Economic Plan To Revive 2021 2023 Economy

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MP SPEAKS | The impact of the pandemic is unprecedented. Globally, 45 million people have contracted the virus and close to 1.2 million have died. In Malaysia, about 250 of our citizens have died, with nearly 31,000 infected.
Covid-19 has affected the world economy severely. Global GDP of 2020 is forecasted to contract by -4.4 percent, in comparison to an expansion of 2.8 percent in 2019. The impact is worse compared to the 2008 Global Financial Crisis, and the slowest in 80 years.
World Bank estimated that the pandemic will push an additional 88 million to 115 million people into extreme poverty this year, with the total rising to as many as 150 million by 2021.
The pandemic has also led to a massive loss of employment and therefore income, with International Labor Organization (ILO) estimated the number of job losses around the world to hit close to 350 million.
Malaysia is not spared from the crisis. The GDP for Q2 contracted by 17.1 percent, and the economy has contracted by about eight percent for the first six months of the year.
Our economic contraction in the Q2 is the worst compared to Singapore (-13.2 percent), Thailand (-12.2 percent), Indonesia (-5.32 percent), and even worse compared to the Global Financial Crisis of 2008 or Asian Financial Crisis of 1997/98.
Many Malaysians have lost their jobs, with the number of unemployed increased by 41 percent between January and August this year. The unemployment rate in Malaysia this year is the highest in 30 years.
Although the government has announced assistance up to RM295 billion throughout all the stimulus packages, direct fiscal injection of RM45billion remained low compared to other countries in the region.
Our stimulus packages (as percent of GDP) is lower than neighbouring countries such as Singapore (18.2 percent), Thailand (9.6 percent), and Philippines (7.4 percent).
As shown by a recent study by UN agencies in Malaysia, many lower-income households have yet to recover from the crisis. Millions of Malaysians are impacted by reduction or loss of income and jobs, with their children facing malnutrition and interrupted education. 
Mental health is becoming a critical issue among Malaysian families. If this is not addressed urgently, inequality will widen further, and it will pose serious risks on social and economic stability in the near future.
Economic recovery plan
A people-oriented economic recovery plan is required, and here is the proposal for an economic recovery in the next two years. The health intervention will not be addressed here, but it is extremely pertinent that Covid-19 cases to be reduced significantly, as without managing the health impact, economic recovery would not be possible.
The objective of the economic recovery plan is to ensure that Covid-19 is managed, the most vulnerable get sustainable assistance and safety net is in place, firms can continue doing business, workers have jobs, and unemployed get employed.
Large scale measures are needed to help the rakyat and reverse the economic decline. We must spend for the many, not for the few.
Protect lives and livelihood
First, economic recovery would not happen if the health crisis is not solved. Assistance towards managing the pandemic must remain a priority, and the relevant ministries and agencies should be given enough resources (financial, equipment and manpower).
The vaccination will be given to everyone in Malaysia.
Second, to protect livelihood and given that many Malaysians are in a dire state, there must be immediate measures to put ensure a safety net is provided, with cash in the hands of those affected to sustain them through this pandemic. The cost of this assistance is about RM50 billion per year.
- A monthly cash assistance will be provided of RM750 per month for the next 12 months for all B40 families, and RM500 per month for all M40 households, single mothers, elderly, OKUs, and homeless. It will cover almost 90 percent of all Malaysians.
All of the family members (above 18 years old) of the recipients must register with the Inland Revenue Board (LHDN), Socso and EPF. The MyKad, BSH database as well as the e-wallet programs are ready-made to implement such cash transfers.


