This article first appeared in Forum, The Edge Malaysia Weekly on February 28, 2022 - March 6, 2022

As we enter into the month of March, Malaysia seems to be finding a rhythm again in carrying on amid the Covid-19 pandemic. Our economy has gradually reopened since the end of last year, schools have resumed classes, businesses/factories are allowed to operate, festivities are celebrated and people are going about their daily lives in accordance with the SOPs.

It seems things are off to a hopeful start. The many policy actions in 2021 — mainly short-term responses aimed at preventing the immediate disintegration of the nation’s social and economic fabric — appear to have produced a positive impact on some levels. We are arguably better prepared to deal with the arrival of the Omicron wave, with 97.9% of the adult population having received their first two doses of the vaccine and children as young as five years old getting theirs. Labour market conditions have been improving, with increasing employment levels and a decreasing unemployment rate. Malaysia’s GDP forecast for 2022 is promising (projected at 5.8% by the World Bank), supported by expectations of a strong recovery through domestic demand, acceleration of production activities and growth in external conditions. Talk of reopening our borders in the second quarter sounds a positive note on boosting economic activity. Yet, amid the optimism about our progress towards recovery, where do we look to for continued, sustainable economic growth?

Malaysia will need to step up in 2022. As the year progresses, mere recovery will not be enough for us to have a shot at transforming into a high-­income nation, fulfilling what was ambitiously set out in the 12th Malaysia Plan, or becoming a carbon-neutral nation by 2050.

Globally, myriad events have occurred. New waves of infections and variants of Covid-19, supply chain problems, geopolitical uncertainty, lower growth and higher inflation may continue to hold back any meaningful growth in many countries. Malaysia will not be spared. Nationally, the pandemic has threatened to undo years of economic growth, human development and employment prospects. We are faced with rising inequality, households sliding back into poverty and an imminent crisis in our social protection network, with only 3% of Malaysians able to afford to retire. The widening digital gap has impacted businesses in adapting to the new normal, while many of our children are deprived of academic learning due to a lack of basic online learning tools and the disrupted education system brought about by the pandemic.

No doubt, achieving sustainable economic growth and inclusive social mobility is complicated by the emergence of the “polycrisis” of our times. For Malaysia, over the past two years, it was a combination of a health crisis (the pandemic), a political crisis (the Sheraton Move and its aftermath), economic disruption and, as we saw recently, natural disasters. The complexity and frequency of such crises look likely to only increase in frequency and in proportion.

Therefore, the persisting looming question to be addressed here is — how to better prepare ourselves beyond addressing merely the short-term shocks of the pandemic, but chart a longer policy course that builds our economic growth trajectory. In other words, assuming we are (more or less) on the road to recovery, where will our (sustainable) growth come from?

Dealing with the societal challenges mentioned above will require significant reforms, institutional adaptation and bold actions from all key stakeholders. To ensure an economy that works for all, and a society that is for all, we must aim for higher, cleaner economic growth, but at the same time build a more economically secure workforce and a stronger and more supportive community. To get there, we must challenge the old dogmas that hold us back.

We can and must act now to map out an economic future for the country based on inclusive, sustainable economic growth and development. One of the more obvious tools to address this is a renewed industrial policy that takes into account economic security needs from a national perspective.

In Malaysia, our reliance on primary industries and a cheap labour model does not provide much competitiveness at a global level anymore. The focus should now be firmly on kick-starting new sectors with high scope for growth, and productivity improvement. To do so, a broader industrial strategy that builds on the concept of missions provides an interesting framework.

Missions give us a common greater public goal to address societal challenges, not in a piecemeal manner but through large-scale collaborations between the public and private sectors via development of innovative solutions. As missions do not dictate what needs to be done but merely create the conditions for finding workable solutions, it allows research, innovation and new frontier technology to happen through various sectors, thereby creating multiplier or spillover effects across various industries and that will move us closer to addressing the challenges on hand.

There are plenty of missions that as a society we need to address, from climate change to poverty to flood management. In a post-Covid-19 Malaysia, this could mean, among others:

•     Strengthening our healthcare system: How do we create an ecosystem that is better prepared for future pandemics? How do we leverage Malaysia’s existing market as the biggest medical glove producer?

•     Tackling climate change and reducing our carbon footprint: How do we accelerate our established solar panel industry and are there innovative ways to transit away from our reliance on oil?

•     Achieving food security: How do we modernise our agriculture and fisheries sector while shifting away from commodity-based farming?

•     Ensuring decent shelter for all: Can we create innovative social housing projects and sustainable living space solutions?

•     Reducing the digital gap: Are there innovations to increase digital inclusivity for businesses and for education?

