CORONAVIRUS | An investment expert has expressed concern that providing financial assistance to tide businesses over is akin to merely providing ‘life support’.
Special investment adviser to the Penang chief minister, Lee Kah Choon said putting the country into productive mode is the key for long-term financial sustainability, not only for the nation but also for the citizens.
"For a trading nation like Malaysia that relies on its manufacturing sector which contributes 85 percent of its export, a prolonged lockdown will be devastating," Lee said in a statement.
He pointed to at least two aspects where an extended lockdown would impact the country's economy.
He noted that the main economic driver of the country is manufacturing, oil and gas and palm oil.
But oil price has plummeted to below US$20 per barrel and it is expected to average around US$40 per barrel for 2020 (against the 2020 budget of US$62 per barrel).
Low oil prices will reduce the need for biodiesel which may indirectly impact palm oil prices.
The sharp reduction of Indian import of Malaysian palm oil aggravates further a dire situation.
"That leaves us with manufacturing as the main economic driver.
"As Malaysia forms part of the global supply chain, any disruption in our production commitment will impact the supply chain gravely," Lee said.
"We have to bear in mind too that our two biggest customers, the US is not in lockdown and China has started production.
"Any prolonged lockdown in Malaysia will see our supply chain being replaced by countries such as China, South Korea, Taiwan and Singapore," he warned.
Lee was referring to two stimulus packages announced by Putrajaya which was announced by Prime Minister Muhyiddin Yassin.
Lee said it is likely another stimulus package in favour of small and medium-sized enterprises (SMEs) will be announced by Muhyiddin.
It has since been confirmed that Muhyiddin will announce additional stimulus measures for SMEs later today.
"For a trading nation like Malaysia that relies on its manufacturing sector which contributes 85 percent of its export, a prolonged lockdown will be devastating," Lee said in a statement.
He pointed to at least two aspects where an extended lockdown would impact the country's economy.
He noted that the main economic driver of the country is manufacturing, oil and gas and palm oil.
But oil price has plummeted to below US$20 per barrel and it is expected to average around US$40 per barrel for 2020 (against the 2020 budget of US$62 per barrel).
Low oil prices will reduce the need for biodiesel which may indirectly impact palm oil prices.
The sharp reduction of Indian import of Malaysian palm oil aggravates further a dire situation.
"That leaves us with manufacturing as the main economic driver.
"As Malaysia forms part of the global supply chain, any disruption in our production commitment will impact the supply chain gravely," Lee said.
"We have to bear in mind too that our two biggest customers, the US is not in lockdown and China has started production.
"Any prolonged lockdown in Malaysia will see our supply chain being replaced by countries such as China, South Korea, Taiwan and Singapore," he warned.
Lee was referring to two stimulus packages announced by Putrajaya which was announced by Prime Minister Muhyiddin Yassin.
Lee said it is likely another stimulus package in favour of small and medium-sized enterprises (SMEs) will be announced by Muhyiddin.
It has since been confirmed that Muhyiddin will announce additional stimulus measures for SMEs later today.
The movement control order has been extended to April 14, and rising cases - to 3,662 and death toll at 61, may see the order extended further.
Apart from China (only applied to certain areas), some countries although affected by the Covid-19 pandemic, do not order a total lockdown.
Lee said the people’s wellbeing in terms of employment will also be negatively impacted.
Currently, the Malaysian labour force by occupation is as follows: manufacturing (37 percent), services (53 percent) and agricultural (10 percent).
Malaysia's national unemployment rate stands at just above 3 percent (0.5 million of the population) before the MCO.
Lee said the latest projection shows that there may be a 15 percent (2.4 million people) unemployment rate if the workforce does not go back to productive work again.
However, Lee added, reenergising the industry and putting the people back to work cannot happen in a vacuum.
He said the manufacturing sector cannot operate without their supply chain being energised, and the people cannot go back to work without proper protection.
"We can achieve the said twin objectives by building trust amongst the government, the industries and the employees.
"The government should quickly work on an EHS (Environment, Health & Safety) protocol that the industries can adopt to protect the health and safety of its employees and the public as well as the environment from hazards associated with the workplace," he said.
"The sponsor manufacturer can then apply to the government (together with its full supply chain) for approval to commence operations in accordance with the approved EHS protocol," he added.
"The current practice of approving below 50 percent operations is impractical without the support of the full supply chain," he stressed.
He cited examples where sanitisers cannot be put on the shelves without the supply of bottles and eggs cannot be supplied without the trays.
Currently, the bottles and the trays are not in production because they are not ‘essential’ on their own.
"Extraordinary time calls for extraordinary solutions and we are in an extraordinary time.
"We need to look for a paradigm shift away from pitting health against the economy.
"We need to look for a partnership between the government, the industries and the citizenry," Lee said.
"Otherwise, we may have a bankrupt government, shuttered industries and unemployment awaiting us after this pandemic is over," he added. - Mkini
Apart from China (only applied to certain areas), some countries although affected by the Covid-19 pandemic, do not order a total lockdown.
Lee said the people’s wellbeing in terms of employment will also be negatively impacted.
Currently, the Malaysian labour force by occupation is as follows: manufacturing (37 percent), services (53 percent) and agricultural (10 percent).
Malaysia's national unemployment rate stands at just above 3 percent (0.5 million of the population) before the MCO.
Lee said the latest projection shows that there may be a 15 percent (2.4 million people) unemployment rate if the workforce does not go back to productive work again.
However, Lee added, reenergising the industry and putting the people back to work cannot happen in a vacuum.
He said the manufacturing sector cannot operate without their supply chain being energised, and the people cannot go back to work without proper protection.
"We can achieve the said twin objectives by building trust amongst the government, the industries and the employees.
"The government should quickly work on an EHS (Environment, Health & Safety) protocol that the industries can adopt to protect the health and safety of its employees and the public as well as the environment from hazards associated with the workplace," he said.
"The sponsor manufacturer can then apply to the government (together with its full supply chain) for approval to commence operations in accordance with the approved EHS protocol," he added.
"The current practice of approving below 50 percent operations is impractical without the support of the full supply chain," he stressed.
He cited examples where sanitisers cannot be put on the shelves without the supply of bottles and eggs cannot be supplied without the trays.
Currently, the bottles and the trays are not in production because they are not ‘essential’ on their own.
"Extraordinary time calls for extraordinary solutions and we are in an extraordinary time.
"We need to look for a paradigm shift away from pitting health against the economy.
"We need to look for a partnership between the government, the industries and the citizenry," Lee said.
"Otherwise, we may have a bankrupt government, shuttered industries and unemployment awaiting us after this pandemic is over," he added. - Mkini
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.