Penjana – a deeply flawed stimulus package

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Not only are people’s basic needs not given enough priority, some thrusts of the package are poorly conceived, Jeyakumar Devaraj writes. 

The Socialist Party of Malaysia (PSM) appreciates the fact that the Perikatan Nasional government recognises the need for government intervention in addressing the economic downturn that we are now undergoing. 

This shows that the government realises that the neoliberal dictum that markets are self-correcting is inapplicable in the current situation. 

But any government intervention has to be well conceptualised and appropriate to the needs of our society. 

Unfortunately, in the package for the June-December 2020 period, announced by Prime Minister Muhyiddin Yassin, has several major flaws. 

Poorest 20% not covered!

The first major flaw is that the “Penjana” package does not address the loss of income of some 1.5 million daily paid workers in the informal sector. 

These include the women who used to serve customers and wash dishes in restaurants, the people who were helping at the many bazaars that are now closed down because of the movement control order, the people in the rural areas who do kerja kampung (odd jobs around the kampong), the helpers on lorries, and many other daily paid workers. 

All these groups of daily paid workers who are part of the poorest 20% of our population are now with no work. The Penjana package has hardly anything for them, and these families will be in serious economic stress in the coming month.

Another big group that will not receive much benefit from the Penjana package are the operators of micro businesses in the bazaars all over the country. These bazaars have not yet been allowed to reopen. Several hundred thousand petty traders have been without an income since 18 March. 

The one-off RM3,000 per small business announced in the previous stimulus package was of help to a portion of these businesses – but how long will that last them? There is no income support for them in the Penjana package.

The above two groups – the daily paid workers in the informal sector and the micro-business operators – were supported by the Bantuan Prihatin (Caring Aid) scheme, which deposited a total of RM1,600 into their accounts in April and May. This has been very useful to these families. 

But there is no follow-up on this initiative. And the above two groups will have hardly any income from now, and there will be those among them who will face difficulty in putting food on the table. This package has to be reviewed urgently if we are serious about the slogan of “leaving nobody behind”!

PSM has been calling for a modified universal basic income to handle the current downturn. We propose that RM1,000 be transferred monthly to the account of the woman of families where both she and her husband do not have any income. We estimate that around two million families will require such a programme. 

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This programme will ensure that the bottom 20% do not end up hungry! We believe that such an income support programme must be an integral part of any emergency economic package for the nation now. 

House rental issue not even recognised!

The Penjana package has failed to tackle the issue of house rentals. Around 25% of Malaysian families live in rented houses. Most of them are from the bottom 40% of households.

Quite a large number among them would experience a drop in household income for the rest of the year, and some of them will face the prospect of being evicted by their landlords.

This issue, which will affect several tens of thousands of families across the nation, has not been even recognised by the drafters of the Penjana package! The prime minister says in the foreword that the government recognises the challenges faced by individuals and will take proactive action, but here again, the stimulus package does not protect the poorest among us.

PSM has proposed that the government sets up housing rent tribunals in all districts to resolve rental issues using a tripartite formula so that tenants who are genuinely unable to make full rent payments are helped by the government to settle an amount equal to 60% of their usual rental payment, while the landlord absorbs the loss of 40% of usual rental payments. 

Unfortunately, no provision in the Penjana package addresses this problem.

Failure to handle pressing health needs of our rakyat

Our public healthcare system is, even in the best of times, overcrowded with long waiting times. 

The need to reduce the risk of Covid-19 transmission led to the postponement of many elective procedures and operations from March 2020 onwards. 

The result: our government healthcare system has a backlog of about 150,000 operations and procedures carried over from the past three months. In addition, many people normally who would have gone to private hospitals for treatment are now going to government hospitals because of the drop in their incomes over the past three months.

The congestion and the delays in government hospitals will get worse, and this will adversely affect the health of Malaysians.
PSM has urged the government to increase the budget of the Ministry of Health so that, among others, it can bring into service the under-used operating theatres in district hospitals and, where necessary, pay specialists in the private sector to provide anaesthetic services on a sessional basis. If required, it can employ other specialists from the private sector part-time to provide treatment in the district hospitals. This will help clear the existing backlog of cases and lead to a more efficient and timely provision of medical services to the people.

