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Better to tighten SOP than to have full lockdown

THE government has decided not to impose a full lockdown like the first Movement Control Order, or MCO 1.0, in March last year, which lasted 47 days.

Instead, the decision is to tighten standard operating procedures (SOP) and implement the third MCO (MCO 3.0). What is the rationale behind this? It is clear that an equilibrium must be struck between lives and livelihoods.

During MCO 1.0, the capital economy and the people economy were severely hurt. The economy contracted the worst in the second quarter of last year, at 17.2 per cent.

In April last year alone, it contracted 28.8 per cent, one of the worst in our history. When the gross domestic product contracts, the unemployment rate goes up. It went from 3.2 per cent in January last year to 5.3 per cent in May last year.

The economy saw a deflation, which caused wages to go down and investments to slow. Basically, under MCO 1.0, the economy was "frozen", causing demand and supply shocks.

Almost all sectors were heavily affected, especially services, tourism, aviation and hospitality. In addition, small- and medium-sized enterprises, plus micro enterprises and those in the informal sector, were badly hit. Because of all this, the people economy shattered.

Many lost their jobs, incomes were cut by h al f and businesses were shut abruptly. Even the Top 20 per cent and Middle 40 per cent groups were at risk of falling into the Bottom 40 per cent g ro u p, while the poor got poorer.

MCO 1.0 also had other social costs, like the deterioration of mental health, psychological and emotional stress and the "lost generation" of children due to unpreparedness for online teaching and learning.

It is estimated that the daily cost of MCO 1.0 was RM2.4 billion. Multiply that by 47 days, the cost was RM112.8 billion. To address this, the government launched six stimulus packages, along with the 2021 Budget, amounting to more than RM600 billion.

Hence, if a total lockdown were to be imposed now, with the state of the Malaysian economy today compared with in March last year, the daily cost could be more than RM2.4 billion and the economy may be unable to recover.

Furthermore, a slew of stimulus packages might be needed if the loss is greater than before, which could dampen the public debt and fiscal situation further. But my other concern if we were to introduce a full lockdown this time would be the reversal of the progress in the recovery of the economy as a whole and how it could negatively impact sentiments and confidence in the economy.

Currently, under the six R's strategy of the government, we are at the fifth stage — revitalise. It may take us back to square one, to the first R — resolve — if a lockdown were to be imposed now. Then whatever that had been done since March last year would be a waste and the path towards the sixth R—reform — would be delayed further.

The sixth R is crucial for the government to formulate policies and strategies for the economy, especially post-pandemic, such as the upcoming 12th Malaysia Plan, National Agro-Food Policy 2.0, Fourth Industrial Master Plan and Capital Market Masterplan 3.

The economy has shown signs of recovery. In the first quarter of this year, it contracted 0.5 per cent compared with 3.4 per cent in the fourth quarter of last year and 5.6 per cent in the whole of 2020.

Other economic indicators also show a promising trend, such as wholesale and retail trade, Industrial Production Index and gross exports.

This positive momentum has to be maintained to achieve the many objectives and goals that have been rolled out, such as the National Policy on Science, Technology and Innovation, the National Digital Economy Blueprint, the setting up of the first data centre here by Microsoft and the National Investment Aspirations.

A stricter MCO 3.0 entails two strategies to reduce people movement, limiting workers in the office and shortening operating hours in the economic sector. Most important of all is our self-discipline in adhering to the SOP while waiting for herd immunity to be achieved, which is expected to be attained by the year end.

Only when that happens can the SOP can be loosened a bit and the economic recovery process be executed in full force.


The writer is head of Political and Economic Risk Research Unit, Universiti Utara Malaysia

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