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Tuesday, May 19, 2020
Will COVID-19 pandemic affect Malaysia's exports, SME and employment?

Question: Malaysia's exports may not recover so easily following the COVID-19 pandemic. Economically, what must the Malaysian government do to promote Malaysia's exports?

Chan Kung: Malaysia is basically a market economy country. Such economic system determines that there's not a lot that the government can do to intervene. As such, it is still recommended that government waits patiently for the market to warm up. From the perspective of expanding exports, two main things could be done: The first is the structure of exports. If Malaysia's exports can join the supply chain of Western companies, its exports will benefit, because truthfully speaking, such exports are to meet rigid demand. With that in mind, both the Malaysian government and the business community can do more to adjust the structure of exports. For China personally, it is also equally important to maintain export markets during difficult times. For example, the export of Chinese products is indispensable for the importers within the automotive industry as most parts and accessories originate from China. Then there's the issue of pricing. Competitive prices are always key to maintaining and expanding exports. If the Malaysian government can make efforts to reduce the cost of businesses, such as reducing capital costs, or even attempt to reduce the comprehensive costs including human resources, it would benefit the export of Malaysian goods.

Question: The unemployment rate in Malaysia is rising. How can the government assist SMEs in helping their employees keep their jobs?

Chan Kung: All countries worldwide are facing high unemployment rate. The number of the unemployed in the United States has reached a record high of 23 million, and it is still rising as we speak. This shows just how severe the damages of a public health crisis can be (to a country). Based on the ways in which various countries have responded to the pandemic, I notice that more countries are beginning to adopt countermeasures on the consumer side rather than the production side. Personally, what I have seen is that the measures employed on the production side only concerns industries that are directly impacted by the government's shutdown, such as hospitality, tourism and aviation. Most of the measures are still targeted towards the consumer side of unemployment and households. This is done so with the purpose to salvage the consumer market, in an attempt to maintain and meet the minimum needs of families and ensure social stability. And that's because the unemployment happening in most industries is temporary, and will gradually improve as the economy picks up, so temporary relief measures can help a lot.

From a macroeconomic perspective, consumption is crucial to most countries' national economy. If a certain level of consumption can be ensured, it will help maintain the market size and avoid post-pandemic economic austerity in the national economy. Once the level of consumption is greatly reduced, economic contraction is likely to occur. This is a very dangerous condition that can deepen the economic crisis and turn into a financial crisis from an economic one. Thus, it is necessary to provide direct aid on the consumers' side.

Question: If the rest of the world is still struggling with COVID-19 and is unable to recover, will economy-related issues stimulate and delay loans for a longer period of time?

Chan Kung: The ratio of consumption to exports is about the same for Malaysia's economic structure. This is the key to supporting the Malaysian economy. In 2018, the total export was close to MYR 1 trillion, so exports are very important to the Malaysian economy. Now that the global market is struggling with the pandemic and demands are on the lower side, the impact on the Malaysian economy will definitely be greater. Assuming the Malaysian government employs certain measures to help promote and increase the scale of investment, this will help offset the pandemic's impact on the economy. That is because Malaysia's investment scale obviously still has room for growth from the perspective of GDP growth structure. These measures may include additional aid loans, encouraging commercial banks to extend debt, cutting interest rates, and equity investment. Of course, further opening-up the economy, expanding the market size, and introducing more investors will also have a positive outcome for the economy. In general, the Malaysian economy will have a difficult period and it is still uncertain how long this will last. That being said, ASEAN is slowly becoming a more prominent figure in the global market in the future, so I'd say keep your chin up. An economic rebound will definitely happen, the main challenge here is whether the above average growth can be sustained or not.

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