Research and advocacy of progressive and pragmatic policy ideas.
In a new world of acute outbreaks and economic disruption, Malaysia needs a pandemic-proof social safety net.
By Edwin Goh & Nelleita Omar28 March 2020
At the time of this writing, Malaysia’s Movement Control Order (MCO) had just been extended from 31 March 2020 to 14 April 2020. The number of total reported Covid-19 cases in Malaysia had just hit 2,161 cases, with 26 fatalities. Going by experts’ analyses, it would not be surprising if the MCO is extended even further, past 14th April, to achieve the ‘flattening of the infections curve’ that we sorely need.
While Malaysia’s health and security frontliners work round the clock to contain the public health crisis of Covid-19, we also have to contend with the unfolding economic and humanitarian crisis. Following the first MCO announcement on 16 March 2020, President of the Malaysian SME Association Datuk Michael Kang warned that 10% of SMEs will go bust and that up to 1 million Malaysians could be retrenched. After the extension of the MCO, the Malaysian Institute of Economic Research (MIER) predicted a recession, estimating that 2.4 million people could be put out of a job.
While the outlook for full-time and part-time workers is uncertain, it is worse for informal or self-employed workers. Be it gig worker or street vendor, self-employed workers depend on daily wages for survival and most do not have sufficient protection to cushion themselves against income disruption. A small example from the gig economy: our recent study found that the vast majority of gig workers do not have most forms of economic protection, including emergency savings, EPF or unemployment insurance.
Early policy measures were mostly playing catch-up, walking steps behind the sprinting virus. When the first economic stimulus package (ESP) was announced on 27 February 2020 by then-interim Prime Minister Tun Dr Mahathir Mohammad, Malaysia had only 23 confirmed Covid-19 cases. The main goal then was to support the most affected sectors and maintain business confidence. There was some anticipation of a slowdown, which led to lowering the employee EPF contribution rate to 7%, but most measures were aimed at shoring up the domestic tourism sector.
It now feels like a completely different age. After yet another unprecedented political episode for Malaysia, a new Prime Minister and government were sworn in on 1 March 2020. Only two days later on 3 March 2020, a second wave of Covid-19 infections was detected, escalating in the days ahead with the Tablighi Jamaat gathering and the Floating Chariot Festival.
Catching up to the effects of this second wave, the Prime Minister announced the setting up of a Covid-19 fund on 11 March 2020, mainly to aid infected and quarantined patients who’ve lost their sources of income. When it became clear that the economic fallout was affecting more than just those infected, a few stopgap measures were announced on 16 March 2020, including an Employment Retention Program (ERP) for workers who were told to take unpaid leave (though only workers that contribute to SOCSO’s Employment Insurance Scheme or EIS would be covered).
A critical discovery must have been communicated that very same day for on the same evening, the Prime Minister declared a 2-week Movement Control Order to contain the spread of Covid-19. With most businesses shuttered and civilian movement restricted to only the essentials, the full consequences of the pandemic started to become real for Malaysia.
Additional measures were announced on 23 March 2020 to cushion the impact of the MCO, including enabling EPF account 2 withdrawal. Three days after that, on 26 March 2020, the Malaysian Central Bank (BNM) announced a 6-month loan moratorium for individuals and SMEs to the great relief of many. Yet, there was a palpable sense of widespread anxiety. Several economists called for more adequate measures. Worse still, private pleas from health frontliners began to circulate on Whatsapp and social media highlighting the dire shortage of protective gear and medical equipment.
Thankfully, the crisis also brought forth a tremendous surge of support and action from non-governmental actors, partially from a desire to contribute and partially to fill governmental gaps in coverage and speed. Corporates have pledged funding for or acquired medical equipment for hospitals. Concerned citizens have launched resourceful initiatives, such as Hanaf Alkaf and her like-minded associates who are gathering, validating and publicising various Covid-19 funding drives via their one-stop site kitajaga.us.
