Malaysian Government action will bring on recovery
28 May 2020: A total of 7,600 infections and 115 deaths amongst a population of 33 million is the result of Malaysian lockdown efforts and border closures, but the Malaysian Government’s next actions will be intrinsic to kick-starting the recovery.
“We are now moving towards restarting the economy,” says Dato' Faiz Azmi Executive Chairman, PwC Malaysia. “We have been through the stabilisation phases earlier to contain and to prevent the spread of COVID-19 and hopefully, from 9 June, Malaysia will move into the next phase where freer movement is permitted. For now, we are still under a more relaxed lock-down.”
Malaysia boasts a strong health system. At the height of the infection, a mere 30% of its hospital bed capacity to handle COVID-19 was taken up. GDP was in good shape when the pandemic hit, and it even showed a small positive gain in Q1 – but Q2 is going to be tough. Everyone is bracing for that.
Truth be told, it has not been easy managing COVID-19 in Malaysia. It has land borders with Thailand in Peninsular Malaysia; and in Borneo, the East Malaysian states border Brunei and Indonesia. Dato' Faiz describes the borders as “porous, but still under control”. He adds: “However, we have weathered the crisis well, partly because we have a compliant society who understand why we need to make sacrifices. There is still so much we need to rethink. After all, the government themselves recognised this, as their final part in the six-phase COVID-19 plan, is to have a Reform phase.”
Fortunately, Malaysia also nurtures a culture of conserving cash. Households have largely been able to get by, but there are noticeable signs the population is now feeling the pain of low economic activity. That is where government action comes in.
The initial government stimulus package called “Prihatin” targets the most vulnerable, especially the unemployed and furloughed workers; and Dato' Faiz expects the government’s restart plans to be aimed more at businesses such as SMEs. Moreover, banks are being encouraged to consider moratoriums on loans and possibly some parts of Malaysia’s company insolvency laws may be suspended temporarily.
Many of the existing company laws are based on insolvency systems commonly used in the Commonwealth but, unlike the UK, Malaysia has no concept of administration. In the UK, the administrator will leverage the distressed company's assets to repay creditors without preference; in Malaysia, the existing rescue mechanisms like Judicial Management and Corporate Voluntary Arrangements may not be as effective as they cannot override a secured creditor.
As is the case in most countries, there are worries about resuming pre-COVID-19 lifestyles. “How do you engender trust such that the public feels safe to leave their homes and behave normally? We believe targeted testing and tracking with ample hospital beds and resources as a backstop, will certainly help,” says Dato' Faiz.
What will fresh economic activity to stimulate growth look like? He expects to see more infrastructure projects announced, and perhaps the high-speed rail link between Kuala Lumpur and Singapore will now come to fruition.
Some sectors will truly struggle through recovery, he continues, commenting that certain sectors, perhaps the airlines based here, the food and beverage sector and the related tourism businesses, will be affected; but others, such as petroleum, palm oil and rubber businesses, will simply adapt.
Many businesses in the private sector will restart reassured by the testing and tracing systems already up and running. “Where we see a cluster of infections arise, we must be able to track and test quickly, to close the cluster down fast,” he comments. Such clusters have emerged recently such as when resuming air links with East Malaysia. Testing and tracing brought the spread of the cluster to a close.”
As for PwC Malaysia’s own working practices, Dato' Faiz says: “We have worked from home very successfully. We had “Google-ised” the entire business in Malaysia a few years back so working from home has been easy to manage, even down to mundane things like filling in timesheets and billing.”
The question of office space is going to be a thorny one as businesses the world over emerge from COVID-19 emergency measures and some of us will inevitably declare ourselves nomads, resisting a return to office life.
“Will we need offices? Will we need large amounts of office space? It is going to be interesting. But one aspect we are monitoring is the mental health issues that may arise with employees living alone or in confined spaces or even those with young families,” he says, commenting on the use of virtual team activities such as yoga via GoogleMeet at PwC Malaysia. It is a way of making sure everyone checks in at least daily.
“We will have to learn how to use digital tools better,” he says, “and we will need full internet access throughout the entire country and not just the urban hubs in Malaysia. We assumed that the internet infrastructure is strong; it is not always the case, as we have observed recently.”
In many ways, Malaysia is riding out the crisis well, in comparison with most South East Asian countries, nevertheless, he concludes: “At the end of the day, we live in a globally connected world, so our neighbours’ well-being will have an impact on our recovery too.”