Q and A with TSMY on National Recovery Council
1. What is the role of the National Recovery Council and why was it formed?
The National Recovery Council was formed when I was the Prime Minister, and initially aimed to execute the exit strategy for us to transition out of the pandemic. We had formulated the National Recovery Plan (NRP) which had allowed a safe transition out of the pandemic in phases. However, we acknowledge that the impact of the pandemic was severe on our economy, and the well-being of our people. The last of the 8 stimulus packages worth RM 530 billion in value, called the PEMULIH were also announced end June 2021 and implemented until the end of 2021.
When I stepped down as Prime Minister, I stayed as the Chairman of the National Recovery Council, which became an advisory body to the Cabinet on national recovery matters. Proposals were deliberated and recommendations were then made to Cabinet. However, as I have stressed earlier, the Council is an advisory body, while some of the recommendations were acted upon, such as re-opening of borders, many others were not.
2. You pointed out that it is not just economic recovery but also socio-economic recovery, what were the issues discussed by the Council?
The issues discussed were wide-ranging of affected industries such as the challenges of MSMEs, shortage of foreign workers, need for enhancement of social welfare system, the “loss generation” of students due to Covid-19, mental health issues and poverty rate in the country. As I have stressed, the impact on the economy during Covid-19 was severe and we needed to correct the course to ensure our economic growth trajectory is back on track.
3. The National Recovery Council had done series of engagement sessions with the business community, what were the main issues highlighted?
Yes, we had organized series of engagement sessions on the issues and challenges confronting these different groups. In these discussions one of the main feed-back was the impact of our systematic implementation of the National Recovery Plan and vaccination programme. Foreign and domestic businesses praised our orderly plan which enabled these businesses to re-open progressively in stages.
But what is more rewarding is I have people coming up to me during my engagement sessions to say:
“Tan Sri thank you, I tak bungkus, tak buang pekerja, because I ambil wage subsidy masa time Covid for my business”- That is correct, we spent more than RM 15 billion on wage subsidies to help more than 300,000 business mostly SMEs, to save more than 3 million jobs.
“Tan Sri, terima kasih, Bakul Makanan you bagi, jadi bekal keluarga makan tiap-tiap malam.” That is correct, we gave more than RM 50 million for food baskets when we do targeted lockdowns, and after. We gave individual MPs, cut red-tape RM 500,000 each for food baskets.
“Tan Sri, terima kasih dapat Bantuan Prihatin. Boleh beli lampin, susu anak.” That is correct, we gave more than RM 22 billion in direct cash assistance during the pandemic, more than 10.1 million recipients of direct cash hand-out.
“Tan Sri, saya dapat vaksin saya hidup. Jiran saya tak dapat vaksin dia dah tiada.” We spent more than RM 5 billion procuring vaccine 140% of the population from the start, because we knew we were racing against time, the extra purchase meant we could do BOOSTER shots faster than any other country.
The policies that the Government took then, are all validated now. The three consecutive quarters of economic growth we have enjoyed today, are all due to the bold policies we took to safeguard the economy.
In these engagement sessions, the businesses share difficulties of getting foreign workers to work in sectors like F&B, plantation, the lack of coordinated push for tourism sector recovery, the financing difficulties of MSME businesses were main issues highlighted.
Close to 98% of registered business entities in Malaysia are MSMEs and they contribute close to 40% of Malaysia’s Gross Domestic Product. Keeping them a float will not only protect jobs but ensure that country’s economic engine continues running. That was why, we included MSMEs assistance and disbursed RM6.08 billion directly to MSMEs under the Geran Khas Prihatin program.
4. Generally, are you satisfied with the pace of the recovery? Why?
I wish it were better. We need an even recovery process as certain states are more reliant on specific industries, such as tourism and manufacturing. The uneven speed of recovery among states will deepen wealth and development disparities. That is why I urged the formation of state-level National Recovery Councils. Recovery must be aligned to long development goals if this nation, is to be more economically inclusive and resilient.
5. Do you see the high inflation and weak ringgit affecting the momentum of economic recovery?
When we entered 2022, we were confident that 2022 will be the year of recovery. Yes, in a way we have achieved that, the first half growth is 6.9%, and our second quarter growth is 8.9%, the highest in Southeast Asia. While these numbers show growth, we are however affected by global issues especially the war in Ukraine, which have disrupted global supply chain and led to tightening of monetary policies in developed economies – leading to decline of Ringgit and hikes of our interest rate, the OPR by BNM.
The inflationary pressure and the increase in interest rates, has further affected slowed down consumption and impacted borrowing costs deterring investments. Meanwhile, weaker ringgit means that our import bill becomes higher. While the current economic situation may withstand this impact of high inflation and weak ringgit, the more pressing question would be for how long? Until our gains are wiped out.
6. You have been speaking about B40 group becoming B61, how can the incomes of this group recover? What are the steps that can be taken?
Yes, the pandemic severely impacted on household income of Malaysians. According to a report by a media research company, Mindshare, household income until June 2022 has shown a decrease by 26 percent from 2018, with average monthly household income in Malaysia being RM 2965.
As we all are aware, B40, M40 and T20 are classified by the income range of households. In short, B40 are those with household income below RM 5000, M40 is between RM 5001 to RM 10,000 and T20 have household income above RM 10,000. Nonetheless, the situation has changed with more M category have fallen to the B category. If we were to follow the same income range as previously according to the report, the B income group will now be 61%, while M is 14% and T at 18%, while 7% could not be identified.
This shows that the middle class is shrinking consistent with other reports such as from Khazanah Research Institute which said that 70% of Malaysians are in the “vulnerable” group due to the pandemic. In the Mindshare Report, one is more troubling is that 76% of this B61 group has an average household income of below RM 2,965. And would have to eat once a day, compromising protein options etc. This is alarming and has dire consequences not just for recovery momentum but the nation’s development agenda as a whole.
A shrinking middle class is not a good prospect for any economy because as incomes are reduced, spending, and saving power decreases. What are the steps that can be taken? First, we must ensure that our social safety nets are strengthened. Welfare system like the e-Kasih needs a total revamp – enhancing social safety nets for informal sector while creating jobs with decent wages.
Separately, we must make sure that the Poverty Line Index which I had revised as Prime Minister in 2020 from RM 980 to RM 2,208, continue to be adjusted. This will enable us to target assistance to the poor more efficiently.
7. It is predicted that the 2023 Global Economic Growth will be weaker, the IMF cut its projection for global growth in October for 2023 to 2.7%, how will this impact the recovery momentum?
A slowdown in global economy, at a time when our post-pandemic growth is fragile, will have severe repercussions.
A slowdown in global growth will lead to weaker demand for our exports. There will be flight to safety from investors back into safer, mature developed markets. While weaker ringgit may mean our exports are cheaper – companies may scale down. sectors like tourism, global travels for leisure may also be impacted if recessions happen in many markets. So yes, 2023 will be a very challenging year for our recovery momentum if the bleak outlook persists.
8. How would NRC advise the Government on how to mitigate the impact of weaker global growth next year?
I believe the NRC would need to advise the Government prioritise by enhancing resilience in critical economic sectors to safeguard our economy. Generate tourism receipts through innovative campaign strategy that targets specific markets which may be recession-proof. These are some ideas, but we will have to deep-dive, diagnose the problem and prescribe the solutions correctly.
However, what is most important is being responsive to the needs of the rakyat. Although our fiscal space is tight, we must find ways to prioritise protecting our people. We have done it before during the pandemic, with the right policy mix, consistent policies and leadership, I believe Malaysia can weather the economic storm.