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Malaysia needs a plan for greater coherence, confidence and legitimacy

Yin Shao Loong and Nazihah Muhamad Noor / Malay Mail Share:

Ten months on from the first movement control order (MCO) in response to the Covid-19 pandemic, Malaysia is now in its second MCO in its economic heartland and has embarked on a six-and-a-half-month Emergency. Yet, we still lack a coherent and coordinated all-of-government plan that unifies economic recovery with the battle against the pandemic.

Public anxiety is heightened, investors are openly expressing dissatisfaction, tens of thousands of businesses have folded, 764,400 are currently unemployed, an additional 1–1.7 million jobs are at risk of pay cuts, no pay leave, etc. short of unemployment, around one million are entering an uncertain job market, and there is no clear end in sight.

The government appears to be waging separate battles on several fronts in the absence of an overarching strategy — namely, managing daily cases, securing vaccines, and the Penjana economic recovery plan — with the health and economic plans operating in parallel rather than unison. The recent announcement of a forthcoming National Pandemic Management Strategic Plan gives no indication of a commitment to tightly synchronise health and finance.

This comes with a cost: Public confidence, which can compromise compliance.

To better manage confidence amongst stakeholders, the government must firmly communicate that it has an overarching plan to deal with the public health and economic fallout of Covid-19. The plan must synchronise public health measures with well-timed financial relief, because Covid-19 restrictions in the name of public health typically equate to economic restrictions.

The lag between MCO announcements, SOP announcements and revisions, and possible financial relief gives too much time for confusion to set in through information vacuums.

Announcing clear SOPs and comprehensive economic relief measures simultaneously with tightening restrictions would reduce public dissatisfaction. Synchronising MCO and economic relief measures can reduce the total amount of economic damage inflicted. Less economic damage means an easier recovery which will reduce burdens on both the Treasury and households because we still have a long way to go before this pandemic is over.

While we have already missed the opportunity to do this with the current MCO, the Ministry of Finance (MOF) and the line ministries can move swiftly to target relief for the most vulnerable segments of society.

Among the segments with livelihoods most vulnerable to MCOs are women, youth, workers with lower educational attainment, informal workers and SMEs. Disbursements of cash transfers under Bantuan Prihatin Rakyat and Bantuan Prihatin Nasional should have been brought forward to the MCO launch date alongside additional cash transfers for the vulnerable self-employed. Payroll support for struggling businesses can be revived to stem unemployment. These are all forms of paying people and businesses to stay at home to help flatten the pandemic curve.

Adding to the difficulty of recovery is the over-optimistic assumption that the Malaysian economy would undergo a V-shaped recovery permitting a sharp return to fiscal consolidation in 2021. This  may have led the government to under-budget recovery programmes under Penjana. It is now becoming clear that since the vaccination plan could take 18 months, if not more, 2021 could mirror 2020 economically and a more cautious recovery scenario needs to be budgeted for.

The Ministry of Health’s (MOH) budget for 2021 amounted to 2.2 per cent of GDP, short of the 6 per cent of GDP called for by Director-General Noor Hisham Abdullah. More budget would allow MOH to, among other things, increase tracing and testing capacity which would reduce the need for future economically-damaging lockdowns.

Repeated lockdowns imply a bumpy W-shaped “recovery”. The intensity of these dips can be flattened by tighter coordination between health and finance, as well as timely interventions to prevent the need for lockdowns. MOF should provide more fiscal space for public health measures and stimulating domestic demand.

Our existing acronym-based system, namely MCO, Enhanced MCO (EMCO), Conditional MCO (CMCO) and Recovery MCO (RMCO) does not immediately make obvious what each label denotes in terms of levels of restriction, especially when each iteration seems to have standard operating procedures (SOPs) that are specifically tailored on an ad hoc-basis to each time and place they are introduced. We need a clearer system that eliminates confusion and delayed rollouts of SOPs. Clarity of communication here will reduce economic friction and inspire greater confidence.

Rulings and restrictions must be consistent with the latest scientific findings on how the virus propagates, and should also incorporate socioeconomic considerations, following appropriate risk assessment of cost/benefit of any exemptions. The exemption process must be transparent, publicly disclosing the entity requesting exemption, the deliberations behind the decision and the authority approving the final decision. Informing the public of the rationale behind specific exemptions (for example, being able to go to the gym but not schools during the past CMCO and RMCO) can increase acceptability and compliance.

Ultimately, there must be a core plan with a clear narrative on how we get beyond the pandemic and how all its parts work together towards that goal. It is necessary to have some flexibility in this plan because we all understand that not everything can be known or foreseen — especially since scientific findings are still ongoing — but the government cannot afford to give the public or investors the impression that it is just reacting to events or improvising as it enters the second year of the pandemic. A coherent, unified, and well-communicated plan will be the foundation for a strong recovery.

 

Yin Shao Loong is a senior research associate at Khazanah Research Institute focusing on industrial policy, climate change and sustainability. Nazihah Muhamad Noor is a research associate at Khazanah Research Institute focused on public health and inequality. This is the personal opinion of the writers or organisation and does not necessarily represent the views of Malay Mail.

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