At the same time, all the 110 social assistance and social safety net programs run by at least 30 government agencies and ministries will be combined and centralised under the Women, Family and Community Development Ministry. This will allow for better coordination and cost savings.
- To assist those who are unemployed due to retrenchment or contract termination (excluding those who receive Socso EIS), a monthly cash grant of up to RM1,000 for six months will be given.
- To assist families that need emergency cash, emergency microcredit to troubled households, with a maximum of RM2,500 interest-free loan for families that need temporary money, and additional RM2,500 interest-free loan to rebuild their lives.
- Given that many of our children are malnourished, the Supplementary Feeding Programme (Rancangan Makanan Tambahan) will be extended to all government-run primary school so that the children will have at least one nutritional meal per day. This will be a permanent programme.
Help businesses to maintain workforce and hiring
Third, to help all businesses, several assistances will be provided, which will cost RM 45 billion.
- A grant of RM6,000 to be given to all self-employed, including freelancers, to be paid in equal amounts on a monthly basis (RM500 per month). This would allow 2.4 million of them to re-start their businesses.
However, to be eligible, the self-employed must register their business with EPF, Socso, and LHDN. Currently, about only three percent of 2.3 million total self-employed in the country are registered with Socso. In the second year, the self-employed will be eligible for a wage subsidy or EIS if they consistently contribute to the above-mentioned agencies.
- To assist the SMEs, wage subsidy will be extended for the next 6 months, at the rate of RM900 per month or 75 percent of the minimum wage.
The automatic extension automatic will cover firms of revenue below RM50 million per annum (which is SME Corp definition for manufacturing and services firm). Firms with revenue between RM50 million to RM500 million must show a drop in sales of at least 20 percent in the last six months to be eligible.
- For firms that require additional financing, the government will provide an interest-free loan, co-financing with financial institutions, with a maximum loan amount of RM1 million per firm. This will cover most of the micro and SMEs.
The loan moratorium will also be extended for all firms for another 12 months, subject to a loan amount of RM1 million.
- To support local firms, the government will promote buy Malaysian first. All government agencies and GLCs will procure products and services from the local companies and manufacturers for at least three years.
Reduce cost of doing business and ease cash flow for households and firms
Fourth, to reduce the cost of doing business and to ease cash flow for firms and households, two main thrusts are proposed:
- Charges for government services related to registration, licenses, permits will be temporarily discounted for the next 12 months.
- To assist with the income constraints of the families while acknowledging the stress on the financial sector, there will be a pre-approved moratorium for housing loan (below RM500,000) for the next six months.

This will cover all of B40 and certain segments of M40 that are most impacted by the crisis. This is to ensure that Malaysians would continue to have a roof over their head during the crisis.

- Additionally, LHDN should not be introducing new rules to burden businesses.
Addressing employment
Fifth, to encourage firms to employ and at the same time to address the unemployment in the country, several programs will be implemented which cost about RM20 billion.
- Firms who employ new employees will enjoy a tax deduction for the total cost of wages paid.
- The government will also start RM 10 billion job incentive program to support the creation of new jobs for local workers, by co-paying salaries of all new local hires for one year, subject to a cap, as follows: aged 40 and above: up to 50 percent of monthly salary; and Under 40: up to 25 percent of monthly salary.
- To encourage young Malaysians to be involved in modern agriculture, and to reduce food import bill — from fresh vegetables to meat, dairy products, and processed food - which amounted to RM50 billion per year, the government will provide 6 acres of land (leasehold at a nominal rate) to any young Malaysians below the age of 40 to get involved in modern agriculture.
This initiative will be undertaken with a partnership between the federal government and various state governments. The participants will be provided with a one-off grant, and interest-free loan, and training by Mardi in planting cash crops. 
The products will be supplied to government schools for breakfast meal programmes. The programme is expected to cost RM10 billion per year.
Promoting inclusive development
Special attention will be given to Sabah, one of the poorest states in Malaysia. It is also currently the state with the highest number of Covid-19 cases, and as a consequence, the majority of households and businesses are in a dire state. Thus, to assist the people, additional assistance is needed.
- The state government should provide additional interest loan free on top of what the federal government has provided. This is to help more SMEs that are badly affected by the economic crisis.
- Allocation will be provided to ensure food security. Agriculture and agro-food industry will be heavily promoted, particularly by providing a grant to resuscitate and promote food security in Sabah.
- Internet is crucial and now has become a necessity, thus, the state government will be given extra allocation to build more internet tower especially in rural areas and provide 2GB internet for students free of charge.
Delivery system must reach targeted groups
It is important to ensure that all the assistance reach the targeted groups. Currently, coverage is very poor. Laksana-25 showed that many of the intended recipients still do not get the assistance; soft loans for SMEs still under-utilised as only 42 percent of the total RM2 billion has been utilised with only 0.3 percent of total 900,000 SMEs received the soft loans.
Although 44 percent of RM400 million has been used for Micro Credit Scheme (Tekun and BSN), the applicants are still small at only 1.7 percent of total 693,670 micro-enterprises.
How to pay for the programmes
How do we finance the above assistance, which is estimated at about RM115 billion in 2021 in fiscal injection by the government? It will be paid from four sources:
1. The government will tap into several reserve funds that will be used to help the rakyat. It is expected RM10 billion can be raised from this initiative.
2. Government will divest some of its holdings in GLCs to local GLICs and pension funds. Public entities owned by the rakyat such as EPF, KWAP, PNB, and Tabung Haji will be the main beneficiaries of the diversification, in that way, government asset will be owned directly by the people. It allows the government to raise another RM10 billion from this diversification.


