Cover Story: Living with Covid-19 key to economic recovery

Saturday 27 Jul 2024

This article first appeared in The Edge Malaysia Weekly on October 18, 2021 - October 24, 2021

Lockdowns have been damaging to livelihoods and mental health

AFTER battling with Covid-19 for more than 19 months, Malaysia is set to move to an endemic stage, from a pandemic, although the exact date has yet to be announced. What is certain is that we will have to live with Covid-19 for a longer period of time.

Initially, many Asia-Pacific countries adopted a zero-Covid strategy, following the successful containment of the virus. But then came the highly infectious Delta variant, dashing such hopes and prodding nations such as Australia, New Zealand and Vietnam to ditch their plans.

China is the last major holdout, prompting a warning from S&P Global Ratings that this could worsen the debt situation of the companies in the country, especially when outbreaks continue to lead to broad mobility restrictions and disruptions.

Nevertheless, as Health Minister Khairy Jamaluddin has pointed out, accepting Covid-19 as endemic is not a defeat but a measure to adapt. So was the lifting of the interstate travel ban last week, which allowed the people some degree of freedom, as more than 90% of the Malaysian adult population have fully been vaccinated. Of the total population, two-thirds have been fully vaccinated.

Returning to normalcy, the country now has more tools to safely manage the risks of Covid-19 collectively and as individuals, according to medical doctor and health systems specialist Yap Wei Aun.

“We understand a lot more about the disease and how it spreads and how it doesn’t spread. And vaccines, when in the arms of people, have been a game changer. It is now time for us to reap the benefits of our sacrifices and technological progress — vaccine and rapid diagnostics,” Yap tells The Edge.

While Malaysia progresses to the endemic stage, Datuk Dr Adeeba Kamarulzaman, professor of medicine and infectious diseases at the University of Malaya, notes that the virus will always be present at a low level, with little damage to the population. But the health system will be able to cope with the challenges, she assures.

It is now time for us to reap the benefits of our sacrifices and technological progress — vaccine and rapid diagnostics — Yap

“We will have to accept a certain number of infections and deaths from the disease. We will continue to have breakthrough infections, but our hope is that the impact will be less severe and more manageable. Initially, we thought Covid-19 was a temporary thing. Most countries were aiming for zero-Covid. But now, it is not possible, regardless of herd immunity,” she tells The Edge.

The zero-Covid-19 strategy, Yap says, has been damaging to both lives — including mental health, suicides, unhealthy lifestyles as well as domestic abuse — and livelihoods. At the same time, it draws the attention of the healthcare system away from other preventable health risks such as cardiovascular risks and cancer.

To coexist with the virus, he says, a large part will involve doing what the people have already been doing, such as mask wearing, physical distancing, and accepting safe and effective vaccines. The difference is that more activities will become permissible as the risks have been reduced.

“All activities have risks, which we have managed even before Covid-19. So, in many ways, we are reverting to a situation where we act as free but responsible citizens. Not everyone will want to do everything that is permissible and that is fine. But for those who want to, that is also fine, provided that basic risk reduction norms are followed to minimise harm to others.”

As part of a safe reopening, Yap says, any increases and decreases in the number of Covid-19 cases are to be expected, and that the same goes for localised outbreaks. “These are not, on their own, an indication that the reopening has failed, but it is about how we manage them so that deaths, severe infections and disruptions are minimised.”

With a high vaccination rate, Adeeba is confident Malaysia will not see a huge spike in coronavirus cases again if the country continues to implement a mixture of safety control, including standard operating procedures (SOPs), and testing.

She stresses that the government must have policies and measures in place for non-pharmaceutical interventions including social distancing, maintaining hygiene and masking. Over time, there should be further relaxations of restrictions while balancing them with the underlying risks.

“Taking into consideration the high vaccination rate, maybe masking should be applied only to indoor places, then people will start to feel some sense of normality. For example, in Germany, masking is needed only when you get into public transport or go indoors or into crowded places.”

All stakeholders — the government, employers, schools, families and individuals — will have their role to play, Yap says.

