“There must be clear goals and clear timelines” to navigate through crisis: Malaysia’s ex-finance minister Daim Zainuddin
Interview conducted by Firoz Abdul Hamid and Jeremiah Capacillo
Daim Zainuddin is a man apart. The Malaysian politician has walked the corridors of power in both the public and private sector, and this on a global stage. As former finance minister of Malaysia in the second half of the 1980s and again between 1999 and 2001, he is credited to have managed and resolved a couple of crises for his country, particularly in the aftermath of the Asian Financial Crisis in his second term. He retired from all official government and political posts in 2001..
In his latest role, Daim Zainuddin led the Council of Eminent Persons, a group of five influential politicians and business people created by former prime minister Mahathir Mohamed after the latter’s spectacular election win in 2018. The council was mandated with advising the cabinet on policy matters, implementing the newly elected Alliance of Hope (Pakatan Harapan) coalition’s election promises and reviewing the country’s mega-projects and international business deals commenced or proposed under the former government of Najib Razak.
Daim Zainuddin is also an experienced businessman who ventured from salt production to land and property development, plastic production, food processing to steel and iron product making and eventually became a strategic investor in the property development and banking sectors.
In this interview with Investvine, Daim Zainuddin discusses the pandemic and its effect on the Malaysian economy, as well as government issues, business and the perils of government-linked companies, while giving ideas for exiting the crises.
This is part one of a three-part series.
PART ONE: The pandemic and the economy
Investvine: The change of government in Malaysia was somewhat abrupt in February 2020. How much of this – in your view – has grossly affected Malaysia’s handling of the economic disruption by Covid-19? Had the political change not taken place, would the economic situation be different? Where their lost opportunities?
Daim Zainuddin: It is hard to speculate on a future of “what could have been.” However, what is clear is that the change of government has led to a lot of political uncertainty that continues till today. There was upheaval across every state government, across government-linked companies, state investment companies and statutory bodies, and interruptions to various initiatives and projects that were already underway. In addition, the magnitude and duration of the global economic contraction, the volatility in commodity prices and the potential risks of de-globalisation with implications on global supply chains were the factors to influence economic recovery and market sentiments.
Strictly speaking, Malaysia should be entering this challenging period from a position of strength. The strong fundamentals built over the last decades provide us with the resilience to deal with shocks and prepare for an economic recovery. This means:
- supported by well-trained medical staff and well-equipped facilities, Malaysia’s healthcare system has demonstrated robustness and resilience in the Covid-19 crisis.
- our diversified sources of growth and external trade structure can help mitigate the economic impact of external and domestic developments.
- continued presence of domestic institutional investors, as well as the potent and liquid financial markets remain supportive of orderly market conditions.
- stress tests conducted by Bank Negara Malaysia continue to affirm that financial institutions remain resilient even under severe shock scenarios.
However, at the onset of the pandemic, the country was caught in a myriad of domestic political struggles which led to political change. Due to the fragility and status of the present government and with the Covid-19 lockdown, the entire cabinet from the prime minister down withdrew from public scrutiny. There were hardly any press conferences, save for the daily updates. Even in announcing the two economic stimulus packages, the media was not given a chance to question the intent and scope of the measures. So much so, the packages became a mere means of using one or two recipients as testimony of how “effective” they were. In the sense of communication and accountability, definitely the change in government had an impact.
“What is clear is that the change of government has led to a lot of political uncertainty that continues till today. There was upheaval across every state government…”
The implications are clear and simple — rather than having a government with a mandate to lead the nation through these difficult times, we have one that is inherently unstable due to the way it came into power. We are faced with politicians grappling with self-interest, multiple court cases, potential defectors and attempts to buy support. We don’t really know if and when parliament will sit, nor have a clear indication of what the policy priorities are. As far as the public is concerned, the impression and perception given is that the present government is only interested in securing its position by whatever means, even if that requires the placing of politicians in high paying positions within state companies at the expense of public funds.
Having said that, the economy would have been badly hit by Covid-19 anyhow, no matter which government was in charge. No country has escaped unscathed from the impact of this pandemic. However, political and social stability go a long way in steering a nation through a time of crisis. Experience, coupled with calm, wise and decisive leadership makes a huge difference in restoring order through the chaos of a dual crisis such as the one we are facing now. Trust in the government and in its ability to steer the country out of such crises is paramount. You can see the difference in how Jacinda Ardern handled New Zealand’s lockdown and how the people responded to the government’s actions as opposed to, say, Boris Johnson and his bumbling through a supposed lockdown in the UK.
So, if the people feel the government knows what it is doing, if the people are confident the government has a long-term plan to steer the country through these crises, then, of course, whatever action the government takes will be more effective. What we lost as a result of the change of government is that all the plans that had been put in place by the Pakatan Harapan government, and that includes long-term institutional changes that were being initiated, have all been put on the back burner and Malaysia has missed a golden opportunity to steer towards greater maturity, stability, unity, equality and cohesion.
The Malaysian economy is essentially propped by small and medium enterprises. Up to 90 per cent of the economy is driven by this sector, but now they are the most affected not only in Malaysia, but globally.
How – in your view – can the sector henceforth bounce back, and what is the role of the government in this process? Has the stimulus package been effective?
