Going digital and more incentives can mitigate Covid-19 impact


  • Focus
  • Sunday, 22 Mar 2020

WITH the Covid-19 pandemic sweeping across the globe, and Malaysia’s Movement control order (MCO) in place, businesses can turn to digital alternatives and e-commerce as a way to mitigate economic loss.

Although the Covid-19 pandemic impacts everyone, those most adversely affected are workers who are paid on a daily basis and small medium enterprises (SME), says Monash University Malaysia’s Prof Mahendhiran Sanggaran Nair.

Prof Mahendhiran, who is from the university’s Econometrics & Business Statistics department, says that some SMEs are seeing close to a 50% drop in income.

“Many have turned to online digital platforms for their businesses and online delivery of services as a means to cushion the blow to their business, ” says Mahendhiran, who is also Monash Malaysia’s Vice President (Research and Development).

He predicts a surge in online learning materials and digital content arising from this crisis as institutions and organisations also look towards developing digital content to meet the needs of their clientele.

With this in mind, Mahendhiran suggests for those looking for additional streams of income to look towards alternative part-time employment and income using the digital platform.

“If you look at human history, challenges such as Covid-19 has brought about the best of humanity working together to overcome the challenge, and thinking creatively to transcend the constraints imposed by this challenge on our way of life, ” he says through Whatsapp.

Mahendhiran views the MCO as a necessary disruption in our life in order to disrupt the transmission of Covid-19 virus.

“The virus has a major impact on the quality of life of people and it has a long-term impact on the economy, ” he says.

On Wednesday, the International Labour Organisation (ILO) said preliminary assessments show that almost 25 million jobs could be lost worldwide as a result of Covid-19.

However the impact on global unemployment could be significantly lower if an internationally coordinated policy response happens like what was seen during the global financial crisis of 2008/9 where three main pillars were strengthened; protecting workers in the workplace, stimulating the economy and employment, and supporting jobs and incomes.Diversify income sources

Economist Prof Dr Yeah Kim Leng recommends for members of the public whose income has been affected by Covid-19 to look towards income sources from the informal sector such as freelancing work or taking up odd jobs.

“Of course in this current period, it is difficult to find these types of employment. They will have to be creative to find supplementary income sources, ” says Yeah, who is from Sunway University and also Malaysian Economic Association deputy president.

Among those whose incomes are most severely impacted are individuals working in industries like travel, aviation, hotels, restaurants and e-hailing drivers.

“The government can also chip in by encouraging start-ups to create part time jobs for online delivery, special services, or things like data entry. It is possible, with the help of the government, for industries or business associations to provide these types of opportunities, ” he says via telephone interview.

Bigger firms can also look into ways they can outsource some of their business activities to part-timers and leverage on the fact that there is a cheaper supply of services.

“This is especially so for businesses which are least-affected by the epidemic and are looking to increase production capacities. They can look into all these possible opportunities to create employment to support the unfortunate people who were retrenched or looking for supplementary sources of income, ” he says.

“The Malaysian government will likely have to come out with more targeted measures to alleviate the economic burden faced by SMEs and importantly, employees in the medium and low income brackets, ” he says, suggesting measures like an expansion of cash handouts and wage subsidies by the government.

“I think the government is also looking at expanding the stimulus package to provide extended income support for affected industries. That would be helpful to sustain their spending, ” he says.

Yeah recommends for those who are least affected by Covid-19 to continue with their daily spending according to their means.

“If spending stops, the economy grinds to a halt. It will deepen the economic downturn if consumers were to stop spending considering that household spending accounts for nearly 60% of the GDP, ” he says.

In a public health crisis where lives are involved, public health takes precedence over economic priorities, says Yeah.

“In order for the country to survive the crisis with the least amount of loss of life and to minimise the negative economic impact, we all must work to contain the virus, ” he says in support of the MCO.

Calls for another updated stimulus package Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan has called for an updated stimulus package to take into consideration recent developments in fighting Covid-19.

While some bigger companies have contingency plans to minimise the impact of Covid-19, many micro-enterprises with five employees or less are not prepared at all, says Shamsuddin.

He explains that there are about 650,000 micro-enterprises in Malaysia.

He suggests a suspension of the Human Resources Development Fund (HRDF) contribution for all sectors and not just for industries like tourism. This is because all sectors of the economy are hard hit by Covid-19, says Shamsuddin.

“Some businesses saw a reduction of revenue by 30 percent, some unlucky ones saw a 50% reduction. If the government does not come with the right stimulus package, we can possibly see many more people getting retrenched during this period, ” he says.

To avoid widespread retrenchment, employers should be incentivised to retain their employees, says Shamsuddin.

On Monday, the Perikatan Nasional government introduced additional benefits under its revised economic stimulus package for employees who are affected by Covid-19.

These include a RM600 monthly financial assistance for a maximum period of six months for employees who are forced to take unpaid leave beginning March 1.

However, it was reported on Friday that Defence Minister Datuk Seri Ismail Sabri had said that all private sector employers must pay their workers’ salaries during the two weeks of the MCO and that employers should not force their staff to go on unpaid leave.

Additionally, the revised stimulus package allows affected employees with monthly salaries of under RM4,000 to withdraw from the Employee Insurance System (EIS). The RM200 payment for Bantuan Sara Hidup (BSH) recipients will be brought forward to March 16 from its initial date in May with an additional RM100 paid to BSH recipients later in May.

The government will also give a 2% discount to all power consumers in commercial, industrial and agriculture as well as domestic sectors for six months to help cushion the financial impact.

The initial stimulus package of RM20bil announced on Feb 27 outlined a large range of incentives including tax breaks and postponements, and discounts for affected parties.

Help daily wage earners

The Malaysian Trades Union Congress (MTUC) secretary-general J. Solomon has called on the government to give special assistance to daily paid casual workers who depend on the daily wages to make ends meet, particularly if they are from vulnerable sectors.

“There will be huge cutbacks in overtime, commissions and performance bonuses with these sectors [tourism, airlines, and other service sectors] facing huge revenue losses. So the most urgent need will be to address the needs of these workers, ” he says.

“A temporary freeze on repayment on all car and housing loans of this category of workers will go a long way in easing their burden brought about by this unfortunate turn of events, ” he says.

Solomon adds that the government should also monitor the millions of foreign workers whose income will be affected.

“We must ensure their needs are handled too. Ignoring this may lead to social injustice, ” he says.

Meanwhile, the Selangor state government announced its own RM127.78mil economic stimulus package to counter the pandemic which includes a deferral on land tax payments, assistance for stranded undergraduates, benefits for frontline workers fighting the virus, and incentives for licensed traders and hawkers.

The Perak government will be giving a special one-off RM500 aid to registered hawkers and small traders. Kelantan has allocated RM5mil to the underprivileged for the duration of the MCO.

The Johor government announced a number of initiatives, among them a one-off RM1,000 aid to those who tested positive for Covid-19 and rent exemptions for thousands of traders.

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