“The government must have a rapid and efficient, but not overly disruptive, testing and tracing system in place, as well as surveillance capability to detect localised outbreaks early on, so that a large outbreak can be avoided.

We will continue to have breakthrough infections, but our hope is that the impact will be less severe and more manageable — Adeeba

“Employers, likewise, will have an important role to ensure that they can confine any potential cases to a small bubble of workers, so that these workers do not infect other workers and jeopardise operations while protecting the surrounding community. Individuals, collectively, also play an important role by reducing activities that have a higher risk of spreading.”

Adeeba urges employers to take care of their workers, especially those who live in dormitories. “Employers should take a step back and look at the role they have played. How did they contribute towards the number of infections or prevent them?

“Look at how they treated migrant workers, many of whom got infected. Can employers do better if they don’t want their factory to be shut down? Are they ensuring 90% or more of their employees have been vaccinated? Have they looked into the ventilation of their factory?” she asks.

When it comes to simplifying the SOPs, striking a balance between safety and convenience may not be an easy task. Yap believes the focus should be on evidence-based public health principles — such as addressing the causes of transmission, including confined spaces with poor ventilation, and minimising crowded spaces and close-contact settings — while taking into consideration personal and household risk factors such as vaccination status, age and comorbidities.

“This means there will necessarily be a change from SOPs — designed for easy enforceability — towards guidance and principles to empower families and employers to reduce the risk of Covid-19.”

Yap adds that the government has a role, through social protection policies and economic policies, to boost and restore the livelihoods of those most affected by the lockdowns and Covid-19.

On the path to normalcy, clear communication between the government and the public is important to restore confidence, observes Adeeba. In addition, the availability of transparent data will certainly help people make their own assessment.

“Instead of taking the ‘big daddy’ approach, the people need to decide the risks, for example, of eating in a restaurant, based on the infection level in your community. We can’t afford to close and shut. If community transmission is a bit higher, you may or may not go out for the next couple of weeks.”

Despite the relaxations, Adeeba says the country needs to stay vigilant with a proper system in place, with continued testing, tracing and isolation, so that the situation will not get out of control again.

“The Ministry of Health is working on a testing strategy. We have to ensure that testing is widely available. By and large, if you develop symptoms after vaccination, you should undergo quarantine. Be self-aware and prevent the disease,” she urges, noting that effective contact tracing would be through automation and digitalisation.

If we implement a zero-Covid strategy, the economic trade-off will be huge and the chances of success will be very dependent on the authorities [and] citizens — Yeah

Zero-Covid strategy costly

From an economic point of view, Dr Yeah Kim Leng, professor of economics at Sunway University, says it would be very expensive to implement a zero-Covid strategy.

“If we implement a zero-Covid strategy, the economic trade-off will be huge and the chances of success will be very dependent on the authorities’ capabilities and cooperation from the citizens. It is a whole [of] society approach. When there is an outbreak, then there will be a complete shutdown of economic activities and zero movements,” he adds.

For the transition to the endemic stage — the justification being that almost the entire adult population is already fully vaccinated — the healthcare cost is anticipated to be lower, in view of the reduced number of Category 4 and Category 5 Covid-19 patients.

Yeah says, “The onus is on individuals to build their own so-called Covid bubble. It allows for gradual normalisation of socioeconomic activities. People still have to continue observing the SOPs because of the risk of contracting the virus. Those who have to engage in greater social economic activities will have to take higher risks.

“Covid-19 remains a threat, but it does not deter people from going about their normal lives. They have to take extra precautions, but it is less threatening now with a much lower mortality rate.”

Overall, he says, the transition to the endemic stage will reduce the social cost of lockdowns and restrictions on mobility.

That said, Malaysia still needs to build up its healthcare capacity to address whatever shortcomings it has experienced, says Yeah, who cautions that the progress to normalcy will take longer than expected and could be prolonged with the emergence of new variants.

“We have to see the effectiveness of the vaccine and the need for booster shots,” he adds.