Over 65 per cent of Malaysians are employed by small and medium enterprises, and many are small family-owned businesses without the big cushions of reserves that bigger companies use to have. The government must focus its efforts towards helping the sector survive the upcoming recession and to weather the storm that is bound to hit us – or rather, that has already hit us.
The government has offered various incentives and financing for small and medium enterprises, but what we need to see is proper monitoring of its implementation. The latest report from the ministry of finance reveals that the coverage remains low, although reasons for this are unclear. Less than two per cent of small and medium enterprises nationwide have obtained funds from the soft loans programme, and less than three per cent of micro enterprises across the country have benefited from the micro credit scheme. It is not that people do not need the money – we saw a flood of people rushing to pawnshops when the first phase of lockdown was lifted. The government must thus look into why the coverage is low and what are the weaknesses here. Is it that processing is taking too long? Are the terms and conditions of the loans unclear or unattractive? Are the target recipients aware of the loans and how to access them? Are the small and medium enterprises already saddled with too many loan commitments to be able to take on more debt? Is it that they feel a near-term recovery is nowhere in sight?
Beyond these short-term stimulus measures, medium- to long-term strategies are equally important to accelerate digital transformation and to augment our labour force and business capability to compete effectively as we navigate this “new normal.” We need these nine reforms urgently. A re-skill and upskill of our labour force and small and medium enterprises is necessary to deliver new business models and build operational resilience in the post-Covid-19 era. There is a need to accelerate efforts in the implementation of the Industry 4.0 policy in a way that Malaysia can build and seize new opportunities in fiercely competitive areas.
When the initial lockdown was enforced, we faced many issues with the food supply chain, namely a shortage of packaging supplies, issues with logistics and transportation, shortage of labourers and increase in prices for many imported items. These prices have not come down so far – it is an area that neither the government nor the media have explored. The fact is that food prices have gone up during the last four months.
I’ve mentioned this before, and I think it must be re-emphasised – food security must be a top priority. The ministry of agriculture and AgroBank are providing micro credits and in-kind incentives for urban farming, which is a good start. But the government must have clear long-term goals for the local agriculture industry, and the political will to implement them. This will involve a lot of cooperation with individual state governments as well as government-linked companies, state investment companies, government agencies and local universities that have access to large land banks.
“These prices have not come down so far – it is an area that neither the government nor the media have explored. The fact is that food prices have gone up during the last four months”
Over the lockdown period, many people took to gardening or expanded their existing home plots. We gained a renewed appreciation for those involved in essential services, such as food production and delivery. The previous government had done a master plan for food production and was about to implement various agri-policies. I would hope that the current government would just implement the plan, to not only provide funding and materials for the development of the local agriculture and food industry, but also incentives for training and development. It is not only about farmers, but also other important industries such as robotics, drone manufacturing, logistics, biotechnology research, genetic engineering, healthcare, as well as packaging and processing.
And most important of all, it is about education. About educating the people on the importance and attractions of agriculture, about the importance of food security, about the importance of food that is produced with utmost integrity. About an appreciation of where our food comes from, an appreciation of the work that goes into producing our food so that people realise and appreciate the work of farmers and fishermen instead of taking these jobs for granted, and about realising that there may be financial rewards in this industry if it’s done well and intelligently.
As someone who has steered the country through two major financial crises, what are your views on the stimulus package? Has it been comprehensive? How could it have been better?
There were two areas that needed attention. The first was to keep small and medium enterprises afloat, thus ensuring continued employment. The second was to increase the people’s spending capacity by ensuring affordability of products. When we hear stories of businesses closing for good and people losing their jobs, we need to ask if the stimulus packages have met the first objective. I feel the government needs to look seriously into this and provide us the statistics of how many businesses have closed for good and how many jobs have been affected.
“My view is – and I believe many share this – that the government must listen to the voice of the people and must call parliament to session, it must face the media and hence public opinion”
Secondly, the effort to put money into the people’s hands has been very short-term. I’m not saying there should be long-term handouts, but there can be long-term measures to reduce the people’s expenditure. For example, reducing intra-city toll rates. What has happened to plans to reduce these rates? For example, reducing energy rates given the drastic fall in oil prices, reducing broadband costs or reducing food prices. Has the government thought of such measures and are they reflected in the packages?
Here is where I feel the real disconnect is: The government needs accurate information and feedback to better formulate more effective measures and assistance. If you choose to avoid scrutiny and closet yourself, you lose invaluable and real public opinion, insight and feedback. The government could have in fact been more effective had it been more open to public scrutiny. Instead, by using the Covid-19 pandemic, it is merely making decisions that it feels are the right ones in a vacuum without any public feedback or input.
The previous government, on the other hand, was extremely open to the point of bickering amongst itself and that was messy, but then democracy is messy.
My view is – and I believe many share this – that the government must listen to the voice of the people and must call parliament to session, it must face the media and hence public opinion.
What industries and sectors do you see thriving in a post-Covid-19 world? And what industries might suffer long-term consequences in the long run?