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But here again, a pressing basic need has been overlooked: apart from the RM50m allocated to PeKa (a healthcare scheme for the bottom 40%), there is nothing else for the Ministry of Health.

Misconceived targets

Not only are some very basic needs of the rakyat – food (= guaranteed basic income), shelter and healthcare – not given sufficient priority, some thrusts of the Penjana package are poorly conceived.

In the introduction to the section on rejuvenating businesses (p22 in the English version) the planners write “targeted assistance will be put in place to regenerate the most affected economic sectors”.

Further (on p28), the document mentions a RM1bn fund to finance small and medium-sized enterprises (SMEs) in the tourism sector so that they “remain competitive in the new normal”.

This shows up the rather muddled thinking of the planners. The core problem is not “consumer confidence” or “business confidence”. The problem is the risk of infection!

The government has to understand and accept that certain sectors of the economy – aviation, hotel, tourism – cannot be rejuvenated until a medical solution – an effective vaccine or a good treatment protocol – is found for Covid-19. Until then, public health requirements will thwart attempts to revive these sectors. 

PSM agrees that these sectors need funds not to rejuvenate them and get them to function as before but to enable them to downsize in a controlled and socially just manner, while safeguarding their assets so as to survive to “fight another day”. 

These firms will need funds to pay proper retrenchment benefits to their workers and to deal with outstanding financial commitments such as payments to suppliers, rents and loans. These firms will also need funds to maintain their fixed capital – security and maintenance of buildings, storage of aeroplanes, other vehicles and machinery.

The pandemic will pass, eventually. At that time, these firms should be able to restart their businesses. It would be in the nation’s interest that they can do so then, as they would generate employment, bring in foreign exchange and contribute to government revenue by paying taxes.

So we need to help them manage these tough times. But we need to be clear about the nature of the help that they need.

Misplaced priorities

Why is there a need to help housing developers sell their over-priced luxury properties? This initiative is projected to cost the government RM1bn (p44 of the Penjana document). We think this is the wrong way to proceed.

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PSM has suggested that the government should stimulate the construction industry by embarking on an ambitious programme of providing social housing to the people of Malaysia. We could start by building 200 home in each district to be rented out to young families and to families without their own homes. 

Such an approach would provide jobs for those in the construction sector and its suppliers. It would also be socially just as it would meet a real need of the people. 

There are a few other initiatives of dubious benefit in the Penjana package.

Back to the drawing board!

The programmes to handle the Covid-19-induced recession have to be based on a clear analysis of the nature of the problem. 

We cannot resuscitate certain sectors of the economy to their previous levels because of the physical distancing required to bring the pandemic under control. The pandemic has not yet peaked in Europe, the US and in Latin America. So travel from these regions has to be restricted for the next several months at least, and this will affect airlines, hotels and the tourism sector.

In addition, many Malaysian firms produce for the export market. Many of the countries we export to are in recession. Our export market will shrink in the near term. 

No amount of pump-priming will overcome these two major causes of our downturn. Resuscitating the Malaysian economy to its former growth path is not feasible at this point. 

We need to have more realistic goals. The PSM suggestion is that we ensure:

  • every person in the country gets the following basic items – food, shelter and medical care. There should be no compromise on this
  • that the productive assets of our economy – the SMEs in particular – must be given enough support so they can ride the economic storm. They should not be permitted to close down because of cashflow problems     

Based on all of this, PSM respectfully urges the government to improve on the Penjana package. While some items of the announced package have merit, many flawed aspects should be altered. We have outlined some of these in this article. 

The government should get input from various sources – other political parties, unions, civil society groups, NGOs and academicians – to improve on the Penjana package.

The prime minister began his foreword to the Penjana package by saying “we are now living in unprecedented times.” He is right in saying that. We are in uncharted waters right now.

That is all the more reason the government should invite and consider input from multiple sources to craft the best policy response for our nation. PSM would be willing to take part in such discussions.

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