As consumers and businesses are still hesitant about spending and investing, given the lingering threat of another resurgence, Yeah highlights that the government has to take necessary measures to boost their confidence and assure them that it is prepared to face the challenges that may occur.

To help businesses recover faster, he says, there is a need to further consider restrictions on operating capacity. “This will help create jobs to reduce the unemployment rate and increase the people’s income. Right now, the unemployment rate is still at 4.8%, and we need to bring it down to below 4%. That is the short-term critical measure to restore livelihoods.”

Yeah believes the upcoming Budget 2022 will be an expansionary one to provide adequate support to the low-income group and small and medium enterprises.

He says, “Hard-hit households may need more support from the government, especially those who have lost their jobs. After the end of the subsidy programme and loan moratorium, there could be further financial distress among the households, so the government can make contingency plans to provide some relief to them.

“For the small businesses that have been negatively affected by Covid-19, a further relaxation is very important, so that domestic consumption can be spurred, leading to higher business volume.

“If [small businesses] still cannot recover at the end of the loan moratorium, then the government has to provide debt restructuring support to avoid bankruptcies. The government has to engage with the banks to create a win-win solution for both the banks and borrowers. This can be done by setting up a fund to provide short-term assistance, with cooperation from the banks.

“For those who remain vulnerable to Covid-19, especially those who cannot find jobs when the economy recovers, the government has to increase cash handouts. Consumer fear of spending may result in a slower recovery in the economy, so there is a need for an extension of the relief and support.”

Last Wednesday, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that the banking sector would set up a Financial Management and Resilience Programme (Urus) to help the B50 (bottom 50% income group).

Under the 12th Malaysia Plan, the country’s economy is expected to grow between 4.5% and 5.5% over the next five years, but Yeah believes it will be a tall order if no structural reforms are undertaken.

He says, “In the longer term, you need to upskill workers and attract more investments to raise productivity and competitiveness. We need to continue to raise investor confidence, so that we can have sustained investments for the expansion of the economy, failing which, it will lead to fewer jobs and constraints in production capacity expansion.”

Simplify SOPs

When the economy fully reopens, a conducive and business-friendly environment is crucial to ensuring that businesses can operate smoothly and without worrying that they will run afoul of the law. To do this, standard operating procedures (SOPs) must be kept to the minimum and simplified. Enforcement agencies, including local councils, must also be on the same page, say businesses.

Jeremy Lim, vice-president of the Restaurant and Bistro Owners Association, says that in the process of adopting the SOPs, the association had to seek clarification from various ministries to ensure that the rules were properly observed.

Lim commends the government’s holistic approach in dealing with the pandemic, though there have been constant adjustments and changes to the SOPs at the federal level.

“We have adopted the SOPs. So far, it has been good. But in our engagements with the ministries ... for example, when dine-in was allowed, we highlighted that they needed to be crystal clear about what that means in terms of local enforcement,” he tells The Edge.

“You need to stipulate in the SOPs that if I have licensed premises, I can serve a full range of products, meaning alcoholic and non-alcoholic drinks. This is to avoid misinterpretation by the local council.”

The association has been extremely supportive of the vaccination requirement, with 99% of its members’ employees fully vaccinated.

“The remaining 1% not vaccinated is due to the timing. As the food and beverage (F&B) industry is powered by a very young workforce, some are still waiting for their turn to get vaccinated,” says Lim.

The latest SOPs state that the distance between tables has to be at least one metre, but most F&B operators are still practising the 50% capacity rule, he says. “What we prioritise is the health of our staff and customers.”

Although the cost of doing business will rise with regular self-testing and sanitisation, the mindset of F&B operators is to keep their staff employed, says Lim. “We see it as a new way of doing business. Thankfully, the government has set a ceiling price on the test kits and it could be even lower in December.”

He stresses that both the government and stakeholders should keep the engagement channels open and vibrant as the country moves into the endemic stage. “Policymakers need to improve their communication with the public. Also, it is important to have communication between the federal government, state governments and local councils, so there is no misinterpretation of the guidelines.”

