Penjana – A deeply flawed stimulus package!

Parti Sosialis Malaysia (PSM) appreciates the fact that the Perikatan Nasional Government recognizes the need for government intervention in addressing the economic downturn that we are now undergoing. This indicates that the government realises that the neoliberal dictum that markets are self-correcting is inapplicable in the current situation. But any government intervention has to be well conceptualized and appropriate to the needs of our society. Unfortunately, there are several major flaws in the package announced by Tan Sri Muhiyiddin for the June- December 2020 period.

The Poorest 20% not covered!

The first major flaw is that the Penjana Package does not address the loss of income of the approximately 1.5 million daily paid workers in the informal sector. These include the women who used to serve customers and wash dishes in restaurants, the people who were helping out at the numerous bazaars that are now closed down because of the Movement Control Order, the people in the rural areas who do “kerja kampung” (basically odd jobs around the kampung), the helpers on lorries, and many other daily paid workers. All these groups of daily paid workers who are part of the poorest 20% of our population are now without any work. There is hardly anything for them in the “Penjana” Package, and these families are going to be in serious economic stress this coming month!

Another big group that will not receive much benefit from the Penjana Package are the operators of micro-businesses in the bazaars all over the country. These bazaars have not been allowed to reopen yet. Several hundred thousand petty traders have been without an income since March 18th. The one-off RM 3000 per small business announced in the previous stimulus package was of help to a portion of these businesses but how long will that last them? There is no income support for them in the Penjana Package.

The above two groups were supported by the Bantuan Prihatin (BPN) scheme which deposited a total of RM1600 into their accounts in April and May. This has been very useful to these families. But there is no follow-up on the BPN initiative. And the above 2 groups will have hardly any income going forward and there will be those among them who will be facing difficulty in putting food on the table. This has to be reviewed urgently if we are serious about the slogan of “leaving nobody behind”!

The PSM has been calling for a modified Universal Basic Income to handle the current downturn. We propose that a sum of RM1000 be transferred monthly to the account of the woman of families where both she and her husband do not have any income. We estimate that around 2 million families will require such a program. This program will ensure that the bottom 20% do not end up hungry! We believe that such an income support program must be an integral part of any emergency economic package for the nation at this point in time.

House Rental Issue not even Recognised!

The Penjana Package has failed to address the issue of house rental. Around 25% of Malaysian families live in rented houses. Most of them are from the B40 group. Quite a large number among them would experience a drop in household income for the rest of the year, and some of them will face the prospect of being evicted by their landlord. This issue that will affect several tens of thousands of families across the nation has not been even recognized by the drafters of the Penjana Package! The Prime Minister says in the Foreword that the government recognizes the challenges faced by individuals and will take proactive action, but clearly, here again, the poorest among us are not adequately protected by this stimulus package.

The PSM has proposed that the government sets up Housing Rent Tribunals in all districts to resolve rental issues using a tri-partite formula whereby tenants who are genuinely unable to make full rent payments are helped by the government to settle an amount equal to 60% of their usual rental payment, while the landlord absorbs the loss of 40% of usual rental payment. Unfortunately there is no provision in the Penjana Package that addresses this problem.

Failure to handle the pressing Health Needs of our Rakyat

Our public Health Care System is, even in the best of times, very overcrowded with long waiting times. The need to reduce the risk of Covid 19 transmission led to the postponement of many elective procedures and operations from March 2020 onwards. As a result our government health care system has a backlog of approximately 150,000 operations and procedures carried over from the past three months. In addition to that, many people normally would have gone to Private Hospitals for treatment are now coming to Government Hospitals because of the drop in their income these past 3 months. The congestion and the delays in Government Hospitals is going to get worse, and this will adversely affect the health of Malaysians.

The PSM has urged the government to increase the budget of the Ministry of Health Budget so that, among others, the under-utilized operating theatres in District Hospitals can be brought into service and where necessary, specialists in the private sector be paid to provide anaesthetic services on a sessional basis. If required, other specialists from the private sector can be employed part time to provide treatment in the District Hospitals. This will help clear the existing backlog of cases and lead to a more efficient and timely provision of medical services to our population. But here again, a pressing basic need has been overlooked. Apart from the RM50 million allocated to the PEKA program, there is nothing else for the Ministry of Health.