As a former businessman, my mantra is to focus on basic needs – food, shelter, clothing. With Covid-19, we see a push further towards the focus on basic needs. I’ve already spoken in some detail about the food production industry, particularly agriculture and food processing. We will also need to consider affordable housing, particularly housing that is also environmentally friendly and sustainable, for instance by way of solar roof panels and rainwater catchment. Now, Internet and telecommunications are also a daily necessity in order to work and study.
“Schools are placed to produce all-rounded students where they mix, they compete, they adjust to each other’s weaknesses and strengths and they support each other. Can you substitute this with leaning from home?”
The post-pandemic world is likely to bring strong growth prospects for the technology and electronics sector due to emerging opportunities from a low-touch economy. In surviving the pandemic over the past months, people around the world have experimented with new ways of doing things through technology. Many jobs and businesses become “virtually possible” (from remote work to virtual tours of museums and real estate) with very little transition time.
Such trends could have a lasting impact on semiconductor demand and open new possibilities for existing products and services. For example, demand could increase for semiconductors that enable servers, connectivity, and cloud usage. Semiconductors may also be in high demand for products and services, such as contactless solutions (e.g. elevator buttons), automated-delivery solutions for the last mile (e.g. robots and drones), as well as digital work processes and the Internet of Things.
Furthermore, increased demand for medical products to enhance healthcare capacity is likely to see continued strong strides for the healthcare sector.
Meanwhile, crowd-gathering businesses (e.g. dining, entertainment, recreation, travel) have borne the brunt of the pandemic thus far. Moving forward, Covid-19 induced anxieties and new norms arising from social distancing are likely to continue to bring medium-to-long-term demand challenges for such services, especially if businesses are unable to offer low contact options to wary customers.
The government must do the planning and the monitoring but call for tenders and let the private sector build. Long-term, we are seeing a major shift in the tourism and hospitality industry. I believe there will be a shift away from the large tour group model, and as travel becomes more of a luxury, people will gravitate towards more intentional, slow-paced travel. As people shift away from a high consumption lifestyle, we may see a change in retail patterns, particularly for items deemed non-essential, for instance clothing (beyond what is necessary) and other lifestyle items.
We have seen industries that cater to online businesses, distance learning and communications thrive in the Covid-19 era. But we also must remember that human beings are essentially social creatures. These non face-to-face dealings will thrive for now but for how long before people feel the need to integrate and socialise? We talk about online education taking over from conventional school learning but is this really the way forward? A situation where children learn in their own cocoons? So again, we need to think of a balance – to not put all our eggs into that one basket.
Schools are placed to produce all-rounded students where they mix, they compete, they adjust to each other’s weaknesses and strengths and they support each other. Can you substitute this with leaning from home?
With many cross-border travel restrictions still in place and expected to be lifted only gradually, coupled with high degree of fear for air travel, the situation for international tourism remains tough and this is likely to persist for quite some time.
A study conducted by McKinsey & Company showed that green shoots are emerging in China’s domestic travel market after virus containment measures have been lifted with some notable trends, namely – the young are more open to resuming travel, self-guided and self-driven tours become dominant, economy travel will recover more quickly and outdoor and nature-related destinations will be more popular than congested cities. Tourism businesses in China are responding to these trends via three main strategies, namely by ensuring physical distancing and enhancing hygiene, with aggressive price promotion, as well as byengaging customers through social media, targeting the younger segment.
In Malaysia, where the tourism industry supports many businesses and livelihoods, domestic tourism offers a major chance for driving recovery. Thailand, for instance, has introduced many programmes to promote domestic tourism.
With virus containment and domestic travel restrictions gradually lifted, there are opportunities for us to revive growth in domestic tourism activities. While various incentives are being offered to stimulate domestic tourism spending (e.g. personal tax relief, cash vouchers), products and processes in the tourism and services sectors need to be appropriately modified to give customers a peace of mind.
There is a need for the government to work together with industry players to respond to changes in customer behaviour and develop robust and continuously enhance standard operating procedures. Travel activity will continue, but it will not be the same. Enhanced protocols for social distancing, sanitisation and contact-less service will not only safeguard the health of customers and employees, but also help restore confidence. This lays the foundation for future recovery in international travels.
Beyond the stimulus packages, what long-term solutions do you recommend the government undertake to deal with rising unemployment and business closures?
Firstly, the government should be taking steps to prevent unemployment by way of incentives that encourage employee retainment and retraining. The wage subsidy was a good start and helped protect many jobs that would otherwise have been lost to Covid-19. However, this incentive was insufficient and many have lost their jobs regardless.
As a result, many young workers are migrating back home from big cities due to the lockdown. Many have lost their jobs and have faced retrenchment. The development of rural areas and the rural industry must be a key focus area for the government to ensure that those now unemployed are able to find new opportunities.
“As these gaps in the economy become clear, the government must produce short-term, medium-term and long-term plans to encourage retraining and entrepreneurship in key economic areas”
In Pakistan, tens of thousands of labourers who lost work during the country’s lockdown were retrained as “jungle workers” to plant saplings throughout the country. This was part of their efforts to combat climate change, an existential threat that continues to loom over us in tandem with the pandemic and the economic recession.