The association has more than 500 members in Malaysia. Since the pandemic, however, an estimated 30% of F&B outlets have shuttered their operations, according to Lim. “Some of them cannot take the uncertainty. Some felt that it was meaningless with the increased cost of doing business and confusing SOPs.”

As businesses resume operations, Datuk Michael Kang Hua Keong, president of the SME Association of Malaysia, lists the three main priorities: simplifying the SOPs; improving the cash flow of small and medium enterprises (SMEs); and foreign labour intake.

“Every enforcement body has its own set of rules. We hope the government can simplify and standardise all the SOPs so that the enforcement does not trouble the SMEs,” he says.

“There are also different SOPs across the different industries. It would be good if the government could streamline these into just 10 SOPs, which include social distancing, masking and testing.”

Kang points to the emergence of the “little Napoleon phenomenon” when it comes to the implementation of SOPs. “When arriving from overseas, why were some people unable to get approval for home quarantine? All these rules and procedures have to be simplified. We are talking about recovery and opening up the economy.”

To address the higher cost of doing business in the endemic stage, he stresses the importance of technology and digitalisation adoption. “SMEs have to innovate and change their business models,” he says, but observes that the most critical issue is still cash flow and government assistance in the form of loans for working capital to help relieve their financial pressure.

“We also hope the government can provide incentives for self-testing of employees. If the wage subsidy programme can be extended to the middle of next year, then it will help SMEs as well.”

At the same time, Kang observes that many businesses will face a manpower shortage when economic activities restart. “Businesses can engage those who have been staying at home, such as housewives, so they can also contribute to the economy by doing a part-time job or on a project basis,” he says.

“In terms of foreign labour, 600,000 have returned to their home countries since the pandemic. In total, we have 1½ million job vacancies. But there are only 748,000 local unemployed persons, so it is not enough to address market needs. To help the economy recover, the government still has to bring in foreign workers.”

Retail Group Malaysia (RGM) managing director Tan Hai Hsin also stresses the need for clear guidelines from the government, with the same SOPs for all states. For now, he says, the current SOPs are enough to control the spread of Covid-19 infections.

When retail and F&B outlets were allowed to open in August, many either remained closed or did not allow dine-in for up to a month, as not all of their employees had been fully vaccinated. Most saw this as an opportunity cost.

Tan notes that overall sales have yet to return to pre-Covid-19 levels for reasons such as limited seating capacity and restrictions on seating arrangements that discourage social gatherings of more than two people. “Furthermore, many families are still reluctant to bring their young children and old folks out to dine. Also, there are still many F&B outlets at shopping malls and shopoffices that do not allow dine-in.”

He stresses that Malaysian retailers do not require direct monetary incentives from the government to stay afloat, but rather indirect assistance. For instance, a bigger budget allocation is required for proactive action plans to control the spread of the virus to prevent another lockdown, as retailers of non-essential items can ill-afford another forced closure of physical stores.

Tan hopes that in the event of another lockdown, all retailers with physical stores will be allowed to stay open with strict SOPs. “Retailers will figure out ways to lure customers to visit their stores. As long as physical stores stay open, there will be a better chance for survival,” he says.

“Previous lockdowns have proved that online shopping, pick-up, take away and delivery are not enough to keep retailers, especially F&B outlets, alive.”

In addition, the reopening of borders for foreign tourists is important for retailers in major cities such as Kuala Lumpur, Johor Baru, Melaka and Kota Kinabalu, which depend on foreign tourists, says Tan. He emphasises that proactive and concrete action plans are needed to stimulate the economy in 2022.

“When Malaysia’s economic activities are vibrant, more people will get jobs with higher pay. This will encourage people to spend more on consumer goods and services,” he adds.

RGM’s latest retail industry report released this month shows that F&B outlets (cafés and restaurants) recorded a year-on-year decline of 10.9% in 2Q2021. On the other hand, another sub-segment, comprising take-away, kiosks and stalls, jumped 37.5% y-o-y.

For the July-to-September period, café and restaurant operators project a further drop of 30.2%, while the business volume of F&B kiosk and stall operators is expected to expand by 1.5%.

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