Misconceived Targets

Not only are some very basic needs of the rakyat – food (= guaranteed basic income), shelter and health care – not given sufficient priority, some of the thrusts of the Penjana Package are poorly conceived. In the introduction to the section on rejuvenating businesses (Pg 22 in the English version) the planners write “targeted assistance will be put in place to regenerate the most affected economic sectors”. Further on (pg 28) the document mentions a RM 1 billion fund to finance SMEs in the Tourism Sector so that they “remain competitive in the new normal”.

This indicates rather muddled thinking on the part of the planners! The core problem is not “consumer confidence” or “business confidence”. The problem is the risk of infection! The government has to understand and accept that certain sectors of the economy – aviation, hotel, tourism – cannot be rejuvenated until a medical solution –an effective vaccine or a good treatment protocol – is found for Covid 19. Until then, public health requirements will thwart attempts to grow these sectors. The PSM agrees that these sectors need funds, but not to rejuvenate them and get them to function as before, but instead to enable them to downsize in a controlled and socially just manner, while safeguarding their assets so as to survive to “fight another day”.

These firms will need funds to pay proper retrenchment benefits to their workers and to deal with outstanding financial commitments – payments due to suppliers, rents, loans, etc. These firms will also need funds to maintain their fixed capital – security and maintenance of buildings, storage of aeroplanes, other vehicles and machinery. The pandemic will pass, eventually. At that time these firms should be in a position to re-start their businesses. It would be in the interest of the nation that they can do so then as they would generate employment, bring in foreign exchange and contribute to government revenue by paying taxes. So we need to help them manage these difficult times. But we need to be clear as to the nature of help that they need.

Misplaced Priorities

Why is there a need to help housing developers sell their over-priced luxury properties? This initiative is projected to cost the government RM 1 billion.(Pg 44 of the Penjana document) We think that this is the wrong way to proceed.

The PSM has suggested that the government should stimulate the construction industry by embarking on an ambitious program of providing social housing to the people of Malaysia. We could start with building 200 housing units in each district to be rented out to young families and to families without their own houses. Such an approach would provide jobs for people in the construction sector and in the industries supplying the construction sector. At the same time such an initiative would be socially just as it would be meeting a real need of the people.

There are a few other initiatives of dubious benefit in the Penjana Package.

Back to the Drawing Board!

The programs to handle the Covid 19 induced recession have to be based on a clear analysis of the nature of the problem. Certain sectors of the economy cannot be resuscitated to their previous levels because of the physical distancing required to bring the pandemic under control. The pandemic has yet to peak in Europe, the US and in Latin America. So travel from these regions has to be restricted for the next several months at least and this will impact airlines, hotels and the tourism sector. In addition, many Malaysian firms produce for the export market. Many of the countries we are exporting to are in recession. Our export market will shrink in the near term. No amount of pump priming will overcome these two major causes of our downturn.

Resuscitating the Malaysian economy to its former growth path is not feasible at this point. We need to have more realistic goals. The PSM suggestion is that we ensure that

a) every person in the country gets the following basic items – food, shelter and medical care. There should be no compromise on this.

b) the productive assets of our economy – the SMEs in particular – must be given enough support so that they can ride the economic storm. They should not be permitted to close down because of cash-flow problems.

Based on all of this, the PSM respectfully urges the Government to improve on the Penjana Package. While some of the items of the announced package have merit, there are many flawed aspects that should be altered. We have outlined some of these in this article. The Government should obtain input from various sources – other political parties, unions, civil society groups, NGOs and academicians to improve on the Penjana Package.

The Prime Minister began his Foreword to the Penjana Package saying, “We are now living in unprecedented times”. He is right in saying that! We are in uncharted waters right now. That’s all the more the reason the government should invite and consider input from multiple sources to craft the best policy response for our nation. The PSM would be quite willing to take part in such discussions.

Dr.Jeyakumar Devaraj
PSM Chairperson

6/6/2020

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