About the authors Imprint Traversing the Tightrope © 2020 Friedrich-Ebert-Stiftung Syed Marwan is a Fellow at the Institute for Indonesia Ofce Research & Development of Policy (IRDP) and an Jl. Kemang Selatan II No. 2A The Socio-Economic Impact of COVID-19 Assistant Professor at the International Islamic Jakarta 12730, Indonesia University Malaysia (IIUM). He obtained his & Reform of Social Protection Policies in Malaysia degree of Commerce (Economics & Finance) Responsible: from the University of Melbourne, and Sergio Grassi | Resident Director postgraduate studies at International Centre for Syed Marwan Education in Islamic Finance (INCEIF) and PhD in Phone: +62 21 719 37 11 IIUM Institute of Islamic Banking and Finance E-mail: [email protected] Ikmal Nordin (IIiBF). His research interests are in Social impact Website: www.fes-indonesia.org and Socially Responsible Investment (SRI). Facebook: Friedrich-Ebert-Stiftung Indonesia Ng Ming Yang Ofce Ikmal Nordin is Economics Fellow at the Institute for Research & Development of Policy Commercial use of all media published by (IRDP). He obtained his degree in Accounting & the Friedrich- Ebert-Stiftung (FES) is not permitted Finance from the London School of Economics without the written consent of the FES and Political Science, and Masters degree in Political Economy at SOAS, University of London. His research interests are in price dynamics, household consumption behaviour and economic history. Ng Ming Yang is a Research Ofcer at the Institute for Research & Development of Policy (IRDP). He holds an undergraduate degree in Economics from The University of Edinburgh. His primary research scope focuses on socioeconomics and governance. Friedrich-Ebert-Stiftung (FES) is the oldest political foundation in Germany. The foundation is named after Friedrich Ebert, the rst democratically elected president of Germany. The Singapore-based Friedrich-Ebert-Stiftung (FES) Ofce for Regional Cooperation in Asia coordinates activities in the region that connect global and country programmes. Through regional activities, it creates synergies between the work by FES on national and global level, responding to the challenges of globalization, labour mobility and regional integration. FES established its Indonesia Representative Ofce in 1968 and has since 2012 been in cooperation with the Coordinating Ministry of Human Development and Culture of the Republic of Indonesia. In order to pursue social justice in politics, the economy and in the society as one of FES leading principles worldwide, FES Indonesia has been conducting various activities in recent years to support the Social Security Reform, Welfare State, and Social Economic Development in Indonesia as well as promoting Indonesia as a reference to other countries in the region and at the international level for democratization, socio-economic and peaceful development. www.fes-asia.org Traversing the Tightrope The Socio-Economic Impact of COVID-19 & Reform of Social Protection Policies in Malaysia Syed Marwan Ikmal Nordin Ng Ming Yang December 2020 Traversing the Tightrope The Socio-Economic Impact of COVID-19 & Reform of Social Protection Policies in Malaysia Abbreviations 2 List of Tables 4 List of Figures 4 Executive Summary 5 2 Abbreviations AD Aggregate demand BNM Bank Negara Malaysia BPN Bantuan Prihatin National BSH Bantuan Sara Hidup CMCO Conditional Movement Control Order COVID-19 Coronavirus disease 2019 DOSM Department of Statistics Malaysia EPF Employees Provident Fund FMM Federation of Malaysian Manufacturers GDP Gross Domestic Product HRDF Human Resources Development Fund IMF International Monetary Fund ISIS Institute of Strategic and International Studies KRI Khazanah Research Institute LHDN Lembaga Hasil Dalam Negeri MARA Majlis Amanah Rakyat MCO Movement Control Order MIER Malaysian Institute of Economic Research MOTAC Ministry of Tourism, Arts and Culture MPC Monetary Policy Committee MTT Modern Monetary Theory OPR Overnight Policy Rate PENJANA Pelan Jana Semula Ekonomi Negara PSF PENJANA SME Financing PTF PENJANA Tourism Financing RMCO Recovery Movement Control Order SMEs Small and Medium Enterprises SOSCO Social Security Organisation SRF Special Relief Fund SRR Statutory Reserve Requirement UBI Universal Basic Income UK United Kingdom UN United Nations UNDP United Nations Development Programme US United States WAO Women’s Aid Organisation WCC Women’s Center for Change WHO World Health Organization 3 Traversing the Tightrope The Socio-Economic Impact of COVID-19 & Reform of Social Protection Policies in Malaysia List of Tables Table 1. Key programs under the first objective: Protecting the citizens 9 Table 2. Key programs under the second objective: Supporting businesses 9 Table 3. Key programs under the third