A mercy-for-all stimulus to save lives, restart the economy

The Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced various unprecedented economic stimulus and relief plan for the benefit of the people at large and to help those in society with the greatest financial exposure. 

This is against the backdrop of the extension of just announced Restricted Movement Order (RMO) to last till April 14 2020.

The world is facing an unprecedented crisis. The Covid-19 pandemic occurs amid the backdrop of on-going uncertainties in the global economy due to the collapse of global oil prices, the US and China trade war, the tension between Iran and US, the ethno-religious riots in India, the dubious Middle East’s Deal of the Century propounded by US President Donald Trump's administration and China’s US$2 trillion domestic debt bubble. 

In one go, the world is being confronted not with a double or triple but multiple whammies.

All other challenges are being eclipsed by the Covid-19 pandemic. While the impact of these uncertainties usually affects nations differently in the sense that developed countries can weather these perfect storms better, the Covid-19 crisis has shown that all countries are equally not immune to the virus.

This creates a level playing field in term of dishing out economic stimulus to the infected economy. 

The question of whether the off-budget stimulus will create excessive inflation, affect sovereign ratings or causing a dent on a country’s economic growth, while important, becomes irrelevant since every country is equally impacted with the virus.

Hence, the first order of business in such a situation is to save lives, while at the same time, resuscitate the economy for its survival and future growth.

It is imperative therefore the economic stimulus that will ensure the survival of the rakyat for now in this difficult and trying time, is placed at the highest priority as oppose to any fiscal prudence, Gross Domestic Product (GDP) growth or rating agency factors. 

The focus must be primarily on the rakyat which comprises individuals and their families, and their livelihoods whether as farmers, fishermen, hawkers, entrepreneurs or businessmen.

Economic stimulus for the future growth of the economy and its macroeconomic stability will be topics of future analysis conducted by many, to assist in ensuring a speedy and robust economic recovery posit the Covid-19 health crisis.

Since drastic time requires drastic measure, our suggestion is for the government to draw on some of its reserve to finance the big expenditures to save lives and re-start the economy. 

In this extraordinary time, austerity consideration will “kill” the ordinary people in the streets and their families along with the economy.

Hence, for now our collective focus should be on the next nine months beginning April 2020. Although we are aware of the uncertainty over how long the Covid-19 saga will last, yet we actually have a precedent in the SARS outbreak where most countries were then on a path of economic stimulus for six months before a return to some semblance of normalcy.

Some of the worthy consideration for the administration to make:

For ordinary people and their families:

• Those with no EPF account or a meagre balance in their EPF account will be provided a monthly cash payout of RM500 for 6 months beginning April, 2020.

• A BR1M-like cash payout of RM1,000 in April, RM2,500 in May and RM3,000 in June.

• Suspension of income tax for M40 (middle-40 income group) for fiscal year 2020.

• A six-month moratorium on all bank loans for individuals affected by the Covid-19 outbreak.

• A six-month waiver on interest payment for credit cards loans for those affected by Covid-19.

• From April, loan arrears can be converted to interest-free term loan not exceeding one year.

• Government services related to registration, licenses, permits, etc. should be temporarily discounted to ease cash flow concerns for households.

• Tap into zakat (tithe) funds for rightful disbursements to the rightful recipients.

For small businesses:

• A six-month moratorium on all bank loans for SMEs affected by the Covid-19 outbreak.

• A six-month waiver on interest payment for credit cards loans of SMEs affected by Covid-19.

• From April, loan arrears can be converted to interest-free term loan not exceeding one year.

• For SMEs, 25 percent rebate on utilities for the first 2 months and 15 percent rebate for another 4 months.

• A discount of 50 percent for rental of market and stalls covering a period of six months up to September 2020.

• Government to bear the payment of sick leave for small businesses for 14 days.

• Government services related to registration, licenses, permits, etc. should be temporarily discounted to ease cash flow concerns for businesses.

• Business rate abolished for one year for small businesses that are affected by the Covid-19.

• Funds channelled to development finance institutions of RM 100 million for businesses hit worst by the Covid-19.

• Companies with up to 250 employees can apply for loans between RM 250,000 and RM 500,000.

• Thirty percent discounts for payments of land rents to all land uses for the year 2020.

• Reduction in corporate tax at the prevailing rate of 24 percent to 18 percent for all hotels for Year of Assessment 2020.

For our front-liners:

• Critical Services Incentive Payment to be increased from RM750 to RM1000 from April until the pandemic ends.

• RM500 monthly allowance for medical doctors, nurses and medical personnel who are working tirelessly in hospitals and clinics from April until Covid-19 pandemic ends. (Sarawak Model)

• RM500 monthly allowance for Immigration officers manning the entry points throughout Malaysia from April till Covid-19 pandemic ends. (Sarawak model)

• RM500 monthly allowance for the Royal Malaysia Police (PDRM) and officers working around the clock to ensure safety and security of Malaysians from April until Covid-19 pandemic ends. (Sarawak Model)

• RM500 monthly allowance for Malaysian Armed Forces (ATM) personnel manning the borders and those helping the police in maintaining law and order from April until Covid-19 pandemic ends. (Sarawak Model)

• Free food: Providing dedicated support of food supplies for doctors and healthcare personnel involved in the testing, diagnosing, and treating patients at risk of Covid-19 from April until Covid-19 pandemic ends.

The expected economic stimulus to be presented by the administration will definitely be huge although it will be implemented for a limited period of time, between six to 12 months. 

But because the merciful nature of this stimulus lies in its focus and emphasis on putting money into the pockets of the most vulnerable segments of our society during the pandemic, it radiates and begets another mercy – the multiplier effect of their spending will revive and accelerate the infected economy to a myriad of vigorous economic activities that will pull the country together towards peace and prosperity. 

The focus is to survive and ready for a restart of the economy.

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RAIS HUSSIN is is the president/CEO at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research. - Mkini