In Malaysia, where we have seen many forest areas being degazetted over the years, the government should be taking strides to protect and rejuvenate our natural treasures. These natural resources will not only buffer our nation against the impact of climate change, but also provide fodder for the local tourism industry. With the recession looming and international travel remaining uncertain, there must be a clear plan to boost local tourism to encourage Malaysians to travel around at home.
The government should be taking stock of what needs to be done to protect our ecosystem and rejuvenate rural industries at the same time. I’ve maintained that sustainable, modern precise agriculture will be a key area if Malaysia wishes to progress as a developed nation. We cannot succeed as a nation if we are unable to feed ourselves.
The government must act now and take stock of our human capital. What are our strengths, where are we lacking? Sustainable modern precise agriculture, particularly food production, must be expanded in Malaysia. We need to think about training the youth in these sectors, as well as complementary sectors which are currently blind spots in the local agriculture landscape. For instance, seed production in Malaysia is very low; we should encourage research and produce more. Besides seeds, fertilisers and animal feed are also mostly imported, adding to the costs of food production. In fact, our food import bill was 50 billion ringgit, or $11.7 billion, in 2018.
There are various barriers to entry for food production, one of them being access to capital and land. There is also our over-reliance on cheap foreign labour and the gaps and weaknesses in the supply chain that we saw revealed during the lockdown. As these gaps in the economy become clear, the government must produce short-term, medium-term and long-term plans to encourage retraining and entrepreneurship in key economic areas. They must understand that people will be hesitant to take financial risks during these difficult times, and plan accordingly.
What measures can the government take to help Malaysia’s hard-hit tourism, entertainment and service industries to get them back on their feet?
As the economy slowly starts to reopen, we are seeing more people taking local holidays, and slowly starting to return to their usual routines.
The increase in local travel should be taken as an opportunity to improve rural infrastructure and stimulate the local economy. Both federal and state governments should work together to ensure that concerted efforts are being made to conserve our cultural, architectural and environmental heritage, and at the same time create new products. After Covid-19, tourists may prefer small and environmentally friendly chalets and villas instead of huge hotels.
I mentioned earlier that rural youth could be retrained in environmental conservation as it was done in Pakistan. Similarly, unemployed architects, urban planners, graphic designers, artists and the like should be mobilised to create a vibrant arts scene that reflects the unique culture and history of each state, especially in smaller towns which time has forgotten and their rejuvenation can then encourage local tourism.
“We bring our families to places such as Europe and and are astonished at their villages and forests. Yet, we have the very same attractions here”
What will be important is to provide the framework and tools for the local tourism and entertainment industry to thrive again. For rural areas, there should be a focus on improving access through roads, public transport, Internet and telephone accessibility. The government can also work with Internet platforms such as AirBnb, Agoda, Expedia and the like to encourage small businesses to list their services on these websites in order to help them access a wider customer base.
In this context, most important is to foster an appreciation of what this country has to offer in terms of environmental getaways. We bring our families to places such as Europe and and are astonished at their villages and forests. Yet, we have the very same attractions here, but for some reason, there is no appreciation for it. Why is that so? Is it a marketing issue, a matter of ignorance or a matter of taking the easy way out? These questions need to be asked and their answers will guide us forward.
Should Malaysia enter a recession this year, what measures can the government take to overcome it? Would the same measures you took in dealing with the 1998 Asian financial crisis be relevant here?
At the very basic level, Malaysia must first have four things secured: political and social stability, clear policies, strong fair and just leadership, and an overarching respect for the rule of law.
“Reporting and communication must be clear and transparent to rebuild trust with the government, it must not just be focused on media propaganda”
Back in 1998, the National Economic Action Council met daily. We monitored information, tracked changing trends and held regular sessions with relevant stakeholders who spoke for the people on the ground. By having a clear understanding of what is happening at the ground level, we could formulate quick and efficient policy responses to alleviate economic disruptions to households and businesses.
The government must engage with these stakeholders – those representing specific economic sectors such as chambers of commerce, industry associations, workers unions and settler associations. They are all key to reopening the economy and require specific interventions to effectively help them. A blanket approach will be a waste of money. In times like these, the government must be ready to spend to protect the citizens, but must spend wisely. There must be clear goals and clear timelines. Reporting and communication must be clear and transparent to rebuild trust with the government, it must not just be focused on media propaganda.
The government must learn to act quickly and in a concerted manner. It is not just the finance ministry that has to handle the economic crisis. All the ministries, all the government agencies, all the individual state governments must work hand in hand to ensure that there is a clear plan that caters to the needs of the population and is able to revitalise the economy so that money can be put into the hands of the people.
I read recently that the prime minister visited the finance ministry’s operations room for the stimulus packages. He also launched an electronic dashboard in the ministry which tracks the effectiveness of the packages. However, stakeholders and the people would want to know “is this the only time we will hear of this dashboard?” The ministry needs to compile at least weekly reports of its dashboard so that the public knows what is happening to the stimulus packages. Much like what happened during the 1998 crisis when the National Economic Recovery Plan was updated every week.
Part one of the interview ends here. Read part two of this interview.