Herein lies the greatest challenge. Such endeavours will require reforming the role of the government. The unprecedented monetary and fiscal support mobilised during the pandemic has reset our appreciation of what the government can afford. With its unparalleled resources, no other entity has the scale, impact and legitimacy required to lead, steer and enact the change that is needed. How the government can sustain such spending is a separate topic for another day. But huge commitments such as “patient 

financing” — finance that does not expect a short-term return and understands the outcome of a mission is uncertain — is crucial to build the right capacity to increase our ability to experiment, and learn from the results. Further, this means the government must increase its abilities, so that it can productively and efficiently collaborate and work on the delivery together with the private sector.

In short, to restart our economic growth, we have to first fundamentally rethink the role that government plays in setting off catalytic reactions, and thereby transforming into a capable, active player to stimulate improvements across the economy.

Our economy should make society more inclusive and liveable. Essentially, it should work for the many and not the few. In order to benefit the broadest segment of the population, aiming for high growth should also go hand in hand with higher wages. In other words, economic policy should aim to create good jobs that are not just well paid, but are also meaningful and fulfilling for the workers.

As much as the recent numbers show a decrease in unemployment, in reality, there has not been a full recovery in the labour and employment markets. The displaced workforce was most apparent in occupations requiring face-to-face interactions and in certain industries such as tourism and aviation. The reemployment of these workers will be ongoing, but the key question here is how we ensure that new employment opportunities are sustainable and future-proof. The emergence of the gig economy has pushed more workers into more vulnerable and lower-earning roles that are susceptible to volatile changes, both in employment status and remuneration received. And if we have another round of economic disruption due to new variants, that will derail any sense of recovery.

We need a comprehensive national job growth plan that is aligned with our industrial policies and overall economic direction to provide opportunities for people to join the labour force again. 

Initiatives such as “JaminKerja”, announced in Budget 2022, are encouraging but there are three crucial questions that such programmes need to address: (i) What kind of jobs are being generated? (ii) Do they pay enough to live on? and (iii) Are they resilient to the future demands of the economy?

To promote better quality jobs, we should create an ecosystem that encourages career mobility but, more importantly, basic economic stability. In other words, we must enhance our education and training systems to help our workforce to adapt to changing skill needs, but at the same time, improve job quality that addresses fundamental issues such as decent pay, acceptable working hours and a safe working environment. All of the above is not elusive. The recent announcement of higher wages and clear career pathways for waste management workers in Singapore shows that good jobs are not just for the elite few, if thought is put into structuring a workable model.

Many policymakers, economists and academicians have spoken about the need to increase the productivity of our workforce. The importance of promoting investment in automation has been frequently discussed. But it is also time to address the over-reliance on foreign workers in many sectors of our economy. One can argue that, for years, the availability of cheap labour has been a key factor in reducing incentives for companies to invest in automation that would increase productivity, and by extension to also pay higher wages and shift workers to more productive roles (for example, 

supervising machines on a production line rather than being the ones assembling the products, which in many instances can be automated).

This is not to say that we should ban foreign workers entirely or discontinue our foreign worker policy. We should instead set up a comprehensive, holistic road map that effectively ensures the policy works to our economy’s long-term advantage. 

In other words, while promoting a healthy economic growth trajectory, we must also address the low wage growth that our workforce is subjected to partly due to the abundance of cheap foreign labour. Policy tools must eventually aim at equalising the cost of foreign and Malaysian workers without increasing the unit cost of the product or service being produced. At the same time, policies that generously incentivise automation and training will help companies rely less on low-cost labour while maintaining their competitiveness.

To re-energise our economic growth sustainably, we must not forget about the social contract that underlies economic development. Over the last two years, the halt in economic activity has exposed the precarity of a large section of the population, and the inadequacy of the programmes and tools currently available to support them. This economic insecurity at the individual level needs to be acknowledged through a comprehensive, fit-for-purpose social safety net that addresses the inequalities that arise due to unforeseen events or any transitions, and ensures “no one is left behind”.

The flaws of our social protection system are now more apparent than ever. We have an increasing pension gap where more and more will retire into poverty at an alarming rate. The recent calls to allow for more Employees Provident Fund withdrawals show the dismal scenario we are faced with as those affected by the recent flooding are in desperate need of cash to rebuild their homes. Yet, the majority of EPF members do not have much money left in their accounts.

A comprehensive review of our social safety net is required. This includes critically reviewing and adapting the cash aid programmes to meet the needs of the recipients, enlarging coverage of unemployment schemes to cover different segments of the population and relooking at the implementation of fair tax burdens. Fundamentally, moving our workforce away from lower paying forms of employment creates a sustainable scenario where one is able to not just, at the very least, set aside some amount for retirement, but that the amount will be sufficient for them to retire. To put it simply, people need to be paid more.

If 2020 and 2021 were about executing short-term recovery measures to avoid the total collapse of our economy, saving lives and sustaining people’s livelihoods, 2022 should be about consensus building, seeking new frameworks and deploying our policy tools differently to set us up long term to deal with the lessons learnt from the pandemic and the challenges our society faces going forward.

Tan E Hun is executive director of the Research for Social Advancement (REFSA) policy institute

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