News analysis

Malaysia's poorest can breathe easier with $83.4b coronavirus stimulus package, but jobs still at stake

Experts say stimulus does little to sustain businesses, secure jobs

Makcik Kiah has become a viral sensation in Malaysia as the hypothetical auntie set to benefit from Prime Minister Muhyiddin Yassin's headline-grabbing RM250 billion (S$83.4 billion) stimulus package unveiled on Friday.

According to Tan Sri Muhyiddin's script, someone like Makcik Kiah, who has been unable to sell her banana fritters during the country's four-week-long partial shutdown, will receive a cash handout of RM4,200 from the government in the next few months, as well as savings and deferments of financial liabilities worth up to RM4,464.

These measures will, for now, help low-and middle-income earners like her to cushion the economic blow from the coronavirus outbreak and the movement control order. But they will not keep the economy ticking over and protect jobs in the longer term, say business owners.

Experts and representatives of Malaysia's small and medium-sized enterprises (SMEs) - which account for two-thirds of the country's 15 million jobs - say the stimulus package contains little to help them. While the package includes a six-month wage subsidy of RM600 per month for 3.3 million workers earning below RM4,000, Citi Research estimates that translates to as little as 15 per cent of the wage bill.

Businesses get some relief in the form of a six-month moratorium on existing bank loan repayments - although interest will continue to accrue on the loans - and access to a RM4.5 billion fund from which they can borrow at 3.5 per cent interest, instead of the usual 3.75 per cent.

But the SME Association warns businesses are still likely to shutter and millions of jobs could be at risk.

"Why would SMEs take loans to pay salaries and rental when they don't have any income to sustain their businesses?" SME Association president Michael Kang told The Star. He added that up to four million jobs could be lost if these firms decide not to prolong their losses.

The Malaysian Employers Federation also criticised the wage subsidy scheme because it is available only to SMEs which can show that their normal revenue has at least halved since Jan 1.

This means larger firms which do not qualify for the scheme have little incentive to retain their thousands of workers, and are more likely to retrench them instead.

Hoteliers and food and beverage operators are among those who have also asked the government to cover half their wage bills.

Responding to the stimulus package, the opposition Pakatan Harapan coalition immediately called for the government to double its contribution to private sector wages to RM1,200 monthly.

A worker spraying disinfectant on a street in Kuala Lumpur yesterday, while the movement control order is in place due to the coronavirus outbreak. Malaysia on Friday unveiled a RM250 billion (S$83.4 billion) stimulus package to cushion the country's
A worker spraying disinfectant on a street in Kuala Lumpur yesterday, while the movement control order is in place due to the coronavirus outbreak. Malaysia on Friday unveiled a RM250 billion (S$83.4 billion) stimulus package to cushion the country's economic blow from the coronavirus outbreak and the movement control order. PHOTO: REUTERS

The Malaysian Employers Federation also criticised the wage subsidy scheme because it is available only to SMEs which can show that their normal revenue has at least halved since Jan 1. This means larger firms which do not qualify for the scheme have little incentive to retain their thousands of workers, and are more likely to retrench them instead.

Opposition MP Wong Chen chastised the government for failing to "protect the fishing rod (jobs)", while just giving fish (handouts).

He compared Malaysia's wage subsidy, which he estimated at about 20 per cent of average incomes - with that of Denmark (75 per cent across the board) and Singapore, which on Thursday offered 25 per cent to 75 per cent support in its own package.

"In Singapore, wage subsidy is 3.2 times bigger than the welfare component," he said of the $15.1 billion spent on job security.

"In Malaysia, we go the opposite direction, allocating RM12 billion on welfare handouts and RM6 billion for wage support."

 
 
 
 

The basic handout will reach nearly three-quarters of the country's households and another 3.4 million single adults, with a payout of up to RM1,600.

One-off payments of up to RM500 will also reach civil servants, freelancers and students in higher education.

Meanwhile, data made available to The Sunday Times shows nearly 15,000 claims for unemployment benefits as of Monday, with February job losses 60 per cent higher than the same month last year. Meanwhile, March is on track to show an 80 per cent increase in job losses year on year.

Mr Muhyiddin's speech on Friday did not predict what would happen to Makcik Kiah in six months' time, when the cash windfall runs out.

But judging from the brickbats and unemployment figures, she might still have trouble making ends meet in a struggling economy.


Unpacking the package

Malaysia's RM250 billion (S$83.4 billion) stimulus package announced on Friday includes RM20 billion from an earlier plan unveiled last month. Friday's second stimulus plan therefore amounts to RM230 billion, of which RM21.8 billion will come directly from the government. Here are the components of the package:

LOAN MORATORIUM 

Some RM100 billion will be in the form of a six-month moratorium on loan repayments beginning next month on all loans for individuals and small businesses. However, interest will continue to accrue during this period.

DANAJAMIN CREDIT GUARANTEE 

The government will guarantee up to 80 per cent of loans worth at least RM20 million to ensure that there is enough working capital for major firms. The total debt guaranteed for this year is RM50 billion.

EMPLOYEES PROVIDENT FUND AND PRIVATE RETIREMENT SCHEME WITHDRAWALS 

Some 12 million workers can withdraw up to RM6,000 from their retirement savings held by the Employees Provident Fund (EPF), freeing up an estimated RM40 billion. Those who invest in private retirement plans can also access RM1,500 from their accounts.

BANTUAN PRIHATIN NASIONAL CASH HANDOUTS 

The government will spend about RM11 billion on cash handouts. Most will go to 5.1 million households - nearly three-quarters of all families - and 3.4 million single adults.

FINANCING FOR SMES 

About RM4.5 billion of credit will be made available at low interest rates to help small firms. Another RM5 billion will be in the form of guarantees to help SMEs obtain loans.

EPF AND HUMAN RESOURCES DEVELOPMENT FUND DEFERMENT 

SMEs will be allowed to defer and restructure their EPF contributions, freeing up nearly RM10 billion in cash flow. Contributions to the Human Resources Development Fund will also be waived for six months.

WAGE SUBSIDY 

SMEs whose revenue has dropped by at least half this year can claim up to RM600 per employee per month for six months, to help pay the salaries of staff earning less than RM4,000. This is expected to cost RM6 billion and benefit 3.3 million workers.

OTHERS 

These include RM2 billion investment in new projects, RM1 billion in healthcare procurement, and discounts for electricity and Internet largely borne by the private sector.

 
A version of this article appeared in the print edition of The Sunday Times on March 29, 2020, with the headline 'Malaysia's poorest can breathe easier, but jobs still at stake'. Subscribe