We are the lucky ones. When other developed countries still debate about how to “flatten the curve”, we are one of the few countries that had done so successfully. With this, we can reopen our economy.
More cars add to highways on rush hours, more people queue in front of the retail stores, more friends catch up over a cup of coffee without a screen dividing them.
But our economy is still nowhere close to recovering.
My job requires me to talk to at least 5 different businesses each day. And while most have said that businesses are picking up as the economy reopens, they are nowhere near pre-pandemic levels.
Small businesses are at the brink of dying off.
A fashion startup is cutting 30% of its staffs’ salary as revenue takes a steep 50% dive. An event and advertising company had to cut all but one of its fresh graduates from the team. A 12-year old Malay restaurant has told all its staff that they are losing their jobs if the orders do not pick up, as they only have a 1-month runway left.
Worst job loss numbers in 30 years
The economy is reopening but it is not recovering.
Most businesses could only commit to 1-month contracts instead of 3 or 6 months. Most job advertisements have hundreds of desperate applicants. Most property and car agents cut down their paper-thin commissions as people hold back on buying big items. Most business webinars talk about the panic after the loan moratorium ends in September.
This is not a sign of recovery; there has yet to be any reason for optimism.
In the face of grave uncertainty, we lie to ourselves to feel better. Two months ago, our Finance Minister, Tengku Zafrul, declared that our economy is set for recovery in 2021 as more than 70% of the workforce has returned to work.
This was baffling to many, including the Malaysian Trade Union Congress (MTUC) that thought the prediction was highly unrealistic. Not only have certain industries like tourism, manufacturing, construction, and entertainment and events suffered a drastic and permanent decline, the ripple effects to other industries have only started.
Two weeks after Tengku Zafrul’s statement, the Chief Statistician Mohd Uzir Mahidin disclosed that Malaysia’s unemployment rate spiked to 5% as nearly 778,000 people are now out of jobs. This is the highest ever in 30 years, and most economists have predicted that this will spiral further.
Worse, this survey does not take into account those who could not fall within the category of “unemployment” despite being poorly affected by the control orders. The time lag also means that the actual figures are much higher.
For context, the unemployment rate was 3.2% during the Asian Financial Crisis in 1997 and 3.7% during the 2008 Great Recession. Malaysia’s GDP only recovered 5 years succeeding the 1997 financial crisis – we are definitely not out of the woods.
MTUC’s prediction that more than 2 million people will be jobless at the end of the year is a scary but likely reality.
Mountain of paperwork kills off small businesses
When the Prime Minister announced that domestic tourism is permitted during the recovery movement control order, we heard that people were rushing to travel. The Langkawi hotels received 1,000 bookings in 45 minutes. Many thought we were bucking the economic trend – heading for the V-shaped recovery.
It turns out, this was a lie too. The Langkawi Tourism Association CEO, Zainudin Kadir, said that there was no basis for such a claim. Although we hoped there were a surge and return of consumer spending, this remained a dream.
Reality is harsher. The RM295 billion stimulus bill by the Malaysian government was important to our economy. But to small businesses, they were either too complicated, too small, or too slow. Hundreds and thousands of small businesses were not familiar with the application processes, and with only approximately 1 to 2 months’ cash at hand, they were forced to lay off, hold back, or close down entirely.
Until 31 May, only RM3.22 billion out of the total RM13.8 billion allocation in the first stimulus package has been approved. This low take-up rate means that the approval and disbursement process is long and inefficient.
This is unsurprising because small businesses have a difficult time figuring out the voluminous paperwork. The jungle of government bureaucracy meant that only the most persistent survives. Questions like “What assistance programs do you need?”, “Who do you approach?”, “Whether you qualify?” or “Whether you meet the requirement?” are sources of confusion.
Small business failures are an accelerant to a recession
Banks that are saddled with an influx of applications are also less helpful to small businesses. They give differing opinions or did not respond to queries completely. Even if one small business gets assistance, it is only enough to act as disaster relief for another small business. Small businesses suffer together. And once this is cut, everyone sinks.
The spiral continues when people lose their jobs and the ability to spend. The key has always been in consumer spending. When businesses shut down, workers lose their jobs. Without a monthly income, they could not spend. Poorer workers are disproportionately affected as they do not have a wealth cushion, being saddled with high debts, forcing them to sell whatever they can to get quick cash.
Pawnshops form a beeline. They now even provide stools for the people in the queue.
Young people, already not market-ready, enter the job market at a bad time. They are most vulnerable to be laid off, and a generation of young entrepreneurs and innovators now have to scale back on their dreams – pushing the country back by a few years.
While Malaysians look for jobs on the ground, politicians also scramble for the highest positions. The political risk in our country would further delay our economic recovery. The legitimacy question of the Perikatan Nasional government would not disappear simply because of the health crisis – or even the economic crisis – dissipates. The slim majority that Prime Minister Muhyiddin Yassin holds means that there is always a threat of a no-confidence vote and a snap election.
What this means is that money from other countries will not flow rapidly, and money does not trickle down as people hold back on their decisions. We haven’t even talked about the possibility of a second wave of coronavirus.
This is the worst of times – but nobody cares.
(Revised article published on Malaysiakini).
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