Traversing the tightrope

The coronavirus pandemic hit Malaysia amidst a period of political turmoil and uncertainty as political parties were scrambling to form a new coalition government. While the country’s clear policy responses managed to flatten the curve of infections in the beginning, it has recently declared a state of emergency with case numbers reaching a national high of over 4,000 cases a day in January 2021. 

This new FES publication analyses the early stages of the pandemic in Malaysia after the newly established government imposed a strict Movement Control Order (MCO) in March 2020. It seemed that this sledgehammer bought the Malaysian government and society precious time to design the necessary instruments to continuously manage life with the pandemic. However, in balancing the dilemma of protecting life’s and livelihoods, the transitional MCO restrictions, which will last at least until August 2021, continue to disrupt economic activities and result in a bleak labour market & economic outlook.

Balancing the dilemma of protecting lives and livelihoods

On 27 March, the Malaysian government introduced the RM250 billion (58 billion USD) Prihatin Rakyat Economic Stimulus Package or Prihatin, an enhancement to the Economic Stimulus Package announced on 27 February 2020, to mitigate the impact of the COVID-19 crisis and the repercussions of the MCO.

Prihatin has received a lot of praise for its pure size for a small country like Malaysia as well as several cash transfer programmes for vulnerable low-income earners that make up 40 per cent of the population. But there has also been criticism from the business community, trade unions, civil society as well as experts that these responses are insufficient and do not address fundamental socio-economic deficiencies.

Main strands of concern are that since there is no sufficient help for small and medium enterprises (SME), the country is heading towards an SME recession wave. Meanwhile, labour organization are criticizing that there is also almost no assistance for middle-income groups.

Progressive think tanks and labour unions in Malaysia are furthermore projecting that 2.4 million jobs (13–14 per cent of all jobs in Malaysia) might be lost due to the multidimensional crisis. With the insufficiency and inefficiencies present within economic and social safety nets in Malaysia, vulnerable groups such as the poor, gig-workers, other self-employed, women, youth and the millions of migrant workers, will be disproportionally affected.

A stress test of the labour market

The crisis-generated stress test of the labour market highlighted longstanding inter-related features and weaknesses of the labour market in Malaysia.

First, the high number and the vulnerability of those working in the informal sector, the gig-economy and working self-employed.

Second, the high number of low-paid foreign workers in Malaysia. For a long time, this labour regime has been causing a race to the bottom regarding wages and labour standards and reducing incentives to navigate the Malaysian economy to higher productivity and higher added value production and output.

And third, the under-provision of care work as well as the lack of appreciation or recognition of care work and work done mostly by women.

A possible silver-lining?

In a nutshell, the crisis laid bare pre-existing power-structures, trends, inequalities, and vulnerabilities of the entire socio-economic model in Malaysia, which have been further accelerated by the pandemic like under a magnifying glass.

At the same time, progressive experts in Malaysia are calling the pandemic a hard lesson learnt for a more comprehensive welfare state with better automatic stabilizers to enhance the resilience and improve the delivery of public goods and the availability of essential needs like affordable health care, affordable education, affordable housing, and affordable transport.

Despite all the negative repercussions, the COVID-19 crisis also provides an opportunity for Malaysia to revisit and reform its economic and social protection policies to become more equitable, resilient and robust in the future. However, this not only requires stable political conditions and adequate long-term policies, but also the will to put them into practice.

Read the full analysis here: