‘EMCO will take huge economic toll on Selangor, KL’

 

Selangor and Kuala Lumpur contribute 40% of the country’s GDP and the latest lockdown will affect the country’s economy badly, say economists.

PETALING JAYA: The enhanced movement control order (EMCO) announced in large parts of Selangor and certain areas in Kuala Lumpur will leave prolonged scars on their already struggling economy, warned an economist.

Senior minister for security Ismail Sabri Yaakob announced today that all districts in Selangor, except Sabak Bernam, will be placed under an EMCO from July 3-16 after a spike in cases in the state.

Meanwhile, several localities in Kuala Lumpur – the most of which are around public flats – will also be placed under an EMCO during the same period.

Carmelo Ferlito, CEO of the Center for Market Education, noted that while Selangor and Kuala Lumpur host 25.5% of the Malaysian population, they contribute 40% of the country’s gross domestic product (GDP).

“I believe that at this point, the national economic resilience of the country is compromised for good and the scars will remain for a long time, with our children paying the higher cost of ideologically driven policies,” he said.

Stressing that policies need to be based on a sound trade-off analysis, he cited a recent study by two economists which found that Malaysia has spent RM8 billion to treat Covid-19 patients while the cost of lockdowns was estimated at around RM175 billion per year.

“Investing in the healthcare system for prevention (measures) and timely treatment will cost just a fraction of lockdown costs,” he pointed out.

“So, why insist on a very costly policy that does not produce any significant result?”

He said the country needs a 180-degree change in strategy centred around a focus on developing effective treatments to minimise mortality rates instead of focusing on daily cases.

He also called for the economy to be opened up, but noted this should be accompanied by compulsory weekly tests and the use of effective contact tracing software.

Another economist said that ensuring the EMCO in Selangor and Kuala Lumpur is limited to 14 days will help prevent sustained damage to the affected area’s economies.

“The daily economic losses can be contained if the EMCO is kept as short as possible and not extended,” said Yeah Kim Leng, an economics professor at Sunway University.

“What’s important is for the government to get relief resources ready, especially food and other essential items, for households not able to sustain themselves.”

Yeah said that given the rising infections, the targeted lockdown was needed to prevent critical care facilities from being overwhelmed.

Together with the lockdown, the government needs to accelerate vaccination in those areas, and hope to reduce the infection rate in EMCO areas within the 14 days.

He also called for an “integrated strategy” to contain infections in EMCO areas, stressing that stricter enforcement, monitoring and compliance of SOPs should go hand-in-hand with enhanced testing, contact tracing, isolation and quarantine.

Meanwhile, Malaysian Employers Federation (MEF) president Syed Hussain Syed Husman pointed out that employers, who have already been suffering with the nationwide total lockdown which started on June 1, will now be faced with more difficulties.

He said the lockdown would be especially difficult for SMEs and micro enterprises that are not included in the government’s list of essential economic and service sectors.

“Many more businesses will close and the suffering is only increasing,” he warned.

“Without any revenue during the lockdown, it will be extremely challenging for them to remain sustainable.”

Ferlito noted that the distinction between essential and non-essential services should be abandoned as every business is essential for the person relying on it to put food on the table.

He also observed that the distinction between essential and non-essential businesses is “impossible” to be drawn in practice within a complex economic system.

“What if you can produce food but you do not have your packaging?” he asked.

“And what if your customers are closed? What about transportation and logistics and all the maintenance services required to keep trucks and machines going?

“Drawing a distinction is a symptom of deep economic ignorance.” - FMT