This article first appeared in The Edge Malaysia Weekly on April 13, 2020 - April 19, 2020

AS expected, the government has decided to extend the Movement Control Order (MCO) by another two weeks to April 28.

Without divulging details, Prime Minister Tan Sri Muhyiddin Yassin indicated last Friday in his televised speech that certain businesses will be allowed to resume operations in stages.

As we have seen in other countries, unwinding the restrictions on businesses could take several weeks. But how many businesses can survive the wait?

Ultimately, how high is the economic cost of a prolonged MCO?

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) president Tan Sri Ter Leong Yap acknowledges that it is difficult to strike a balance between public health and the country’s economy.

“The MCO was imposed because we need to bite the bullet and suffer short-term pain so that the spread of Covid-19 can be curbed. We need to take it seriously. We can’t let the crisis prolong. If you asked me, I would like all businesses to continue operating, but it is equally important to break the chain of infections,” he tells The Edge.

Ter highlights that its members from the mining, manufacturing and construction industries have put in some strong requests to the government, asking for the resumption of operations.

“We are compiling a list of companies that are appealing or applying to resume operations in a safe manner. We believe the government will unwind the restrictions gradually,” he says.

“It will not be 100%, that’s for sure. But for those that will be allowed to reopen, we hope they will strictly follow the safety guidelines. They must have self-discipline. We don’t want our efforts and sacrifices in the past few weeks to go down the drain.”

Lee Heng Guie, executive director of the Socio-Economic Research Centre (SERC) of ACCCIM, says the economic cost of the MCO will be high, hence there is a need to be clear on how the latest extension will be different from the current practice.

“We can’t let Covid-19 spread without any measures to control it, but the authorities also have to understand that the longer the lockdown, the greater the economic losses and impact on livelihoods and households. There’s a price to be paid,” he warns.

Lee says it should be a balanced act via a softer approach to the MCO, whereby socio-economic and job losses can be minimised while keeping infections down.

“This can be done by having MCO extensions with some relaxation, by allowing more flexibility in terms of operating hours for businesses, where the impact will be less than that of the first phase of the MCO, which was more restrictive (limited to essential services),” he says.

“In Singapore, industries are still running but they must comply with protective measures at work — for example, the floor plan has to be spaced out. The employers must be responsible.”

Likewise, factories in Germany are still operating, although Covid-19 cases are rampant in the country. It was reported that the factories were quick to get workers on board and impose strict cleanliness measures and organisational rules, often imported from their operations in China.

In some cases, they even brought in their own medical staff. Also, no visitors are allowed, and teams of cleaners sterilise doorknobs, machine handles and other equipment around the clock.

Moreover, break rooms are organised so that workers do not have to stand next to each other. Management staff alternate between working at the office and working from home, while in-house doctors administer coronavirus tests to at-risk workers.

Minimising the impact

Sunway University Business School economics professor Dr Yeah Kim Leng says various kinds of government support should be able to cushion the economic impact for three to six months, but it will be magnified the longer the MCO is extended.

“This is because the economic assistance provided to households and firms can only offset partially the income losses due to the shutdown in economic activity,” he says.

While most manufacturers will have sufficient inventory for two to three months, Yeah says once the inventory is depleted, some of them could face supply disruptions.

“Even if they do manage to source the supplies, there are still risks of these goods being held up at airports or ports, or getting the logistics in place. These are the challenges that the government needs to consider in depth,” he says.

Although some manufacturers are considered as part of essential services, they have to be better managed and streamlined so that there is no loss of productivity, which may affect their supply and performance of goods, says Yeah.

“Delays will affect their business costs. This is something that can be avoided. It is important for us to minimise the impact. We need to have a smart way to do this, we need to allow less-risky industries to start working again,” he says.

RHB Research Institute chief Asean economist Peck Boon Soon says the local supply chain disruption is not too severe at the moment and, in fact, he thinks the situation should get better gradually.

“Demand from the US and Europe is declining while China’s production is slowly ramping up, so from Malaysia’s perspective, our supply chain may not be affected badly. We should have sufficient supply of raw materials. It is not a big concern right now,” he says.

Peck observes that the government is allowing more non-essential companies to start operating again as it has taken cognisance of the problem of supply chain disruption.

“The demand for essential items is high, so the government and businesses are learning how to solve the supply chain problem. The priority is to curb the spread of the virus, but at the same time, perhaps the government should also gradually open up manufacturing activities, especially those that are in the less-risky or safe zones,” he says.

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