Kuala Lumpur, 17 April 2020 – The Institute for Democracy and Economic Affairs (IDEAS) encourages the government to develop an exit strategy for the eventual end to the Movement Control Order (MCO). The principles of a possible exit strategy are discussed in an IDEAS Bried released today titled “COVID-19 and the MCO: An exit strategy for Malaysia” written by IDEAS Senior Fellow, Carmelo Ferlito and Gaetano Perone, Research Fellow at the Department of Management, Economics and Quantitative Methods of the University of Bergamo in Bergamo, Italy.
The paper considers the current scale of the COVID-19 crisis in Malaysia and the impact of current measures to reduce the spread of infection. Currently, the world averages 15.6 deaths per 1 million inhabitants. In Malaysia, the number right now is 3 per million inhabitants, while countries such as Italy and Spain are at 338 and 386 respectively. The paper concludes that Prudent action by the Malaysian government has kept the spread of infection under control with the number of news cases begins to show a downward movement. As a result, It is expected with all the measures put in place, we can expect the pandemic to slow down in late May to mid-June.
As part of the control measures, the Malaysian government has instituted the MCO on 18th March 2020 and is expected to last till 28 April albeit with a possible chance of further extensions. Undoubtedly, the MCO has had a positive impact in checking the spread of the virus. However, it is causing three major problems. Namely, supply chain disruptions and price hikes in the short term and business closures and job loss in the medium. These can potentially lead to social unrest in the long term. Bank Negara Malaysia estimated that the GDP growth in 2020 may oscillate between -2% and +0.5%. With the effectiveness of the stimulus measure in doubt and the government’s capacity to continue spending highly restricted, the authors recommend shifting strategy to developing an MCO exit strategy. The paper proposes the following features for the strategy:
- In the short-run bring the economy back on-line as quickly as possible, prioritising networked industries. Specific recommendations include:
- To include logistics as among the essential services.
- Rapid feedback from MITI for the industry-related firms.
In the medium-run develop protocols for lower restrictions under strict sanitary conditions. Specific recommendations include a gradual relaxation of MCO under strict sanitary conditions (including mass testing), as recently proposed by Dato’ Seri Azmin Ali.
In the medium and long-run the government should accelerate adaptation by firms, to cope with prolonged disruptions. Specific recommendations include fiscal incentives to automation, to reduce dependence on a large labour force.
According to the authors, who stressed how an economic downturn directly affects human lives, it is now time to speed up on the way to normality, to avoid a further spread of the MCO-induced challenges.
The IDEAS Brief is available at this link https://bit.ly/
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