Reopening the Malaysian economy in a new normal

AFTER 47 days of the movement control order (MCO), most businesses have been allowed to resume operations today. As Malaysia’s economy wakes up from the necessary partial shutdown, which has been effective in arresting the spread of the Covid-19 pandemic, the days ahead will look very different. The economy reopens to a new normal.

We enter with a grim picture at the beginning, facing an expected economic loss of RM63 billion from the MCO. Many people would have lost their jobs. Many firms, both large corporates and small medium enterprises (SMEs), would not have escaped unscathed with many of them facing insolvency. The negative effects on credit markets, supply chains, and worker productivity will only dissipate gradually.

The policy objective now is to ensure firms return to their pre-crisis production and employment levels as rapidly and safely as possible.

A detailed plan for the post-MCO phase would require close coordination between the private sector and the government. The unprecedented scale of the pandemic means that the return to work will need to be gradual and phased, and heightened caution is necessary to prevent further waves of infection.

The government, in recent days, has been working to provide information with standard operating procedures for employees to follow social distancing norms to ensure safe work conditions. This support is especially important for SMEs as such companies are likely to have lower capacity than larger ones to scale up the kind of management response necessary and to put in place adequate mitigation measures.

While clear before, the current crisis has increased the benefits SMEs could derive from using new technologies, for instance through remote work and online business platforms. Measures should be identified to further increase the rate of digitisation among SMEs in Malaysia. Subsidized or free broadband access and direct technical support could be provided to SMEs to accelerate the transition to digital platforms.

Once businesses can safely operate, efforts should focus on boosting demand and reactivating supply chains. Adopting broad-based fiscal stimulus consistent with available fiscal space can help lift aggregate demand.

The measures adopted and the way they are implemented should continue to reduce physical transactions or unnecessary face-to-face interaction. Measures should also be scalable and timebound, allowing the government to increase the scope of assistance provided, reduce it as the crisis subsides, and increase it again if the virus surges.

This article is contributed by World Bank senior economist Smita Kuriakose.

source https://www.thesundaily.my/business/reopening-the-malaysian-economy-in-a-new-normal-BB2366542