Covid-19 in Malaysia: New Economic Aid or Further Fallout

Under renewed political pressure, Malaysia’s prime minister tells the country a positive story of successful response and recovery from the public health and economic crisis. Unions and NGOs do not paint the same picture.

A woman sells plants and parkia beans from a mobile stall along a road in Karak, in Malaysia’s Pahang state on August 14, 2020. Malaysia Prime Minister Muhyiddin Yassin announced an additional RM10 billion economic stimulus package on Wednesday, to help businesses and citizens hit by the coronavirus pandemic. (Photo: Mohd Rasfan, AFP)
Serina Abdul Rahman

Serina Rahman

25 September 2020

With a critical election looming in Sabah, Malaysian Prime Minister Muhyiddin Yassin delivered a special address to the nation on Wednesday. While positive about the Covid-19 response and the country’s economic recovery, for many it raised doubts more than spirits.

Yassin spoke of the success of his Covid-19 aid packages. But were they really successful? He announced a new one but it is unclear where the funds will come from.

Government agencies, not surprisingly, provide some support for the prime minister’s optimism. Two weeks ago, Malaysia’s Department of Statistics (DoSM) announced that unemployment fell to 4.7 per cent in July (a 0.2 per cent decrease from June). Bank Negara Malaysia projected a return to positive GDP growth in the second half of this year.

In August, however, the Malaysian Trade Union Congress (MTUC) demanded a more honest take on the economic situation. The Malaysian Employers’ Federation expects that up to 2 million people may lose their jobs by 2021.

In his speech, Muhyiddin highlighted re-employment successes and cited airline staff who opened businesses after being retrenched. Unfortunately, the bottom 40 per cent (B40) who have limited savings to cover basic needs will not have enough capital to do this.

Malaysian government statistics may not reveal the entire picture. There is no indication whether this 4.7 per cent statistic includes the 15,666 Malaysians who were reported to have lost jobs in Singapore. The figures from the Malaysian High Commission in Singapore exclude workers from Malaysia temporarily laid off due to the pandemic, those retrenched but not yet returned to Malaysia, those whose work permits were not renewed, nor those who resigned in expectation of employers’ insolvency. Singapore’s Ministry of Manpower notes that the sectors most affected are those in which many Malaysians are employed: F&B, construction and manufacturing.

While the recently-introduced Periodic Commuting Arrangement (PCA) and the Reciprocal Green Lane (RGL) have enabled more than 3,000 people from both sides to travel for work, this is not relevant to Malaysian blue-collar workers who must commute daily and cannot work remotely. The cost of staying in Singapore under the PCA, and the self-borne costs of quarantine and swab tests are too prohibitive. Expectations that the border may only fully reopen in mid- to end-2021 do not bode well for this segment, nor for Malaysia’s tourism sector.

In his speech, Muhyiddin highlighted re-employment successes and cited airline staff who opened businesses after being retrenched. Unfortunately, the bottom 40 per cent (B40) who have limited savings to cover basic needs will not have enough capital to do this.

NGO reports from the ground paint a clearer picture of those unable to access proclaimed government assistance; they did not fulfil requirements (urban poor) or do not know how to access aid (indigenous or rural communities). NGOs relate how some were rejected for innocuous reasons such as having satellite television or clean homes, regardless of the number of family members unemployed or under one roof. Food aid is still being distributed daily. However, food packages to indigenous people are few and far between and sometimes filled with inappropriate provisions such as pasta, baked beans and multi-grain rice, including quinoa.

The special address promised a new stimulus package worth about RM17 billion that will be channelled automatically to previous recipients and opportunities to reapply for those who were rejected before. But where will this money come from?

Malaysia’s debt-to-GDP ratio, set at a cap of 55 per cent, was already breached at the end of March 2020 when the ratio reached 58.8 per cent. RM35 billion of the first three aid packages was financed by debt resulting in annual interest dues of RM910 million, if rates remain at their historic current lows.

GLCs, including Khazanah, Petronas and large telcos also helped fund these initial packages. This well may be running low though. Petronas, Malaysia’s economic bulwark, recently reported a RM16.5 billion loss for the first half of 2020. Opposition politicians have already cried foul over the launch of Sukuk Prihatin, a RM500 million digital Islamic bond that invites citizens to “contribute to nation-building efforts”.

Wednesday’s announcement of more government assistance was an attractive pitch slated to encourage Sabahans to vote for the PN-BN leaning coalition of Gabungan Rakyat Sabah, as political stability is a known necessity for economic recovery. But analysts have warned that fiscal difficulties can spike with a second wave of Covid-19 infections.

Malaysia’s daily infection numbers have risen again to three digits and Sabah now has four pandemic red zones but few restrictions on movement. Returnees from Sabah do not need to undergo mandatory quarantine and a swab test is only ‘encouraged’. Three positive cases have already been reported in Kuala Lumpur arising from a visit to Sabah.

Muhyiddin reminded citizens to KitaJagaKita; a grassroots call for the people to help themselves when top-down assistance fails. The nation will have to wait and see how much of this new assistance aids those bearing the brunt of this public health crisis and its personal financial pain.

Dr Serina Rahman is a Visiting Fellow with the Malaysia Studies Programme at the ISEAS – Yusof Ishak Institute

ISEAS Commentary — 2020/148

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute. No part of this publication may be reproduced in any form without permission.