Interview conducted by Firoz Abdul Hamid and Jeremiah Capacillo Daim Zainuddin is a man apart. The Malaysian politician has walked the corridors of power in both the public and private sector, and this on a global stage. As former finance minister of Malaysia in the second half of the 1980s and again between 1999 and 2001, he is credited to have managed and resolved a couple of crises for his country, particularly in the aftermath of the Asian Financial Crisis in his second term. He retired from all official government and political posts in 2001.. Daim Zainuddin In his latest...
Interview conducted by Firoz Abdul Hamid and Jeremiah Capacillo
Daim Zainuddin is a man apart. The Malaysian politician has walked the corridors of power in both the public and private sector, and this on a global stage. As former finance minister of Malaysia in the second half of the 1980s and again between 1999 and 2001, he is credited to have managed and resolved a couple of crises for his country, particularly in the aftermath of the Asian Financial Crisis in his second term. He retired from all official government and political posts in 2001..
In his latest role, Daim Zainuddin led the Council of Eminent Persons, a group of five influential politicians and business people created by former prime minister Mahathir Mohamed after the latter’s spectacular election win in 2018. The council was mandated with advising the cabinet on policy matters, implementing the newly elected Alliance of Hope (Pakatan Harapan) coalition’s election promises and reviewing the country’s mega-projects and international business deals commenced or proposed under the former government of Najib Razak.
Daim Zainuddin is also an experienced businessman who ventured from salt production to land and property development, plastic production, food processing to steel and iron product making and eventually became a strategic investor in the property development and banking sectors.
In this interview with Investvine, Daim Zainuddin discusses the pandemic and its effect on the Malaysian economy, as well as government issues, business and the perils of government-linked companies, while giving ideas for exiting the crises.
This is part one of a three-part series.
PART ONE: The pandemic and the economy
Investvine: The change of government in Malaysia was somewhat abrupt in February 2020. How much of this – in your view – has grossly affected Malaysia’s handling of the economic disruption by Covid-19? Had the political change not taken place, would the economic situation be different? Where their lost opportunities?
Daim Zainuddin: It is hard to speculate on a future of “what could have been.” However, what is clear is that the change of government has led to a lot of political uncertainty that continues till today. There was upheaval across every state government, across government-linked companies, state investment companies and statutory bodies, and interruptions to various initiatives and projects that were already underway. In addition, the magnitude and duration of the global economic contraction, the volatility in commodity prices and the potential risks of de-globalisation with implications on global supply chains were the factors to influence economic recovery and market sentiments.
Strictly speaking, Malaysia should be entering this challenging period from a position of strength. The strong fundamentals built over the last decades provide us with the resilience to deal with shocks and prepare for an economic recovery. This means:
- supported by well-trained medical staff and well-equipped facilities, Malaysia’s healthcare system has demonstrated robustness and resilience in the Covid-19 crisis.
- our diversified sources of growth and external trade structure can help mitigate the economic impact of external and domestic developments.
- continued presence of domestic institutional investors, as well as the potent and liquid financial markets remain supportive of orderly market conditions.
- stress tests conducted by Bank Negara Malaysia continue to affirm that financial institutions remain resilient even under severe shock scenarios.
However, at the onset of the pandemic, the country was caught in a myriad of domestic political struggles which led to political change. Due to the fragility and status of the present government and with the Covid-19 lockdown, the entire cabinet from the prime minister down withdrew from public scrutiny. There were hardly any press conferences, save for the daily updates. Even in announcing the two economic stimulus packages, the media was not given a chance to question the intent and scope of the measures. So much so, the packages became a mere means of using one or two recipients as testimony of how “effective” they were. In the sense of communication and accountability, definitely the change in government had an impact.
“What is clear is that the change of government has led to a lot of political uncertainty that continues till today. There was upheaval across every state government…”
The implications are clear and simple — rather than having a government with a mandate to lead the nation through these difficult times, we have one that is inherently unstable due to the way it came into power. We are faced with politicians grappling with self-interest, multiple court cases, potential defectors and attempts to buy support. We don’t really know if and when parliament will sit, nor have a clear indication of what the policy priorities are. As far as the public is concerned, the impression and perception given is that the present government is only interested in securing its position by whatever means, even if that requires the placing of politicians in high paying positions within state companies at the expense of public funds.
Having said that, the economy would have been badly hit by Covid-19 anyhow, no matter which government was in charge. No country has escaped unscathed from the impact of this pandemic. However, political and social stability go a long way in steering a nation through a time of crisis. Experience, coupled with calm, wise and decisive leadership makes a huge difference in restoring order through the chaos of a dual crisis such as the one we are facing now. Trust in the government and in its ability to steer the country out of such crises is paramount. You can see the difference in how Jacinda Ardern handled New Zealand’s lockdown and how the people responded to the government’s actions as opposed to, say, Boris Johnson and his bumbling through a supposed lockdown in the UK.
So, if the people feel the government knows what it is doing, if the people are confident the government has a long-term plan to steer the country through these crises, then, of course, whatever action the government takes will be more effective. What we lost as a result of the change of government is that all the plans that had been put in place by the Pakatan Harapan government, and that includes long-term institutional changes that were being initiated, have all been put on the back burner and Malaysia has missed a golden opportunity to steer towards greater maturity, stability, unity, equality and cohesion.
