Malaysia unveils US$8.2 billion package to save jobs amid coronavirus recession

Malaysia's Prime Minister Muhyiddin Yassin on Friday unveiled a fresh 35 billion ringgit (US$8.2 billion) stimulus package to fend off job losses caused by the coronavirus recession, adding to measures rolled out earlier in the year worth over US$61 billion.

In a televised address, Muhyiddin refrained from directly addressing heated chatter about defections from his fragile administration to the former ruling coalition led by Mahathir Mohamad, but said trade conflicts and political unrest around the world were worsening global economic conditions.

The new measures " which include 10 billion ringgit of direct fiscal spending " will fund 40 initiatives to help businesses across various sectors as well as put cash in the hands of citizens.

"I believe the measures I announced today will help revitalise support among investors, businesses and citizens to work together to stimulate the economy," Muhyiddin said in his speech.

A man in Kuala Lumpur walks past closed stores on April 23, 2020, during the country's restricted movement order. Photo: AP alt=A man in Kuala Lumpur walks past closed stores on April 23, 2020, during the country's restricted movement order. Photo: AP

The latest measures include a one-off payment of 300 ringgit to single mothers and citizens with disabilities, grants for gig-economy enterprises and a three-month extension of a previously announced wage subsidy programme.

To attract foreign direct investment, Muhyiddin said the government will grant companies with new fixed investments of 300-500 million ringgit a zero per cent tax rate for 10 years, while firms that bring in new fixed investments of over 500 million ringgit will enjoy a 15 per cent tax rate for 15 years.

The prime minister's announcement comes ahead of the full lifting of Malaysia's partial lockdown, known as the movement control order, on June 9 " nearly three months since the measures were imposed in mid-March.

Muhyiddin took power just as the coronavirus pandemic was worsening in March, following a self-coup staged by his Parti Pribumi Bersatu Malaysia (PPBM) to get itself out of the multiracial Pakatan Harapan alliance that had been in power since 2018.

The new Perikatan Nasional coalition government, consisting mainly of Malay nationalists such as the former prime minister Najib Razak, was responsible for putting together the massive second and third rounds of stimulus worth 240 billion ringgit.

The Pakatan Harapan alliance launched the first set of measures, worth 20 billion ringgit, weeks before it was toppled by Muhyiddin.

In total, Malaysia's stimulus measures now amount to 21.5 per cent of the economy. The earlier packages, however, received some criticism because just 35 billion ringgit consisted of direct spending, with credit guarantees making up a bulk of the headline 260 billion ringgit figure.

A man works at a fruit market in Kuala Lumpur on May 4, 2020. File photo: AFP alt=A man works at a fruit market in Kuala Lumpur on May 4, 2020. File photo: AFP

Calvin Cheng, an economics researcher with Malaysia's Institute of International and Strategic Studies, said he was uncertain if the new measures would be adequate to tide the country through the medium term.

"In all, I would've liked to see a more ambitious expansion of infrastructure spending, a second round of ... cash transfers and an expansion of the employment insurance scheme," Cheng said.

The wage subsidy scheme and the employment insurance scheme are the twin pillars of the earlier set of measures.

With the latest announcement, the wage subsidy scheme firms can claim up to 1,200 ringgit for six months for workers who earn up to 4,000 ringgit (US$940) per month " with a lower ceiling on claims for larger firms.

The employment insurance scheme grants a monthly payout of 600 ringgit for up to six months to employees put on unpaid leave and earning under 4,000 ringgit.

Cheng suggested the government may have been restricted from taking more aggressive measures due to the legally mandated debt-to-GDP ratio of 55 per cent it must adhere to.

Experts say the recent measures have caused the government to come within touching distance of that ceiling. To increase the limit, Muhyiddin must convene parliament " where he may be faced with the prospect of being defeated by Mahathir and his allies.

The government needs a simple parliamentary majority to pass an increase to the debt ceiling.

The ruling administration had in recent weeks reassured citizens that more help was coming as job losses continued to rise " in part due to the impact businesses suffered during the partial lockdown period.

A survey released this week by JobStreet, a recruitment website, found that 20 per cent of the 5,000 respondents said they had been retrenched. The report concluded that some two million of the country's 12-million strong workforce could lose their jobs due to the Covid-19 recession.

Socso, the national social security agency, on Wednesday reported that job losses increased 42 per cent in the January-March quarter compared with the same period last year.

In a report, the agency said the trend was "expected to accelerate", with job losses increasing by 50 per cent to 200 per cent year-on-year for each subsequent quarter in 2020.

It predicted an unemployment rate of four per cent, higher than in both the 2018 recession and the Asian financial crisis of 1997, which were at 3.7 per cent and 3.2 per cent, respectively.

There are rumours Mahathir Mohamad, ousted by Muhyiddin Yassin in March, may have garnered enough support through defections to retake the prime ministership. Photo: Xinhua alt=There are rumours Mahathir Mohamad, ousted by Muhyiddin Yassin in March, may have garnered enough support through defections to retake the prime ministership. Photo: Xinhua

Elsewhere, the latest trade figures for the economy " Southeast Asia's third largest " also painted a grim short-term picture. Data released this week showed the country registered a trade deficit of 3.5 billion ringgit in April " its first monthly trade deficit in 22 years.

Meanwhile, economic and political observers alike are keeping a close watch on the country's political situation, amid heightening speculation that 94-year-old Mahathir " ousted by Muhyiddin in March " may have garnered enough support through defections to retake the prime ministership.

Mahathir and four of his key allies were last week sacked from PPBM, the party he and Muhyiddin co-founded in their bid to take power from the scandal-haunted Najib in the 2018 election.

This article originally appeared on the South China Morning Post (SCMP).

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