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Malaysia: forget about politics, what really has to be done

By Murray Hunter - posted Friday, 18 June 2021

Over the last week, political pundits have been reporting the events and rumors around the Yang Dipertuan Agong, or King Sultan Abdullah Sultan Ahmad Shah, calling up all political leaders one by one for meetings. With each meeting, there have been various proposals made for how Malaysia should be governed in the short-term, and stories of who will step aside for who, although some of these stories are deliberately misleading to confuse.

In the middle of this week, a council of rulers meeting is planned to be held. This meeting will not solve the crisis, but frame the modus operandi the kingwill use to come to a decision. A decision many are not privy too. Any formula for a solution to Malaysia's current political problem, at this stage is only speculation.

However, no matter what solution is reached, what parties and personalities govern, whether it be by emergency decree or subject to the scrutiny of parliament, the nation's problems are the same.


After the dust settles later this week, the new government, if there is to be one, must focus on governing, and solving the country's immediate issues.

What requires urgent action by the government?

There has been a general feeling by the business community and much of the general public, that attention on what needs to be done in the economy has been disrupted through political infighting. The current situation, midway through 2021 is critical to the very survival of hundreds of thousands of micro-enterprises and SMEs, with the continuation of the EMCO. The SME sector is critical as it directly creates 39.9 percent of GDP, and employs 7.1 million people, 58.4 percent of the total workforce, and many more within the informal sector.

There are lessons to be heeded from the same situation twelve months ago when the country was under a similar Movement Control Order (MCO). Insufficient funds went to households to directly increase consumption. Groups, such as civil servants received relief payments, when many from the informal sector missed out. Allowing individuals to access their EPF and handout packages at the time did little to ward off hardship. With an extended MCO, direct cash handouts to those households that need assistance will be necessary to ward off more families going deeply into poverty. The government, at its current level foreign debt still has latitude to borrow offshore, so funds can be allocated to generate consumption and increase liquidity within the economy.

There are three immediate interrelated problem areas which must be immediately addressed to save the country from a pending inimitable disaster.

This means kickstarting the economy so people can live without dipping into their savings, rely on handouts, or go into debt. This is interrelated with growing unemployment, and the dramatic increase in the under-employed who are unable to make ends meet. While awaiting a solution to the previous two problems, cash needs to be injected into households to assist in their survival and create grassroots economic demand that can drive business.


Although economists predict a modest 6 percent GDP growth rate this year, an extended MCO will erode this. This figure doesn't count the contribution from the informal sector, which supports many people, and has been severely hit by the MCO, receiving very little assistance. According to an Informal Sector Workforce Survey, by the Department of Statistics Malaysia, this effects 17.4 percent of the total workforce in Malaysia, where 0.62 million have lost work and are unpaid. Wage subsidies have excluded this group, which in addition have dependents to provide for.

An extended MCO will worsen this and could even tilt the economy into recession. Businesses which still remain operational will have severe liquidity problems. Assistance is needed to help lever micro-enterprises and SMEs into buoyant liquidity, first to survive, then to take advantage of a recovery.

There needs to be a drastic increase in lending to ease the business liquidity crisis. Government must assist the liquidity of over 900,000 SMEs through putting political leverage over the banking sector, which incidentally much of it is owned by GLCs. There should be a debt moratorium, and schemes where the government guarantees are put in place over SMEs proprietors putting up collateral, which most don't have. The counterintuitive practice of banks restricting lending when lending risk is high due to a poor economic environment must be reversed.

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This article was first published on Murray Hunter's blog on Substack.

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About the Author

Murray Hunter is an associate professor at the University Malaysia Perlis. He blogs at Murray Hunter.

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