He said Malaysia is fortunate to have a very diversified economy that does not depend on just one or two sectors.
“In terms of policy-making, there has been a lot of coordination between the major economic agencies, driven by Prime Minister Tan Sri Muhyiddin Yassin,” he said.
He was commenting at the World Bank Malaysia Economic Monitor June 2020, with a special topic on Surviving the Storm in facing the challenges brought by the COVID-19 and economic crisis.
“We welcome the findings and recommendations of the newly released World Bank Malaysia Economic Monitor as it provides a cogent analysis of the current economic challenges and will help inform our efforts to accelerate the post-COVID19 economic recovery process,” he said.
In terms of policy response, he said, Malaysia has been very quick, and has been implementing for the last three months three packageds by the current government and one from the previous government.
“With the implementation of these packages, we're able to cushion the COVID-19 impact,” he said.
“Firstly we're able to provide food for the people, no Malaysian family is unable to have access to food,
“Health has been a priority since day one, we have been very effective in preventing the pandemic, and we're fortunate that the economy is diversified, and to have a robust manufacturing sector and services, which has always been strong, (while) agriculture is coming up, mining and construction, are doing ok,” he said.
The government responded to the economic impact of the pandemic with two rounds of the Prihatin Rakyat Economic Stimulus Package in February and March 2020, and more recently the Penjana Short-term Economic Recovery Plan.
On challenges in implementing the stimulus packages, Mustapa said the Ministry of Finance, under the Economic Stimulus Implementation and Coordination Unit Between National Agencies (LAKSANA), has been monitoring all sectors.
“So in terms of platform mechanism, it has been put in place, to make sure help reaches the ground, as that’s a big challenge,” he said, noting the government has been providing lots of cash transfers to help small and medium enterprises (SMEs) in the form of RM3,000 grants to micro-enterprises to restart their business.
The challenges include making sure the help goes to the ground and the incomplete data, said Mustapa.
He said it is important to have a robust database, noting the government’s present database on poverty and absolute poverty would be revised in an act, probably in a few months’ time.
Additionally, he said, there are probably about four million people involved in the informal sector but they are not registered with the Companies Commission or the local authorities.
“Going forward, the government continues to listen to the ground, we have a lot of engagement, this is a key feature.
“From the fiscal point of view, the plan in general can be viewed from two perspectives. One is the strategy for the next five to 10 years -- we introduced the Shared Prosperity Vision in October 2019 with three main objectives, we want Malaysians to enjoy a decent standard of living.
“Secondly, we want to close the gaps -- development for all -- and finally, we want to achieve a united, prosperous nation.
“Meanwhile, many Malaysians don't have social protection, as the pandemic has brought challenges as many Malaysians, especially those in the informal sector -- the fishermen, the farmers, petty traders -- and they're a big group of people, and going forward the number, is expected to increase,” he said.
He said there has been a rise in the gig economy, e-hailing and those involved in the food business, and the goal of social protection is to increase the coverage of Malaysians who contribute to various schemes including the Employees Provident Fund (EPF), adding that the biggest challenge would be the 50 per cent of Malaysians who do not contribute towards the EPF.
However, Mutapa said, coordination is very important, as policies should support COVID-19 recovery efforts and the development of an enhanced social protection system.
Meanwhile, the World Bank has suggested some short-, medium- and long-term policy recommendations in the area of publicly financed social assistance and contributory social insurance that should support COVID-19 recovery efforts and the development of an enhanced social protection system.
Short- and medium-term policies for publicly financed social assistance include continuing to provide COVID-19 emergency cash transfers until the incomes of the B40 group recover; deepening social assistance by using Bantuan Sara Hidup Rakyat /Bantuan Rakyat 1 Malaysia as a platform for human capital accumulation and productive welfare; reducinng exclusion error through proactive outreach/enrolment; and replacing non-targeted fuel subsidies with a targeted allowance.
Additionally, the World Bank suggested improving the delivery of social protection programmes, by moving towards a more standardised and commonly implemented targeting system; achieving deeper integration or interoperability of information systems; consolidating front-end service delivery; and updating benchmarks for monetary and non-monetary deprivation.
For publicly financed social assistance long-term policies, the World Bank suggested the government formulate a social protection masterplan based on a functional review of the social protection system by strengthening core social assistance programmes in line with fiscal space; promote productive employment and the capacity of social/care workers; and address the increasing demand for non-cash support services, especially for older persons.
Additionally, it recommended that the government reverse the downward trend in government revenues by increasing the progressivity of the personal income tax framework; expand the capital gains tax; restrict items that are sales and service tax zero-rated or exempted; and focus on the use of tax incentives.
Meanwhile, short- and medium-term policies for contributory social insurance include strengthening the coverage of old-age income protection by broadening the scope of contributions to cover the self-employed, possibly with auto-enrollment and an option to opt-out and work with aggregators, like gig economy platforms.
Moreover, the World Bank recommended that the government strengthen the adequacy of old-age income protection by gradually increasing the minimum withdrawal age for EPF Account 1 balances to 65; convert contributions to EPF Account 2 to retirement savings; mandate a phased withdrawal for EPF balances; and improve social assistance for older persons through a modest, broadly targeted social pension.
For long-term policies, it suggested the government further strengthen the coverage and adequacy of old-age income protection by unifying registration requirements and contribution collection for the EPF, Social Security Organisation, and Human Resources Development Fund; further increase the EPF minimum withdrawal age with increased life expectancy; consider lowering EPF contribution rates and capping covered wages subject to mandatory contributions; offer age-based portfolios, longevity insurance, and annuitisation options; and further improve social assistance for older persons through higher coverage or adequacy of social pensions in line with fiscal space.