3. Government will suspend all of its the development expenditure in 2021 (RM55 billion), and 50 percent in 2022 (RM30 billion), which equalled to about RM75 billion, that can be used to finance the economic recovery programmes.
There will be negligible impact on economic growth, as existing development projects will continue, in particular the National Fiberisation and Connectivity Plan and the 5G network. The suspension of megaprojects may impact GDP but that is purely from accounting purposes only and makes little difference to the lives of the rakyat at the moment.
For 2021, RM55 billion will be available to finance the economic recovery plans, which is good for the economy as job and firms will spend domestically and generate robust economic activity.
4. The government needs to borrow about RM40 billion in 2021 to cover the shortfall for the programs outlined for the year 2021. The shortfall will be financed via domestic borrowings.
To ensure lower debt payment, the government can sell the debt (sukuk) to BNM at 0.5 percent interest rate, thus avoiding burdening future generations of servicing the debt. The RM40 billion borrowing is lower than the expected annual borrowing of RM50 billion in 2020 to finance development expenditure.
With 70 ministers and deputy ministries, and overpaid salary earned by GLCs and GLICs, they have to make sacrifices too.
The rakyat is suffering, therefore everyone has to share in the sacrifice and it should start with the leadership – “kepimpinan melalui teladan”. They must share the burden with the rakyat.
The salary of the ministers and the deputy ministers will be cut by 30 percent for the next 12 months. There will be the abolition of leave passage for the ministers and deputy ministers. The salary of GLCs and GLICs bosses and board members will also be cut, as several of them are getting stratospheric salaries despite working for a publicly owned firm.


For instance, one of the CEO of the subsidiary of Tabung Haji gets, on average, RM1 million per month in remuneration. There are several CEOs of Khazanah owned companies that also earn, on average, between RM500,000 to RM1 million in remuneration per month.
The salary of the chairperson, CEO and board members will be cut by 30 percent in the next 12 months and no bonuses payable in the next two years. There will also be a 20 percent pay cut of the MPs and 10 percent of the members of the senate.
There will also be a 10 percent cut for senior government officers, at Jusa A and above. The entire savings will be used to finance the allowance for the frontliners, to the single-mothers, OKUs, and the elderly.
The deficit of the government in 2021 will be about seven percent, and debt to GDP to remain below 60 percent. To ensure fiscal sustainability in the long run, the fiscal consolidation will start by 2023, with a target of fiscal deficit of three percent by 2027, with a reduction of deficit by one percent per year.
The spending and investment from the above initiatives will generate robust domestic economic activities. Given that this pandemic affects almost all the countries in the world, with the global demand weakening, it is important that we stimulate the local economy. 
Unlike the previous crisis, the ability to export our way out of this crisis is limited.
Accountability and integrity
To ensure that the above programs are executed well and without leakages, integrity and accountability matters. 
Government trust agencies must have independence from political actors, and thus it is pertinent to establish a Parliamentary Oversight Committee for GLCs, GLICs and Statutory Bodies and mandating the publication of annual audited financial reports on a central GLIC data depository that is available for the public.
The board and management of GLCs, GLICs, Statutory Bodies and government agencies will be run entirely by professionals, and existing politicians must vacate their positions immediately.
The above recommendations, if adopted and executed well and without leakages, the lives of the rakyat will be better, businesses can flourish. Confidence will return and will bring economic, political and social stability, which matters for employment creation for both domestic and foreign investors.
The execution of the plan must be inclusive, and no discrimination by race, region, class, gender, and even among the various sectors whether manufacturing, commercial agriculture, fisheries, and the fishermen, farmers.
Special attention must be given to women, and we must not forget their contribution to the economy.

We have gone through many challenging crises before, which we have overcome successfully. 
However, despite that the current crisis is the most challenging that this country is facing, we are confident, that with the right policies and strong honest and rakyat-centric leadership, we can overcome this one more time.

SHAFIE APDAL is Semporna MP. - Mkini

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

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