THE International Monetary Fund (IMF) declared a global recession due to the Covid-19 pandemic in January 2020. The IMF has even likened the Covid-19 recession to the Great Depression in 1929.
If indeed this crisis manifests into a depression, then we will be in for the long haul. To put things in perspective, it took the world 10 years to fully recover from the Great Depression.
In Malaysia, we are stricken by three "disasters", so to speak. Besides Covid-19, we were struck by a surprise change of government in the most untimely manner and also a sharp drop in crude oil price. The price of crude oil today is hovering at around US$25 per barrel. A year ago, it was over US$60.
The economic cycle and property cycle each experience their ups and downs, booms and busts or peaks and troughs. However, these cycles rarely converge, i.e. they each move separately and differently due to the property market’s inelasticity and imperfect characteristics.
The property cycles always lag behind the economic cycles at around one to two years. In today’s scenario, we see both the economic bust and property market trough converging due to the prolonged downturn in the property market and the sudden economic collapse caused by the Covid-19 pandemic.
Globally, businesses and the general economy are affected by the lockdown in various intensities. In Malaysia, all economic activities except for the essential services have been closed to stop the transmission of the coronavirus. This nasty little virus has turned our world upside down.
Businesses, be they micro, small, medium enterprises or large corporations, are struggling to stay afloat in the face of zero income, recurring overheads, disrupted supply chains and onerous contractual obligations.
Economics 101 tells us to ensure that businesses survive in order to prevent massive retrenchment and unemployment. High
unemployment and job losses will bring social chaos and security issues.
So far, the first few stimulus packages announced by the government were to secure the working class to ensure that they have enough money to tide over this difficult period. Although the intention is noble, perhaps the government over-extended its assistance to the large number of civil servants. During the MCO period, the working class, in particular the civil servants, do not suffer financially. For them, the world just froze. Civil servants are still getting paid staying at home with no threat of unemployment. Yet, they are being "rewarded" financially.
If my statistics are correct, there are approximately 1.7million active civil servants and around 800,000 pensioners. This would translate to about RM4bil in wage subsidy. This huge amount of money could and should have been redirected to stimulate the economy or help those outside the system, namely the gig economy, part timers, freelancers and the mom-and-pop shops who are the worst affected besides the B40 group.
The latest economic stimulus package announced on April 6 fortunately addressed most of the concerns of business owners at large.
However, all the stimulus packages so far are basic sustenance at most. They do not address any economic stimulus in the strictest sense of the word. An economic stimulus is supposed to stimulate or rebuild the economy, increase business activities and enhance productivity.
Besides ensuring that the people are fed and the businesses survive, we also need to prepare for an economic comeback after the MCO and Covid-19. I therefore hope to see the next stimulus package include policies, ideas and action plans to prepare for
The Covid-19 crisis is akin to a reshuffling of cards. Many businesses will close shop or downsize. The resilient ones will remain. Therefore, the first order of the day is to facilitate a temporary relief on contractual obligations, otherwise there will be a lot of litigation cases to handle, such as construction disputes, non-fulfilment of contracts, revocation of tenancies, termination of Sales and Purchase Agreements, non-deliveries, and etc.
A moratorium should be imposed to prohibit legal actions for damages, forfeiture of deposits and breach of contracts for a minimum of six months. This would give the contracting parties a breather to sort out the complications caused by the movement control order. If this is not done, business owners will be busy fighting legal battles and will not be able to concentrate on rebuilding their businesses.
It is also prudent to increase the bankruptcy threshold from RM50,000 to RM100,000 to prevent unnecessary hardships caused by the crisis.
The next step would be to encourage the birth of new businesses. To do this, we need to simplify the processes for registration, payment and licensing of new businesses. Empower micro, small and medium enterprises to flourish with work from home concepts in mind, as this appears to be the way of the future. Encourage digitalization, e-commerce and new start-ups. Provide grants for SMEs to upgrade their work processes online, give tax holidays for new start-ups, tax exemptions, incentives, rebates and reliefs for new businesses. This will hopefully reinvigorate our entrepreneurial spirits and replenish our decreased business population.
In preparation for a revival of the busted economy, workers should also learn new skills, upgrade existing ones and improve their knowledge and expertise by taking up e-learning, online courses and other forms of distance learning during the MCO period.
The Human Resources Development Fund (HRDF) can play a major role in this lockdown period by providing free training courses to the employees to equip themselves post-MCO. The government should encourage both the training providers and trainees by offering tax benefits so that workers would emerge stronger, more effective and efficient as well as more proactive and proficient after this crisis.
This Covid-19 crisis has also taught us the importance of food security. In such a global crisis where the supply chain is affected, panic buying, hoarding and selfish agendas have emerged. Perhaps the government should start home farming initiatives to reduce
the reliance on food imports. Again, support and assistance from the government may empower many homes to consider hydroponics, organic farming and horticulture as a small business venture.
In short, the economic stimulus package should be holistic in nature to prepare the nation for the road to recovery.
MICHAEL K. K. KONG , Kuala Lumpur
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