objective: Strengthening the economy 10 Table 4. Key programs in the PRIHATIN SME+ additional stimulus package 10 Table 5. Key programs under the Empower the People focus area 11 Table 6. Key programs under the Propel Businesses focus area 11 Table 7. Key programs under the Stimulate the Economy focus area 12 Table 8. Malaysia’s lockdown stages 21 Table 9. Breakdown of small and medium enterprises by type, 2016 23 Table 10. Measures to support businesses 29 Table 11. Agencies involved in providing assistance 30 List of Figures Figure 1. Number of recipients for employment-related assistance 22 4 Executive Summary • The COVID-19 pandemic hit Malaysia amidst a period of political turmoil and uncertainty as political parties scrambled to form a new coalition government. Nonetheless, Malaysia fared relatively well, with swift policy responses that managed to flatten the curve of infections from overwhelming the healthcare system. • However, in balancing the dilemma of protecting lives and livelihoods, the movement control order restriction disrupted economic activities which resulted in plummeting headline economic figures and a bleak economic outlook. The crisis laid bare the insufficiency and inefficiencies present within economic and social safety nets in Malaysia, especially towards vulnerable groups such as the poor, self-employed, women, youth and migrants. • The government has responded with various monetary and fiscal stimulus measures to tackle the economic downturn but faced criticism that these responses are inadequate and does not address fundamental socio-economic deficiencies. • Arguably, there is still sufficient room to manoeuvre and implement effective medium and longer- term policy responses to address socio-economic structural issues. The COVID-19 crisis provides an opportunity for Malaysia to revisit and reform its economic and social protection policies to become more equitable and robust in the future. This not only requires policies, but also the political will, to put them into practice. 5 Traversing the Tightrope The Socio-Economic Impact of COVID-19 & Reform of Social Protection Policies in Malaysia 1. The social and economic impact of COVID-19 in Malaysia 1.1 Introduction 2020). However, out of the 11.8 million, 3 million The coronavirus disease 2019 (COVID-19) cases are from the United States (US). The US is pandemic has undoubtedly brought about the country with the most confirmed cases at the significant social and economic consequences time that the data is retrieved. that are unprecedented in our current lifetime. 1.2 COVID-19 situation in Malaysia In economic terms, the crisis might be worse than the Asian financial crisis in 1997, the 1.2.1 Historical trend of infections global financial crisis in 2008 and even the great The first case of confirmed COVID-19 infection depression of the 1930s (IMF, 2020a). However, in Malaysia happened on 25 January 2020. This unlike these previous crises, the COVID-19 was less than two days after Singapore reported pandemic crisis started from a public health crisis its first confirmed case of COVID-19 (Abdullah, first, which led to an economic crisis. This has 2020b). On 11 March 2020, Brunei informed posed an enormous challenge which requires Malaysia that the positive case in Brunei was immediate policy responses focused mainly attributed to a religious gathering in the Seri on “flattening the curves” in both healthcare Petaling Mosque, Selangor, Malaysia (Abdullah, and the economy with regard to bankruptcies 2020a). This gathering had attracted more than and unemployment. The general objectives are ten thousand participants and contributed to a to prevent the healthcare system from being spread across the region. overwhelmed and to minimise economically the With a significant spike in COVID-19 cases downturn of contractions. on 16 March 2020 (140 cases), and more than The COVID-19 pandemic was confirmed by 50 per cent of cases related to the religious the World Health Organization (WHO) on 12 gathering cluster, the Malaysian government January 2020. COVID-19 is a novel pneumonia decided to implement the Movement Control disease which was discovered first in Wuhan, Order (MCO) starting from 18 March 2020 China, and is caused by a novel coronavirus (Malaysia, Prime Minister Office, 2020a). For a (SARS-CoV-2). The virus was reported to the month, starting from 16 March, there were more WHO by China on 31 December 2019 (WHO, than one hundred cases daily. It is important to 2020). Thailand reported the first confirmed case note that the effects of the MCO can only be of COVID-19 outside China on 13 January 2020. confirmed after two weeks as the incubation As the virus began to spread globally, countries period of the coronavirus could be up to fourteen