GOING back to basics and assuming that a total reset is needed is the best way forward to recover from the economic impact caused by the Covid-19 pandemic, said Daim Zainuddin.
In an interview with The Malaysian Reserve, the former finance minister said perhaps it is also a good time for the government to revive the agricultural and food production industry.
He added that the impact of Covid-19 has been devastating, causing not just the loss of lives but also the collapse of economies and businesses which have led to massive job losses.
“Businesses which have taken years to build collapsed in a matter of months, people from all age groups suddenly finding themselves with no income,” Daim said.
“How do we deal with it? I feel we have to go back to basics. We have to assume that things need to be rebuilt from the ground again. How do you create jobs for people, and how to provide retraining for those who have left their jobs, and what sort of retraining?” he was quoted as saying in the interview.
He added that not every industry has been impacted negatively, noting that the technology firms have flourished at this time.
“Maybe we can do it (the agriculture and food industry) better this time, with greater use of technology and robotics perhaps.
“Again, this affects our education system. Do we need to emphasise on agricultural studies from a more elementary level and combine it with the study of robotics and AI?
“Obviously, I cannot answer in detail how we deal with this economic situation. But I can say we need to go back to the building blocks and prioritise,” said the close aide of former prime minister Dr Mahathir Mohamad.
Daim was also the former chairman of the Council of Eminent Persons which was formed by Dr Mahathir after Pakatan Harapan came to power in May 2018.
He has retired from politics and business, and is currently attending to his small farm.
Below are excerpts of the interview interview:
Q: The crisis is impacting poorer/more vulnerable people more i.e. daily wage workers, self-employed people, those who operate restaurants, in tourism. We’ve seen massive layoffs and complete shutdowns involving SMEs resulting in loss of income for people at the lower end of income gap. What are some of the measures that need to be put in place to prevent the inequality gap from widening further?
A: No one can be spared from the economic crisis. The priority is to protect the vulnerable households and groups as well as businesses, especially SMEs. For corporates, besides tapping into the RM50 billion Danajamin Guarantee Fund, they can seek feasible debt solutions via the Corporate Debt Restructuring Committee (CDRC).
This crisis exposed the inadequacy of our social safety net. I will give you an example. If you are a private employee and contribute to Socso, the moment you lose your job, you can get income from the employee insurance scheme. The 1st month you’ll get 80% of your last drawn salary, and gradually reduced to 30% of last drawn salary in the 5th and 6th month. But if you are self-employed like Makcik Timah or Pak Ali, you have no protection. Do remember that almost half of the self-employed in the country have already lost their jobs.
The government currently provides wage subsidy to firms, the same assistance should be extended to the self-employed too. During the rehabilitation and recovery phases post Covid-19, job placement, skill training and income support programs must be continued for the vulnerable groups. Some form of financial grants and soft loans can be given to support micro-entrepreneurs, including e-commerce and online business.
Q: Are governments financially prepared for crises? The prime minister said we lose about RM2.4 billion a day under MCO. Did we rush to reopen the economy? Is it the case that the government is incapable of supporting the economy in desperate times?
A: Our fiscal space or the government’s balance sheet must be strong enough to deal with the crisis. We have some fiscal space and debt borrowing capacity (52% of GDP) to adopt a counter-cyclical fiscal stimulus. The government should spend more. The government announced stimulus packages of RM260 billion but the actual direct fiscal injection is only RM35 billion, or about 2% of GDP which is too small to make a meaningful impact. The fiscal deficit, according to the Finance Ministry, is expected to increase to about 4.7% from 3.4%, although with the reduction in GDP and higher borrowing, the deficit will be higher.
I am firmly of the view that the government can afford a higher deficit in order to save jobs and firms. When the economy recovers, we can and must pare the deficit down. We have done this many times, during the 80s crisis, 98 crisis, and 2008 crisis. When the economy recovered, we managed to reduce the deficit. Let’s not be too dogmatic, our focus is to save the rakyat. We must do whatever it takes.
To be fair, I can understand why the government was eager to reopen the economy. I think the point of contention by the stakeholders is how it was carried out – their view was that it was very haphazard and lacking very much in a detailed map.
There was no timetable, there were only two days for everyone to prepare themselves, the SOPs differed from sector to sector. In fact, many SOPs were further changed and fine tuned after the prime minister’s announcement. Many groups and business bodies themselves have related how they were called in for consultation only after the announcement was made.
So much was left to be desired in terms of how the lifting of the restrictions was carried out. We have gone from such a strict level where police were everywhere and peoples’ movements were very restricted, to a state where it seems that it’s anything goes. Families can go shopping together, people can travel from district to district at any time. So, the rakyat doubt there was any real map or timeline for the conditional MCO.
As to whether the government is incapable of supporting the economy in desperate times, the question that you should ask is “does this government know what it is doing and does it have the right people to lead the country out of this crisis?
THE MALAYSIAN INSIGHT