The government has to respond with an effective, broad-based, well-coordinated national policy strategy, Viswanathan Selvaratnam writes.
Malaysia’s biggest challenge is to kickstart the economy and put to work the tens of thousands of laid-off workers.
For this to happen, the chain of infection of the virus has to be broken, followed by a revival of the fragile economy to pre-coronavirus levels. The pandemic has shown us that “the health of the people should be the supreme law” and all else follows from it.
Malaysia faces a daunting task. Both its declining export-dependent earnings and its domestic revenue base will plummet further due to declining global trade and the country’s economic meltdown.
The Economist (21-26 May), the mouthpiece of neoliberal ideology, has warned of a permanent change in the global economy and a fundamental shift away from the current complex interdependent capitalist trade system. The possibility of globalisation unravelling may push countries to protect themselves from another pandemic and to move to self-reliant and self-sufficient national economies.
The Guardian (28 May 2020) reveals that since March, the world economy has continued to shrink at a growing rate.
This impending global shift will thrust Malaysia’s export-dependent economy into a bind. With escalating economic and social costs to be borne to mitigate the deadly pandemic, Malaysia is bound to face resource challenges with the global shift in trade architecture.
We have seen some of these challenges over the last four decades under the then Umno-led Barisan Nasional government: mismanagement, rampant corruption and crony capitalism underpinned by neoliberal trickle-down economic policies.
The coronavirus pandemic has further ravaged an already underperforming Malaysian economy. The economy has been saddled with declines in economic growth, currency, domestic and foreign investments. Add to this mixture sluggish exports, falling prices of crude oil and gas, commodities and electronics, and capital flight.
Consider too the budget deficits, loss-making government-linked companies, inflation, eroding food security and a mismatched and polarised education system.
Then think of the human resources challenges: a bloated civil service, a dependency on cheap semiskilled and unskilled migrant workers (documented and undocumented), stagnant or depressed domestic wages, and.ballooning unemployment including among graduates.
Social problems abound too: high household debt, huge student loan defaults, wide income and wealth disparities, and poverty among marginalised Malaysian wage-dependent workers and households.
The most serious dilemma the country faces is both a lack of domestic food security and the colossal foreign exchange cost of RM50bn yearly on food imports.
The slowdown in global trade, the economic contraction of Malaysia’s major trading partners and the serious impact on the country’s already declining trade and foreign exchange earnings are major economic challenges. If a financial meltdown occurs, it could erode food imports that are essential for people’s daily sustenance. This may emerge as a major threat to lives in Malaysia.
No doubt, Malaysia is in the midst of a global recession, worse than the 1998 and 2008 financial meltdowns, coupled with extreme uncertainty. World exports and imports as well as capital flows have closed down dramatically, challenging the old capitalist order.
Malaysia’s major trading partners – the US, China and the European Union – are, according to The Economist (16-21 May), deep into a level of contraction not seen since the Great Depression of the 1930s. This has prompted these nations to impose trade barriers to protect their domestic economies and move towards self-reliance. This, the Economist says, could shrink world trade by 10%-30% this year, and things could get worse if the global recession is prolonged.
Malaysia must be aware of these major changes and tackle the other challenges we face: the current low investment confidence, the record fall in commodity prices including oil and gas, the depreciating ringgit, the low level of food security, and the need to restructure the economy to the “new normal”.
The uncertain and worrying concern for Malaysians is how long will this global economic crisis last, what its impact will be on the nation’s economy, and how it will affect jobs and livelihoods.
The government’s RM250bn stimulus package was rightly weighted in favour of the Ministry of Health to contain the pandemic.
But immediate one-time limited cash handouts to protect businesses and assist low-income Malaysians will do little if the economic calamity is prolonged. Many will feel the pain especially without adequate social safety nets or if the job market does not improve.
Malaysia must urgently roll out a new comprehensive response to restructure and revitalise the economy, to adapt to the ‘new normal’, and to uplift the people from the brutal ravages inflicted on their finances and social life.
The nation must immediately put in place an unprecedented, nationally oriented and inclusive, economic and social programme to extricate the country from the financial cul de sac it is in. Strengthening food security should be a priority.
These policy measures must be holistic, transparent, accountable and effectively administered to reach out to all the people. People’s basic needs must be met first.
The Perikatan Nasional government, with its “ketuanan Melayu” mindset and a religious nationalist agenda, lacks strong visionary leadership at the helm. It has neither a formal structure nor a common political manifesto except to remain in power.
No wonder many Malaysians are confused, uncertain and anxious about the country’s political governance and direction. They bear the brunt of the many layers of critical economic and social issues that have sprung out of the pandemic and even before it.
To tackle this monumental crisis and the social fallout in a multiracial country requires strong national solidarity and a vibrant democratic space. The government has to respond with an effective, broad-based, well-coordinated national policy strategy.
The immediate policy strategy is for the Malay nationalist PN government, in coordination with its Ministry of Women, Family and Community Development and in alliance with opposition parties, NGOs, community and religious-based associations and village heads, to reach out to the most vulnerable and hardest hit segments of society.
All low-income families in the bottom 40% of households in dire need of food aid have to be helped. Opposition MPs have accused the government agencies in charge of food distribution of failing to deliver promised food aid to this target group in their constituencies.
If so, the consequences for these people could be dire. It also undermines the effort to bring the nation together and rally the people together to launch a unified fight against the deadly coronavirus so that the country can return to normalcy or to the “new normal”.
Even the Financial Times, that bastion of capitalism and neoliberalism, calls for “radical reforms … reversing the prevailing policy direction of the last four decades”, including “basic income and wealth taxes.”
We must have national collaboration to come up with a well-coordinated plan to encourage people to adapt to the emerging “new normal” urgently.
This requires a major shift in economic policy to create a fairer economy. The economy has to be revitalised through a commitment to full employment, more government spending on social programmes, the strengthening of labour unions, restrictions on the financial sector and higher tax rates for higher-income earners and the rich.
The government has to systematically gather data on the key economic sectors that are major drivers of both the domestic and export economy especially those that provide most jobs to the people. This data must be analysed so that we can make valid judgements on the health of these sectors and come up with synchronised policy strategies to revitalise these sectors so that they can be up and running quickly.
Viswanathan Selvaratnam, a third-generation Malaysian, lives in Kuala Lumpur. A higher education specialist, he has taught at the University of Malaya and very briefly at the National University of Singapore