The Malaysian economy is essentially propped by small and medium enterprises. Up to 90 per cent of the economy is driven by this sector, but now they are the most affected not only in Malaysia, but globally.
How – in your view – can the sector henceforth bounce back, and what is the role of the government in this process? Has the stimulus package been effective?
Over 65 per cent of Malaysians are employed by small and medium enterprises, and many are small family-owned businesses without the big cushions of reserves that bigger companies use to have. The government must focus its efforts towards helping the sector survive the upcoming recession and to weather the storm that is bound to hit us – or rather, that has already hit us.
The government has offered various incentives and financing for small and medium enterprises, but what we need to see is proper monitoring of its implementation. The latest report from the ministry of finance reveals that the coverage remains low, although reasons for this are unclear. Less than two per cent of small and medium enterprises nationwide have obtained funds from the soft loans programme, and less than three per cent of micro enterprises across the country have benefited from the micro credit scheme. It is not that people do not need the money – we saw a flood of people rushing to pawnshops when the first phase of lockdown was lifted. The government must thus look into why the coverage is low and what are the weaknesses here. Is it that processing is taking too long? Are the terms and conditions of the loans unclear or unattractive? Are the target recipients aware of the loans and how to access them? Are the small and medium enterprises already saddled with too many loan commitments to be able to take on more debt? Is it that they feel a near-term recovery is nowhere in sight?
Beyond these short-term stimulus measures, medium- to long-term strategies are equally important to accelerate digital transformation and to augment our labour force and business capability to compete effectively as we navigate this “new normal.” We need these nine reforms urgently. A re-skill and upskill of our labour force and small and medium enterprises is necessary to deliver new business models and build operational resilience in the post-Covid-19 era. There is a need to accelerate efforts in the implementation of the Industry 4.0 policy in a way that Malaysia can build and seize new opportunities in fiercely competitive areas.
When the initial lockdown was enforced, we faced many issues with the food supply chain, namely a shortage of packaging supplies, issues with logistics and transportation, shortage of labourers and increase in prices for many imported items. These prices have not come down so far – it is an area that neither the government nor the media have explored. The fact is that food prices have gone up during the last four months.
I’ve mentioned this before, and I think it must be re-emphasised – food security must be a top priority. The ministry of agriculture and AgroBank are providing micro credits and in-kind incentives for urban farming, which is a good start. But the government must have clear long-term goals for the local agriculture industry, and the political will to implement them. This will involve a lot of cooperation with individual state governments as well as government-linked companies, state investment companies, government agencies and local universities that have access to large land banks.
“These prices have not come down so far – it is an area that neither the government nor the media have explored. The fact is that food prices have gone up during the last four months”
Over the lockdown period, many people took to gardening or expanded their existing home plots. We gained a renewed appreciation for those involved in essential services, such as food production and delivery. The previous government had done a master plan for food production and was about to implement various agri-policies. I would hope that the current government would just implement the plan, to not only provide funding and materials for the development of the local agriculture and food industry, but also incentives for training and development. It is not only about farmers, but also other important industries such as robotics, drone manufacturing, logistics, biotechnology research, genetic engineering, healthcare, as well as packaging and processing.
And most important of all, it is about education. About educating the people on the importance and attractions of agriculture, about the importance of food security, about the importance of food that is produced with utmost integrity. About an appreciation of where our food comes from, an appreciation of the work that goes into producing our food so that people realise and appreciate the work of farmers and fishermen instead of taking these jobs for granted, and about realising that there may be financial rewards in this industry if it’s done well and intelligently.
As someone who has steered the country through two major financial crises, what are your views on the stimulus package? Has it been comprehensive? How could it have been better?
There were two areas that needed attention. The first was to keep small and medium enterprises afloat, thus ensuring continued employment. The second was to increase the people’s spending capacity by ensuring affordability of products. When we hear stories of businesses closing for good and people losing their jobs, we need to ask if the stimulus packages have met the first objective. I feel the government needs to look seriously into this and provide us the statistics of how many businesses have closed for good and how many jobs have been affected.
“My view is – and I believe many share this – that the government must listen to the voice of the people and must call parliament to session, it must face the media and hence public opinion”
Secondly, the effort to put money into the people’s hands has been very short-term. I’m not saying there should be long-term handouts, but there can be long-term measures to reduce the people’s expenditure. For example, reducing intra-city toll rates. What has happened to plans to reduce these rates? For example, reducing energy rates given the drastic fall in oil prices, reducing broadband costs or reducing food prices. Has the government thought of such measures and are they reflected in the packages?
Here is where I feel the real disconnect is: The government needs accurate information and feedback to better formulate more effective measures and assistance. If you choose to avoid scrutiny and closet yourself, you lose invaluable and real public opinion, insight and feedback. The government could have in fact been more effective had it been more open to public scrutiny. Instead, by using the Covid-19 pandemic, it is merely making decisions that it feels are the right ones in a vacuum without any public feedback or input.
The previous government, on the other hand, was extremely open to the point of bickering amongst itself and that was messy, but then democracy is messy.
My view is – and I believe many share this – that the government must listen to the voice of the people and must call parliament to session, it must face the media and hence public opinion.