Religious institutions also stepped up to help the vulnerable, from mosques to state agencies. For example, the Selangor Islamic Religious Council (MAIS) and the Malaysian Department of Islamic Development Malaysia (JAKIM) have launched Tabung Prihatin Covid-19 and Musa’adah Covid-19 fund respectively to aid communities severely affected by the MCO and the outbreak.
This is all to the good, but it is also temporary. As we get to grips with the immediate repercussions of this crisis, we need to start getting ahead of this and other future outbreaks rather than constantly playing catch-up. We need to start anticipating and planning for a new normal.
Yesterday’s announcement of the ‘Prihatin Rakyat’ stimulus package gave some signs that the government is transitioning from reaction mode to a more anticipatory mindset. The new 27 March 2020 round of stimulus adds RM230 billion worth of measures onto the initial RM20 billion announced a month ago, totalling up to RM250 billion or about 17% of our country’s GDP. To be clear, it is not RM250 billion of spending – government injection or expenditure amounts to RM25 billion* and of this, additional cash transfers to individuals and wage subsidies to companies come up to around RM16billion.
*Though whether the government may spend even this amount without bringing it to Parliament is a big question.
At first glance, the most critical measure – cash transfers and wage subsidies – looks too broad. RM1,000 feels very different for a family of two compared to a family of five. The one-off cash transfer amounts and frequencies for those earning below RM2,000 a month also appear insufficient considering that these are the workers most likely to rely on daily wages. The measures for SMEs may also not be adequate; despite the RM600 wage subsidy and statutory payment deferments, many will be forced to take on loans in order to keep paying the bulk of worker salaries as revenue dry up and receivables become further delayed or uncollectible.
We hope that the government will continuously monitor and adjust cash transfer and wage subsidy amounts as the weeks go by. It is likely that additional stimulus is being kept in reserve in the event that the MCO has to be further extended. But as Churchill famously said, “never waste a good crisis”. In terms of social protection, this crisis provides opportunities to design and push through initiatives that would not have the same urgency during peacetime.
This is the time to think through and implement a pandemic-proof social safety net for the long haul. Covid-19 and the MCO have exposed the true vulnerability of workers, particularly those relying on daily or part-time wages. This crisis has also revealed the extreme pressures on SMEs in a way that makes previous financial crises seem mild by comparison.
Being prepared for future pandemics or other acute crises means putting in place a social safety net that helps employers, particularly SMEs, preserve jobs and wages during slowdowns. For now, countries around the world are introducing variations of “resilience budgets” comprising low-interest loans, loan guarantees, and tax deferments amongst others. For the long-haul, we should consider SME emergency reserve funds or insurance policies, which could be part-funded by company contributions.
A pandemic-proof social safety net also needs to be able to channel adequate funds directly into workers’ and families’ pockets during times of income loss or disruption. By Senior Minister Datuk Seri Azmin Ali’s admission, the government has a “good database” of the B40, small traders, SMEs and corporates “who have received government assistance” but not other segments of the population.
Having a comprehensive social safety net requires not only integrating the disparate databases of citizen information that resides within and across several government departments, it also requires automatic enrolment into existing social protection schemes under EPF and SOCSO at a minimum. And although many may decry it as unaffordable or ‘un-Asian’, we should at least start discussing the pros and cons of limited versions of a universal basic income (UBI).
At the time of this writing, the full impact of the MCO is only beginning to be felt. We will know in a few weeks whether the latest stimulus package is adequate.
Still, though Covid-19 and the MCO will pass, we may never return to the days before this public health crisis. Scientists have predicted that it will take at least 18 months to safely roll out a vaccine, warning that we may continue to live in varying states of pandemic in the interim. Big picture thinkers are already anticipating significant changes to the way we live even after restrictions are lifted. Epidemiologists have been predicting the outbreak of a new coronavirus since at least 2015 and expect this one will not be the last.
No doubt, the rakyat will want policymakers to take a good hard look at the preparedness of our healthcare system. But the Covid-19 pandemic is not just a public health crisis, it is also an economic and cultural one. We should also demand for a pandemic-proof social safety net for the long haul. In a new world of periodic epidemic, pandemic and economic disruption, a comprehensive social safety net for all Malaysians should be our utmost priority.
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