The pandemic has surely changed the dynamics and problem statements of the local economy
by MOHD NIZAM MAHSHAR/ pic by RAZAK GHAZALI
TO WITHSTAND the crisis within the Covid-19 containment period, the best approach would be to push initiatives to ensure an economic standstill in order to prevent the economy from slipping into worse depression or collapse. It is an option, of no choice. However, moving forward, the rest of the journey is still within our decision.
In figuring out a post-containment or recovery plan, many economists or policymakers tend to envisage a Covid-19 vaccine solution, which would enable a V-curve or a worst-case scenario, a U-Curve economic solution — avoiding the L-collapse recession model. However, a sterile business as a natural solution — which is not exciting — does not solve our Shared Prosperity contestation of our current frog in a boiling water economic plight.
Not entrapped in a rhetorical, sloganeering and empty worded vision, Shared Prosperity Vision 2030 (SPV2030) is a dynamic vision that is able to respond to change. As the wording goes: In all crisis, there should be new opportunities.
Covid-19 has surely changed the dynamics and problem statements of the Malaysian economy and some of the situational analysis behind the founding ideas of SPV2030.
The Challenges of Our Time
Key basic analysis or lessons learned from Covid-19 following the changes in Malaysian economic dynamics are as follows:
Malaysians have High Vulnerability
Findings and the established numbers of those who received the Household Living Aid and wage subsidies concluded that 5,015,186 of Malaysian households and 55.1% workers are vulnerable. They are also readily and inevitably susceptible to any economic crises. These findings allude to the conclusion of a need for an aggressive strategy to push the majority of Malaysians to achieve a decent standard of living and the ability to have six months of savings for at least 80% households.
Business Vulnerability is High
The response from the business community on the second stimulus announcement showed two conclusions. First, businesses have an opportunistic mindset. They try to avert the risk back to the government, while also reduce the impact to their businesses and for many, their personal profits (relevant to the 30% upper echelons of the business world).
While for many micro and small and medium enterprises — which possibly reflect some 70% of local businesses — the risk of suffering a business collapse and jeopardising their savings, capital and employments are real issues which are contributed by factors such as inadequate capital sustainability, loss of market and inability to cope with monthly operation costs.
Businesses not Adaptive to Future Economy and Sustainability
A key problem statement of SPV2030 stated that the Malaysian economy has yet to fully embrace or adapt (or is at the lower end of) Digital Economy, and still very much backward in adoption of technology. Additionally, foreign direct investments in high technology areas declined from 2010 to 2018 to almost 15% in three key technology-based sectors. This has made our economy seems to be moving regressively to conventional economy and very much to low-skilled labour dependent. At times of crisis, we now see the value to adopt and adapt technology, the use of digitalisation, the creation of platforms for digital-businesses and the adaptation of high-skilled labour in managing crises.
Overdependence on Low-Skilled Labour
Malaysia is a well-developed country that is seen as regionally competitive because of its high-skilled and well-educated labour force. However, our current economic ecosystem is now well-placed and gearing up towards a more low-skilled dependent labour economy. We are losing out in terms of competitiveness. The impact of Covid-19 in the US has shown that only 29% of the labour force is adapted to work from home and about 90% of them are professional or skilled workers. However, the more imminent threat is unemployment. The rate of unemployment in the US from early March to early April has reached 16.8 million or 10% of labour, bigger than the 1982 double depression impact. It is predicted that the projection could go beyond 20% unemployment in the months to come, which is worse than the 1930s Great Depression. However, despite these challenges, it is an opportune time to prepare our economic ecosystem for high-skilled labour and dumping out the low-skilled foreign workers dependency.
Challenges of Sustainability and Security
Food, health, energy and ecology securities are four key instrumental safeguards during any crises. The average family in Malaysia spends about RM1,266 on food monthly. This spending makes up more than 30% of total household expenditure. Also, on average, a bottom 40% household spends RM852 on food, or 37.3%.
Apart from ensuring these amounts are in the pocket of the families, the government is responsible in ensuring the security of food production, access to the resources and use during a crisis. As per examples shown during Malaysian rice crises in 1974 and 2008, our rice is very much dependent on 30% import and Padiberas Nasional Bhd (Bernas) as the key private licence holder.
In an official statement by the Rice Miller Association dated March 30, 2020, in their inquiry to the Ministry of Agriculture and Food Industries. The ministry’s officials were not able to determine the location of stockpile in Bernas for the millers to acquire and pack for sales and distribution.
Additionally, billions of ringgit on other food products like meat, vegetables and fruits were imported each year, compromising the should-be goal to be a self-sufficient nation. We are comforted with cheap imported food products up until now when our food security is at risk. Dependency on cheap imported food products, especially essential and staple foods, must be balanced out with food security purpose and food production capacity for local and export production on these products.
Beyond food security, matters of health, energy and ecological-climate securities should also be looked into with more details, beyond lip service.
The other pertinent matter would be to transform our fiscal policy from an austerity approach to managing our negative balance fiscal for the purpose of pushing growth as what was announced as our stimulus.
These challenges of our time make us ponder as to what is needed and appropriate to plan for our economic recovery post Covid- 19 containment period. It is either going back to business as usual and continue to suffer as a low model and labour dependent economy; or seizing this moment to push the reset button and start the process of entangling the problems of our economy towards a high-income economy, quality growth, fair distribution and decent standard of living, and a sustainable future as aspired in our SPV2030.
The clock is ticking for the thinking and implementation to start.
Mohd Nizam Mahshar is a seminal figure in the world of policy and civil development. He is currently the CEO of Institut Masa Depan Malaysia and the key architect in the conceptualisation of SPV2030. The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.