What industries and sectors do you see thriving in a post-Covid-19 world? And what industries might suffer long-term consequences in the long run?
As a former businessman, my mantra is to focus on basic needs – food, shelter, clothing. With Covid-19, we see a push further towards the focus on basic needs. I’ve already spoken in some detail about the food production industry, particularly agriculture and food processing. We will also need to consider affordable housing, particularly housing that is also environmentally friendly and sustainable, for instance by way of solar roof panels and rainwater catchment. Now, Internet and telecommunications are also a daily necessity in order to work and study.
“Schools are placed to produce all-rounded students where they mix, they compete, they adjust to each other’s weaknesses and strengths and they support each other. Can you substitute this with leaning from home?”
The post-pandemic world is likely to bring strong growth prospects for the technology and electronics sector due to emerging opportunities from a low-touch economy. In surviving the pandemic over the past months, people around the world have experimented with new ways of doing things through technology. Many jobs and businesses become “virtually possible” (from remote work to virtual tours of museums and real estate) with very little transition time.
Such trends could have a lasting impact on semiconductor demand and open new possibilities for existing products and services. For example, demand could increase for semiconductors that enable servers, connectivity, and cloud usage. Semiconductors may also be in high demand for products and services, such as contactless solutions (e.g. elevator buttons), automated-delivery solutions for the last mile (e.g. robots and drones), as well as digital work processes and the Internet of Things.
Furthermore, increased demand for medical products to enhance healthcare capacity is likely to see continued strong strides for the healthcare sector.
Meanwhile, crowd-gathering businesses (e.g. dining, entertainment, recreation, travel) have borne the brunt of the pandemic thus far. Moving forward, Covid-19 induced anxieties and new norms arising from social distancing are likely to continue to bring medium-to-long-term demand challenges for such services, especially if businesses are unable to offer low contact options to wary customers.
The government must do the planning and the monitoring but call for tenders and let the private sector build. Long-term, we are seeing a major shift in the tourism and hospitality industry. I believe there will be a shift away from the large tour group model, and as travel becomes more of a luxury, people will gravitate towards more intentional, slow-paced travel. As people shift away from a high consumption lifestyle, we may see a change in retail patterns, particularly for items deemed non-essential, for instance clothing (beyond what is necessary) and other lifestyle items.
We have seen industries that cater to online businesses, distance learning and communications thrive in the Covid-19 era. But we also must remember that human beings are essentially social creatures. These non face-to-face dealings will thrive for now but for how long before people feel the need to integrate and socialise? We talk about online education taking over from conventional school learning but is this really the way forward? A situation where children learn in their own cocoons? So again, we need to think of a balance – to not put all our eggs into that one basket.
Schools are placed to produce all-rounded students where they mix, they compete, they adjust to each other’s weaknesses and strengths and they support each other. Can you substitute this with leaning from home?
With many cross-border travel restrictions still in place and expected to be lifted only gradually, coupled with high degree of fear for air travel, the situation for international tourism remains tough and this is likely to persist for quite some time.
A study conducted by McKinsey & Company showed that green shoots are emerging in China’s domestic travel market after virus containment measures have been lifted with some notable trends, namely – the young are more open to resuming travel, self-guided and self-driven tours become dominant, economy travel will recover more quickly and outdoor and nature-related destinations will be more popular than congested cities. Tourism businesses in China are responding to these trends via three main strategies, namely by ensuring physical distancing and enhancing hygiene, with aggressive price promotion, as well as byengaging customers through social media, targeting the younger segment.
In Malaysia, where the tourism industry supports many businesses and livelihoods, domestic tourism offers a major chance for driving recovery. Thailand, for instance, has introduced many programmes to promote domestic tourism.
With virus containment and domestic travel restrictions gradually lifted, there are opportunities for us to revive growth in domestic tourism activities. While various incentives are being offered to stimulate domestic tourism spending (e.g. personal tax relief, cash vouchers), products and processes in the tourism and services sectors need to be appropriately modified to give customers a peace of mind.
There is a need for the government to work together with industry players to respond to changes in customer behaviour and develop robust and continuously enhance standard operating procedures. Travel activity will continue, but it will not be the same. Enhanced protocols for social distancing, sanitisation and contact-less service will not only safeguard the health of customers and employees, but also help restore confidence. This lays the foundation for future recovery in international travels.
Beyond the stimulus packages, what long-term solutions do you recommend the government undertake to deal with rising unemployment and business closures?
Firstly, the government should be taking steps to prevent unemployment by way of incentives that encourage employee retainment and retraining. The wage subsidy was a good start and helped protect many jobs that would otherwise have been lost to Covid-19. However, this incentive was insufficient and many have lost their jobs regardless.
As a result, many young workers are migrating back home from big cities due to the lockdown. Many have lost their jobs and have faced retrenchment. The development of rural areas and the rural industry must be a key focus area for the government to ensure that those now unemployed are able to find new opportunities.
“As these gaps in the economy become clear, the government must produce short-term, medium-term and long-term plans to encourage retraining and entrepreneurship in key economic areas”
In Pakistan, tens of thousands of labourers who lost work during the country’s lockdown were retrained as “jungle workers” to plant saplings throughout the country. This was part of their efforts to combat climate change, an existential threat that continues to loom over us in tandem with the pandemic and the economic recession.
