What the gov't must do in a 'war-time' economy

I was one of the earliest in Malaysia to use the war analogy to describe our fight against the spread of Covid-19. This provocative perspective has now become a popularly accepted one. 

But be that as it may, I find that many have yet to realise how multifaceted a war effort is.

There are three key components to a war: unity of minds and effort; dynamic deployment of personnel; and mobilisation of resources and industrial production. In this article, let me focus solely on “war-time” production.

No war can be sustained merely through keeping soldiers in high spirits. A general has to aim at maximising the impact of the “Men, Machine and Method” which are at his disposal.

In fighting Covid-19, however hard our healthcare frontliners fight and however skilful they may be, without personal protective equipment (PPE), ventilators, testing kits, medical gloves, and masks, they will get infected, and with them out of the game, the health system will simply collapse.

Even if the rest of the population fully complies with the lockdown rules, if we do not have enough testing kits to trace and test people, for example, or enough masks to go around when the movement control order (MCO) ends on April 14, we risk losing the war.

We need food. We need to grow and import, process and package, and transport and deliver. For such a process to happen smoothly, a whole network of economic activities is involved. For example, big fishing nations can’t survive only on the hard work of fishermen. 

They also rely on engineers to build seaworthy ships, factories to build nets and other fishing equipment, workers to keep quays in good shape, transport vehicles to take the catch to market, roads for these vehicles to use, and information channels maintained at all instances. They need the research and development that this network needs for its survival.

Wars are fought and are finally won on the back of an effective network of industries, through coordination of the supply of food, labour and equipment, maintaining logistics, and securing information flows, among others. But you get my point.

A few scenarios

As we fight what promises to be a protracted war against the Covid-19 virus, a few scenarios present themselves.

First, as much as we hope that the coronavirus nightmare will suddenly end early one fine morning, the truth is that we will only see an end of the pandemic when a proven and widely distributed vaccine is available. Scientists seem to agree that this will not happen for another 12 to 18 months. So, we are in this for the long haul.

And to manage such a situation, thinking short-term — as we are prone to do nowadays — is not going to cut it. We will need more and more hospital beds, more and more ICU facilities especially ventilators, and more and more medical supplies. We will not only need food and water, we will need a whole industrial infrastructure to secure these basic items for that period.

Second, the world as a whole, and we should let that thought sink in a while, is in it for the long haul. This is a global crisis, and this means that we are competing with the United States, Europe and the rest of the world for the same items: masks, PPE, ventilators, among others. 

There have already been stories reported about representatives of different nations competing for stocks of face masks on the tarmac in China’s airports. Like it or not, Malaysia will have to start producing sufficient preventive and medical items for its people. No matter how good our relations with China remain, we cannot keep thinking that China will have sufficient stocks put aside specially to supply to us.

Third, the tourism sector, the MICE (meetings, incentives, conferences and exhibitions) sector and the entertainment sector — and this affects hotels, airlines, cinemas, restaurants, etc. These industries will suffer for a long while. But at the same time, the medical supply and food supply sectors will be needing more and more investment, and more and more properly trained workers. A major shift is needed in our thinking about investments and reskilling programmes, and this has to happen very quickly if we are to stand a chance in handling the health crisis and the unemployment crisis that it will inevitably give rise to.

Fourth, while we plan for the crisis within our national borders, we have to consider the region in crisis as well. By the time the pandemic reaches less prepared nations in the South — in Southeast Asia, South Asia and Africa — the world as a whole will be dealing with an enormous humanitarian crisis. 

If Malaysia is quick on its feet, and if we can build up strong medical and food production capacity, we can be of tremendous help to these other countries. We have the capacity. We just need the necessary boldness and imagination, and a collaborative leadership, to achieve this.

Fifth, since the global economy will be depressed for some time to come, if we can strengthen and upgrade our medical supply and food supply industry in the meantime, Malaysia will be able not only to be useful to the rest of the world, we will also be able to boost our balance of payments. To be sure, these are also the sectors where we are already ahead of the curve when compared to most other countries of a similar size.

Medical supply industry

The government must have clarity and purpose in its array of policies if we are to achieve the desired outcomes. So far, the government has not caught on to the long-term implications of what fighting Covid-19 involves. 

The post-Covid-19 economic situation will depend on how we activate and align our industrial resources in the very fight against that virus now. The full arsenal of industrial policy should be brought to the fore to build our capabilities and capacities for our immediate health requirement and the future of our economy. Malaysia is uniquely and strongly positioned in that context. 

We have a strong rubber-based medical supply industry. Malaysia produces about 60 percent of medical gloves and, significantly, one in every five condoms used in the world.

Penang, Selangor and Johor showcase a decent presence of factories producing for global brands of medical devices as a subsidiary or as outsourced manufacturers.

Much of the rest of our industrial capacity can be easily redirected to produce for the medical field and the nation’s food security.

We should learn from what has been happening among big industrial players in the past few weeks around the world.

Perfume-makers such as Christian Dior, and alcohol brands such as Brewdog, are producing hand sanitisers. Fashion retailers Zara is sourcing material for face masks. Clothes manufacturer Hanes is producing face masks.

China manages to increase the daily production of face masks by more than 10 folds in February from 15 million pieces to more than 150 million pieces a day.

To move in that direction, the Malaysian government will have to strongly signal that it is backing the speedy emergence of a medical supply industry producing for domestic consumption initially, but one that has its sights set on supplying Asean countries and South Asian states soon.

There are multiple ways through which the government can guide industrial players in this direction. For instance, through facilitating procurement procedures and placing sizable orders, requesting banks to give fast-track loans to all “war-time” production and guaranteeing some portion of these loans, and providing training or extra allowance for Malaysians who have lost jobs in other sectors to ease their switch to “war-time” sectors. 

It can also direct relevant government-linked companies (GLCs) to invest, procure or get involved more broadly.

Essentially, the government needs to intervene to achieve larger and longer-term socioeconomic goals. Such intervention makes perfect economic sense in a “war-time” economy. It creates many new future-proof jobs, and it opens the way for the country to emerge as a major regional supplier of medical supplies, which stimulates research and development in that field in the process.

The silver lining in this crisis is showing clearly, where Malaysia is concerned. It is for the government to be bold enough to act on it. 

It is not as if it has any other promising option.

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LIEW CHIN TONG is the DAP national political education director. - Mkini