The state of the Covid-19 pandemic globally is stabilising, according to the World Health Organization. The situation in the Americas, Europe and even Southeast Asia have come off their peaks and are showing trends of improving.
Apart from the various movement restrictions put in place, the vaccination programmes that have been rolled out have made the difference, causing overall cases in these locations to fall, and some sort of normalisation has slowly returned. In much of East Asia, the approach was slightly different as countries such as Japan and South Korea relied more on social discipline to contain the virus right from the beginning.
This is in contrast to what is happening in Malaysia. Confirmed daily cases and the number of daily deaths as a result of the pandemic have been rising since March after peaking at the beginning of the year, and both these numbers are now at the highest they have been since the pandemic started. The number of active cases, a measure of demand on the healthcare system, is also the highest it has ever been, almost 60,000 cases at the point of writing. It is a full-blown crisis and we have one of the highest infection rates on a per capita basis and daily deaths have been in the 50s.
The rate of vaccination too is rather dismal even when benchmarked against the announced schedule. By the end of the third week of May, only 4.7% of the population (1.51 million people) had received at least one dose and less than 3% had been fully vaccinated. We are presently at a seven-day average of 45,000 vaccinations a day, which is still too slow for our population, plus a few million more migrant workers to be vaccinated twice, to achieve herd immunity. If we don’t implement a lockdown, we have to vaccinate at a much, much faster pace or the cases will grow exponentially.
Malaysia’s handling of the pandemic is poor regardless of whatever measure one chooses. This, despite the drastic measure taken to suspend the Constitution with the declaration of Emergency in January with the express purpose of addressing the pandemic. The problem is not just the Emergency but the way it was operationalised, something that parliament should fix when it gets reinstated. The point of the Emergency is to remove partisan politics and focus on the problem at hand by mobilising all available national resources. Instead, partisanship was retained, heightened in fact, when the full executive remained intact while parliament was suspended.
The sequence to managing this crisis — a public health crisis — is clear: get the virus under control first, then manage the consequences of the disease. Managing the pandemic is essentially a science, so it is a matter of just following the science, a knowledge-based, data-driven exercise. The economic problems originate from the disease and they cannot be solved without first solving the public health issue. Trying to do both simultaneously — trying to have their cake and eat it too — will not work. It reflects poor management and leadership. It will just cause the crisis to drag on and you get the worst of both worlds instead.
There seems to be two reasons for this indecision and hesitancy in managing the pandemic and its economic consequences. The first is a political one and this has not been made better with the way the Emergency was implemented. The present government has a thin majority. The Emergency should have removed political contestations altogether, but it instead removed political opposition to a weak government, thereby making the situation even more partisan. This, in turn, contributed towards the government wanting to be populist, or at least not being unpopular, and therefore avoiding the tough decisions. Despite the Emergency, there appears to be a weak central command and that has made communications and coordination worse.
The second reason seems to be anchored on this “we are out of money” attitude. It is well understood that a strict Movement Control Order (MCO) — where everyone except those in essential services stays at home — is a costly affair economically. It effectively stops economic production and given that gross domestic product in nominal terms was RM1.416 trillion in 2020, even at 50%, one day can cost RM2 billion of lost output. But losing RM2 billion a day for two weeks to get the virus under control is much better and economically cheaper than a prolonged period of being in a purgatory of sorts: with neither control over the virus nor a fully open economy that is very costly on both ends.
It is also well understood that when such a lockdown is put in place, public assistance needs to be extended to those affected, particularly those without much of a safety net, for example. Some of this assistance was extended during MCO 1.0 in the middle of last year and the government seems very reluctant to do another MCO 1.0, even with the increasing numbers, because of fiscal constraints.
Despite the huge amounts announced as part of the government’s Covid-19 assistance programmes, the actual fiscal injection, or new monies beyond the normal operating budget, is estimated to be only about 5% of GDP, which is small in absolute terms and relative to countries in the region. Yet, the government is hesitating to extend this assistance and is instead taking the decision to continue with the status quo “with greater enforcement on SOP (standard operating procedure) compliance” — which can be a futile attempt at curbing the spread and, therefore, casualties.
Of course, the current level of government debt is high and, of course, spending will entail more borrowing. But this has been the starting point for any government in Malaysia in the last decade or so, and there are various reasons why that is the case, reasons that past governments failed to address. Now, we are in perhaps the biggest crisis in our history — a health, humanitarian and economic crisis rolled into one. No government should just hold its hands up in the air and say, ‘we are out of money’!
The government must act to literally save lives — yes, 50 people are dying every day, hundreds of thousands are living on subsistence and millions are unemployed — and it has a chance to not just do that but use the crisis and the Emergency to achieve so much more. In fact, it is because the government is looking at the problem in small, disconnected parts that it is acting in a similar manner. That the government came out in April to say that it did not budget for vaccines in the 2021 budget and had to resort to dipping into the National Trust Fund is quite appalling, the kind of thing that undermines confidence in it.
If I am doing a risk analysis of the country, I am aware of where the numbers are, what contributed to them and what the problems are. I can fully understand deficit spending during times like this. Everyone is resorting to the fiscal lever as monetary policy is now largely blunt. What I want to see is how this new spending is allocated, how expenditures will be rationalised, how the operating costs of the government are to be controlled, which projects will be shelved, how the government delivery system will be optimised, and how the revenue side of the fiscal equation will be addressed. These are the questions, and it should not be reduced to “what would the rating agency say if I increase my deficit by another 50 basis points?”.
There is still liquidity in the system and as the global economy recovers, the liquidity will decrease and the costs of borrowing will increase. It is about the growth that can be generated compared with the cost of borrowing. Missing a window like this and being left standing in a mess is just bad.
Malaysia paid the heavy price of an Emergency but it does not get the full benefits from the price paid. Every Malaysian wants to see us overcoming the pandemic; that is not a partisan issue. Had the Emergency been governed in a less partisan manner that involved every party and drew from the best that Malaysia could muster, things would have been a lot different.
But the present leadership heading this Emergency administration can still do better; be more inclusive, ambitious and decisive about what needs to be done to address the immediate needs as well as in moving towards a post-pandemic world that will hopefully see the public health issue resolved but that also has tremendous challenges on the economic front. We can and have to do better than this.
Dr Nungsari A Radhi is an economist and former member of parliament for Balik Pulau