In Malaysia, where we have seen many forest areas being degazetted over the years, the government should be taking strides to protect and rejuvenate our natural treasures. These natural resources will not only buffer our nation against the impact of climate change, but also provide fodder for the local tourism industry. With the recession looming and international travel remaining uncertain, there must be a clear plan to boost local tourism to encourage Malaysians to travel around at home.
The government should be taking stock of what needs to be done to protect our ecosystem and rejuvenate rural industries at the same time. I’ve maintained that sustainable, modern precise agriculture will be a key area if Malaysia wishes to progress as a developed nation. We cannot succeed as a nation if we are unable to feed ourselves.
The government must act now and take stock of our human capital. What are our strengths, where are we lacking? Sustainable modern precise agriculture, particularly food production, must be expanded in Malaysia. We need to think about training the youth in these sectors, as well as complementary sectors which are currently blind spots in the local agriculture landscape. For instance, seed production in Malaysia is very low; we should encourage research and produce more. Besides seeds, fertilisers and animal feed are also mostly imported, adding to the costs of food production. In fact, our food import bill was 50 billion ringgit, or $11.7 billion, in 2018.
There are various barriers to entry for food production, one of them being access to capital and land. There is also our over-reliance on cheap foreign labour and the gaps and weaknesses in the supply chain that we saw revealed during the lockdown. As these gaps in the economy become clear, the government must produce short-term, medium-term and long-term plans to encourage retraining and entrepreneurship in key economic areas. They must understand that people will be hesitant to take financial risks during these difficult times, and plan accordingly.
What measures can the government take to help Malaysia’s hard-hit tourism, entertainment and service industries to get them back on their feet?
As the economy slowly starts to reopen, we are seeing more people taking local holidays, and slowly starting to return to their usual routines.
The increase in local travel should be taken as an opportunity to improve rural infrastructure and stimulate the local economy. Both federal and state governments should work together to ensure that concerted efforts are being made to conserve our cultural, architectural and environmental heritage, and at the same time create new products. After Covid-19, tourists may prefer small and environmentally friendly chalets and villas instead of huge hotels.
I mentioned earlier that rural youth could be retrained in environmental conservation as it was done in Pakistan. Similarly, unemployed architects, urban planners, graphic designers, artists and the like should be mobilised to create a vibrant arts scene that reflects the unique culture and history of each state, especially in smaller towns which time has forgotten and their rejuvenation can then encourage local tourism.
“We bring our families to places such as Europe and and are astonished at their villages and forests. Yet, we have the very same attractions here”
What will be important is to provide the framework and tools for the local tourism and entertainment industry to thrive again. For rural areas, there should be a focus on improving access through roads, public transport, Internet and telephone accessibility. The government can also work with Internet platforms such as AirBnb, Agoda, Expedia and the like to encourage small businesses to list their services on these websites in order to help them access a wider customer base.
In this context, most important is to foster an appreciation of what this country has to offer in terms of environmental getaways. We bring our families to places such as Europe and and are astonished at their villages and forests. Yet, we have the very same attractions here, but for some reason, there is no appreciation for it. Why is that so? Is it a marketing issue, a matter of ignorance or a matter of taking the easy way out? These questions need to be asked and their answers will guide us forward.
Should Malaysia enter a recession this year, what measures can the government take to overcome it? Would the same measures you took in dealing with the 1998 Asian financial crisis be relevant here?
At the very basic level, Malaysia must first have four things secured: political and social stability, clear policies, strong fair and just leadership, and an overarching respect for the rule of law.
“Reporting and communication must be clear and transparent to rebuild trust with the government, it must not just be focused on media propaganda”
Back in 1998, the National Economic Action Council met daily. We monitored information, tracked changing trends and held regular sessions with relevant stakeholders who spoke for the people on the ground. By having a clear understanding of what is happening at the ground level, we could formulate quick and efficient policy responses to alleviate economic disruptions to households and businesses.
The government must engage with these stakeholders – those representing specific economic sectors such as chambers of commerce, industry associations, workers unions and settler associations. They are all key to reopening the economy and require specific interventions to effectively help them. A blanket approach will be a waste of money. In times like these, the government must be ready to spend to protect the citizens, but must spend wisely. There must be clear goals and clear timelines. Reporting and communication must be clear and transparent to rebuild trust with the government, it must not just be focused on media propaganda.
The government must learn to act quickly and in a concerted manner. It is not just the finance ministry that has to handle the economic crisis. All the ministries, all the government agencies, all the individual state governments must work hand in hand to ensure that there is a clear plan that caters to the needs of the population and is able to revitalise the economy so that money can be put into the hands of the people.
I read recently that the prime minister visited the finance ministry’s operations room for the stimulus packages. He also launched an electronic dashboard in the ministry which tracks the effectiveness of the packages. However, stakeholders and the people would want to know “is this the only time we will hear of this dashboard?” The ministry needs to compile at least weekly reports of its dashboard so that the public knows what is happening to the stimulus packages. Much like what happened during the 1998 crisis when the National Economic Recovery Plan was updated every week.
Part one of the interview ends here. Read part two of this interview.
