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IDEAS welcomes stimulus package but calls for an exit strategy

Kuala Lumpur, 2 April 2020 – IDEAS recognises that there are no easy choices for policymakers in managing the trade-off between combatting the spread of the COVID-19 virus and protecting jobs, businesses and the economy. While there remain gaps in the stimulus packages announced by the government thus far, IDEAS would nevertheless like to acknowledge the overall responsiveness of policymakers to advocacy effort by NGOs, think tanks, and the public at large.

However, as we enter the second phase of the Movement Control Order (MCO), we think it is increasingly necessary for the government to create a sustainable economic plan, possibly for the rest of the year, that will pave the way to recovery, in addition to stimulus packages that mostly entail stop-gap measures.

As human restrictions continue, the productive capacity of Malaysia’s economy could be fundamentally damaged as businesses are forced to close and the supply chains of goods and services are broken. The government may find itself getting out from a public health crisis just to get into an economic crisis. Existing stop-gap measures may be insufficient by then while the government faces more fiscal limitations to respond effectively. The government needs an exit strategy.

IDEAS recommends the government to incorporate these three components in the longer-term economic plan – reducing short-term business insolvency risk targeted loosening of production clusters, and incentivising upskilling for future recovery.

First, we need to establish an SME Distress Centre which acts as a one-stop information and business support platform to process application for stimulus package programmes in a streamlined manner. Apart from wages, businesses face liquidity challenges too in meeting rental payments and credit terms with suppliers. A special relief mechanism can be considered to include the application of moratorium on commercial rental payments through the SME Distress Centre. Professional support should also be given to business operators who are facing insolvency to explore all funding options, while at the same time register them for a special programme for training and job opportunities.

Second, we need a clear strategy to bring the economy back to normalcy gradually, but with greater speed. The government, on the advice from public health authorities, should create a zoning system for production clusters or territories as a basis to gradually allowing employees to return to work and businesses to resume operating. Better location-based targeting can also allow the government to expand the list of exempted sectors to include vital enabling industries and supply chains which have been coming under strain. At the same time, incentives could be provided to encourage business compliance on mandatory testing of all staffs and other precautionary measures like employees taking temperature before entering business premises. In this context, state governments and relevant regulators should be empowered with well-defined roles.

Third, we should incorporate longer-term thinking in existing stimulus measures aiming at sustainability. For instance, the Wage Subsidy programme is aimed at safeguarding the near-term welfare of employees, but other programmes are needed to provide the incentives for businesses to send workers for reskilling or enhancing SME digital solutions such as remote working tools, in anticipation of an economic recovery. Reskilling and digitalization will shore up the resilience of the Malaysian economy and allowing it to recover faster.

In short, we need a plan for the next six to twelve months, not just the next two weeks. The government has rightly responded to a cry for help with additional spending, but we also have to recognise that as Malaysia emerges from our MCO we will discover a global economy deeply shaken by the COVID-19 situation, with demand dampened and supply chains disrupted. So, it is high time that we introduce sustainability in stimulus spending backed by longer-term thinking in order to pave the way for greater resilience in our economy.

Importantly, the measures need not focus exclusively on more government funding per se, but rather how the government could intervene, facilitate and enable businesses.

IDEAS stands ready to support Malaysia in any way we can.

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For media enquiry, please contact Ali Salman at ali@ideas.org.my

2020-04-02T11:06:13+00:00 2nd April 2020|Media Statements|Comments Off on IDEAS welcomes stimulus package but calls for an exit strategy