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IDEAS: government needs a comprehensive strategy to return the economy to growth in 2021

Kuala Lumpur, 15 February 2021 – IDEAS calls for the government to strengthen its recovery strategy, in light of the contractions of Malaysia’s Gross Domestic Product (GDP) in the fourth quarter of 2020 (4Q20). The Department of Statistics Malaysia (DOSM) has confirmed the Malaysia economy contracted 5.6% in 2020– the biggest decline since 7.4% in 1998.

In response, IDEAS CEO, Tricia Yeoh said, “The latest GDP figures do not come as a surprise but do underline the scale of the challenge that confronts the Malaysian economy in 2021. To navigate the challenges ahead we need to improve in three areas: firstly, we need greater clarity and consistency in the fight against the pandemic. Second, we need to learn the lessons of the last year to provide the support which businesses and households need. Third, we need to prepare a recovery strategy that strengthens economic resilience particularly for Malaysia’s SMEs.”

To strengthen Malaysia’s efforts to combat the pandemic, Yeoh called for a clarifying of the government: “The government should provide further clarity over the next 6 – 12 months over what public health data points are used to decide on either tighter or looser rules. The government should adopt a pandemic management scale, meaning a tiered approach in the levels of restrictions it decides to implement. It should consider a Pandemic Severity Index as proposed by the Center for Disease Control (CDC), or a set of KPIs to measure the pandemic severity as previously proposed by Dr Khor Swee Kheng of the Malaysian Health Coalition.”

In order to support households and businesses as the pandemic, IDEAS calls on the government to learn from the experience of the last year to improve social protection and support to businesses. Commenting on Malaysia’s social protection system Yeoh said “The COVID-19 pandemic has highlighted gaps in our predominantly employment-based, social protection system.  We need to improve social assistance programmes’ coverage and adequacy to ensure that other vulnerable non-working groups are sufficiently protected. Specifically, the government should investigate the factors that lead to the low take-up rate of EPF’s i-Saraan Scheme and SOCSO’s Self-Employment Social Security Scheme by informal workers and create appropriate incentives for them to contribute voluntarily to these schemes.”

Regarding support for businesses, Yeoh added “We know that SMEs are among the worst hit by the pandemic, but there have been several challenges with ensuring adequate support to these businesses, including the timeliness of support, lack of awareness among SMEs and practical challenges accessing support. The implementation gaps need to be addressed to ensure SMEs can weather the ongoing impact of the pandemic.”

Looking ahead to the outlook for 2021 and beyond, Yeoh said “We all hope and expect 2021 to be the year that we defeat COVID-19 and our economy and society can return to normalcy. However, we must also prepare for future challenges and this means addressing the structural weaknesses the pandemic has exposed. One area is the digital divide between urban and rural areas that affects many economic and social issues. Our research strongly advocates that the government needs to expand internet connectivity to cover both urban and rural areas to ensure digital inclusivity.”

Yeoh added that digitalisation must also be at the heart of our long-term strategy to support SMEs. Many SMEs have yet to digitalise their business activity and this has created additional challenges in the wake of the pandemic. In response, the government needs to widen the scope of up-scaling grants to include utility innovations, as well as reforming TVET and upskilling courses to create industry-ready graduates and increase the digital literacy of Malaysians. To complement this effort, we also recommend developing SME-research institute partnerships to develop a vibrant sectoral research and development and innovation system. The commercialisation of research outcomes will create new and sustainable sources of SME competitiveness.”

“2020 was a difficult year for our society and our economy. To ensure that 2021 is a year when Malaysia can return to growth, we need to adopt a comprehensive strategy which defeats the pandemic, supports households and businesses and lays the foundation for a more resilient economy in the future. The government must work closely with industry, think tanks and researchers to ensure all sectors experience economic recovery and use this pivotal moment as an opportunity to address structural reforms that may also hinder valuable investments from coming our way.”

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2021-02-15T15:28:20+08:00 15th February 2021|Media Statements|Comments Off on IDEAS: government needs a comprehensive strategy to return the economy to growth in 2021