must be reversed.

Exports from the Asean region have crashed during the pandemic. With the low value of the ringgit and the low inflation rate, there are optimal conditions for an export-led recovery.

This is especially the case when large firms are exiting China and looking for alternative manufacturing bases. Industries that employ Malaysian workers should be targeted and assisted at both the enterprise and industry level to grow through exports.

Assisting large multinationals that employ foreign workers, and receive 10-year tax holidays from the Malaysian Investment Development Authority, isn’t making a large contribution to boosting the local economy.

Public infrastructure to assist these companies in laid-out industrial parks further takes away taxpayers’ ringgit.

Many SME proprietors have long stopped taking salaries, curtailed operating expenditure and reduced staff to the minimum to ensure their survival.

Relief packages must benefit SMEs and not GLCs. The SMEs that need the most assistance are those which manufacture local products and target local consumers.

A rapid increase in sales for these “labour intensive” SMEs will create demand for Malaysian jobs to soak up local unemployment. Relief packages could be framed in a way to pay subsidies to companies that “employ Malaysians”.

Special attention also needs to be given to the tourism industry, food and beverages, and retail industry. Their business operations are severely curtailed during the enhanced MCO.

It is clearly evident that international borders will not be reopening anytime in the near future, and the income lost through foreign tourism must be made up some other way.

In tackling under-employment, local government must become micro-enterprise friendly. New stalls should not be prosecuted for not having licences or opening up in forbidden locations, but rather assisted to become by-law compliant. Unemployed, desperate Malaysians, who have no income, shouldn’t be further burdened by bureaucracy.

There needs to be a pro-Malaysian worker policy. For example, security companies which employ Malaysians over foreign workers should be given preference when giving out contracts.

Schemes must be put in place for firms to be encouraged to take on graduates, rather than contracting out work to a consultant or contractor.

The government has to find innovative ways to make Malaysian workers more attractive to employers. This may mean giving up the country’s reliance on foreign workers in some sectors.

A consumption recovery is necessary so that domestic investment will follow to boost employment. It is going to be very difficult to increase foreign investment in these times.

Existing SMEs must focus on driving the economy. Money has to be placed directly in consumers’ hands so that consumers can buy products produced by SMEs. This is where much of Malaysia’s under-employment exists. The proposal to extend subsidies on fuel and cooking oil won’t go very far in assisting families.

A new fresh look must be taken of rural Malaysia, where both unemployment and underemployment exist. Rural micro-enterprises need an urgent boost, with direct grassroot programmes to create sustainable micro-enterprises.

This also needs innovative approaches.

In the health area, the government is focusing on vaccinating the Malaysian population to end the threat posed by the Covid-19 pandemic.

With nearly 5,000 cases daily, with outbreaks all across the country, the success of the vaccine rollout is paramount. There have been criticisms about the logistics of the vaccine rollout and vaccine hesitancy has become a problem. There needs to be a decisive Covid-19 plan and transparency, with strong leadership driving it.

The government must switch over from blanket MCOs to specific targeted protection of the aged and vulnerable. If this can be achieved, Malaysia can then learn to live with Covid-19, with the young and healthy working and operating businesses.

Failure to achieve this will result in untenable hardship and a possible deep recession in Malaysia.

This is but one scenario to solve Malaysia’s outstanding issues. The new administration, if there is one, must be creative and generous to its citizens in getting them through these hard times. This will require taking a look at the economy in new ways.

Murray Hunter is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of FMT.