The Covid bubble

‘When it comes to this year, growth may yet fall short of expectations. New strains of the coronavirus continue to emerge, raising concerns that existing vaccines may no longer be sufficient to end the pandemic. Repeated stop-go cycles undermine confidence, and political pressure to reopen the economy before the virus is contained will continue to build. Many small- and medium-size enterprises are still at risk of going bust, and far too many people are facing the prospects of long-term unemployment. The list of pathologies afflicting the economy is long and includes rising inequality, deleveraging by debt-burdened firms and workers, and political and geopolitical risks.

‘Asset markets remain frothy – if not outright bubbly – because they are being fed by super-accommodative monetary policies. But today’s price/earnings ratios are as high they were in the bubbles preceding the busts of 1929 and 2000. Between ever-rising leverage and the potential for bubbles in special-purpose acquisition companies, tech stocks, and cryptocurrencies, today’s market mania offers plenty of cause for concern.’

Read here (Project Syndicate, Mar 2, 2021)

Chinese tech firms pledge more help for street stalls, small vendors after Premier’s comments

Key points: Premier Li Keqiang says the Chinese government will provide more support for street stalls and small businesses as they are the “fire” of China’s economy. Tech platforms like WeChat and JD.com responded to Li’s comments by announcing new initiatives to help smaller retailers.

Read here (South China Morning Post, June 4, 2020)

Govt needs a U-turn on conditional MCO

‘Yes, it is conditional, but it is physically impossible to ensure everyone complies. You need to give businesses more time to prepare for this, especially the smaller businesses – the small and medium enterprises or SMEs which employ about 70% of workers.

‘This is where infection is most likely – the most number of people are there and the ones most likely to ignore SOPs. They include all sorts of businesses – food and beverage, services, shops, workplaces – virtually all can reopen except for those that involve close contact and mass gatherings.’

Read here (FocusMalaysia, May 4, 2020)

Japan to subsidise 100% of salaries at small companies

‘Japan is working on a subsidy to ensure that temporarily idled small-business employees receive 100% of their wages during the current state of emergency, Nikkei has learned... The Ministry of Health, Labor and Welfare plans to use an existing employment adjustment subsidy, which helps enterprises seeing no choice but to temporarily lay off workers continue to pay them, at least in part... As things stand, laid-off workers at companies that have halted operations are entitled to at least 60% of their regular pay. The government shoulders up to 90% of this to keep them from being dismissed outright, with the company chipping in the other 10%.’

Read here (Nikkei, April 24, 2020)

Digital trade: A boon during the MCO and beyond

Throughout the Covid-19 MCO, digital trade has been a boon in not only connecting businesses to consumers, but also serving as a lifeline for MSMEs and informal workers. Given that digital trade is beneficial in maintaining employment and livelihood in crucial times of emergency, on top of its benefits during “ordinary” times, the government needs to rethink – or better yet, strike while the iron is hot – on how to further encourage digital trade among MSME entrepreneurs in the country.

Read here (ISIS Malaysia, April 17, 2020)

RM250bil stimulus: Priorities in response to a three-faceted crisis

Commentary by Jeyakumar Devaraj

“The first aspect and the precipitating cause of this crisis is the Covid-19 pandemic that is sweeping the world. The pandemic is causing a massive overload on the medical services even in the richest countries in the world...

“The second aspect of the crisis is that many Malaysians in the B40 and M40 groups, especially daily rated workers and small business people have already run out of their meagre savings after 10 days of the Movement Control Order (MCO) and are already having difficulty in providing food for their families...

“The third aspect of the problem is that our small and medium-sized enterprises (SMEs) which employ about 65percent of our workforce are seriously under threat. The lockdown means that the vast majority of these SMEs have had no income since March 18.

“Given this bleak scenario, several measures have to be implemented quickly to address each aspect of the crisis. The capacity of our health care system to respond to the Covid 19 epidemic has to be bolstered, measures to ensure that the poorer 50% of our population have access to food and other basic necessities have to be rolled out and another set of measures to ensure that as many as possible of our SMEs are kept viable so that they can provide employment to the rakyat when we are able to restart the economy.”

Read here (Malaysiakini, March 29, 2020)

Covid-19 package: The woes of a small business owner

‘There is a saying, “Give a man a fish and you can feed him for a day. Teach a man to fish and you feed him for a lifetime”. So help small businesses stay afloat.

‘Revenues are down. Margins, if any are non existent. Wages, rentals and raw material are the three main costs of business. Government assistance is needed to subsidise one part of the expense to keep Malaysians employed.

‘We have been told that we are fighting a war with an invisible enemy. We issue a one-off  “Coronavirus War Bond” to fund this fight to keep jobs. It will break the budget deficit ceilings. What alternative do we have?’

Read here (FocusMalaysia, March 29, 2020)