Responding to the COVID Economy: Part 2 – Understanding the Employment Shock

Media Statement by Dr. Ong Kian Ming, Member of Parliament for Bangi and Assistant Political Education Director for the Democratic Action Party (DAP) on the 5th of June, 2020

Responding to the COVID Economy: Part 2 – Understanding the Employment Shock

Key Points:

  • Loss of Employment (LOE) as recorded by the Employment Insurance System (EIS) increased by 72% in April 2020 (compared to April 2019). Projected to increase by at least 2 half times in 2020 (compared to 2019)
  • Jobs at risk in the 5 most vulnerable sectors (Travel & Tourism, Wholesale & Retail, Construction, Manufacturing & Agriculture) estimated at 1.67 million. Unemployment in 2020 likely to be far higher than the current projection of 4% by Bank Negara Malaysia (BNM). Range between 8% to 14% likely.
  • The Wage Subsidy Program (WSP) and the Employment Retention Program (ERP) have definitely helped businesses but no evidence that they have ‘saved’ 2.4 million jobs
  • Key policy recommendations – pass a COVID Relief Bill (but may be too little too late), targeted incentives and policies to revive the most affected sectors, extended financial assistance to businesses and cash transfers to individuals especially those without EIS protection

One of the most significant economic impact of the COVID crisis is the loss of employment. In the United States, for example, the unemployment jumped from 3.5% in February 2020 to 14.7% in April 2020, a level not reached since the Great Depression, which lasted from 1929 to 1933. In Malaysia, on the surface and in the official statistics (for now), we have not seen a significant increase in the unemployment rate. Even though the unemployment rate increased from 3.3% in February 2020 to 3.9% in March 2020 (or an increase in the number of unemployment from 525,000 to 611,000 in on month), Bank Negara Malaysia (BNM) is projecting the overall unemployment rate to increase to 4% in 2020.[1]

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Responding to the COVID Economy: Part 1 – Understanding Supply and Demand Shocks

Media Statement by Dr. Ong Kian Ming, Member of Parliament for Bangi and Assistant Political Education Director for the Democratic Action Party (DAP) on the 25th of May, 2020

It has been more than 2 months since the 18th of March 2020, which was the start of the Movement Control Order (MCO) in Malaysia. The full extent of the negative economic impact domestically will not be known for a few months. But as we approach the 9th of June, 2020, and hopefully, the lifting of the Conditional Movement Control Order (MCMO), the country needs to have a comprehensive and substantive plan on reviving the economy and adjusting to the ‘new normal’. To be able to plan effectively, we must first understand the unprecedented impact of the COVID19 virus on the domestic and global economy, in terms of supply and demand shocks. Our understanding will shape the policy choices that are before us under a COVID Economy and how conventional economic and financial measures may work differently under a vastly changed economic structure. Without this understanding, we may run into the danger of adopting policy tools which are ineffective in a COVID economy,

The COVID virus resulted in a severe negative supply shock to China’s economy. And it has now spread to the rest of the world. We have had negative supply shocks in the past. The oil crisis in 1973 resulted in a quadrupling of oil prices which then led to petrol shortages, increases to the cost of production and high inflation. Natural disasters such as the tsunamis in the Indian Ocean in 2004 and the tsunami in Japan in 2011 which led to the Fukushima Daiichi nuclear disaster can also cause localised supply shocks.

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UMNO’s dilemma in the Perikatan Nasional (PN) coalition government – Part 2

Media Statement by Dr. Ong Kian Ming, Member of Parliament for Bangi on the 25th of April, 2020

BERSATU’s leadership is aware of its fragile political position. Its short term priority is to ensure the stability of the current government. They will offer GLC and other government agency positions to PN backbenchers in order to secure their loyalty. They will continue to ‘entice’ opposition MPs to join PN with various offers. The Prime Minister will continue to seek Tun Mahathir’s ‘blessing’ for his government. The current BERSATU leaders will also want to strengthen their positions within the party by winning positions in the upcoming party elections.

But even if BERSATU can slightly increase PN’s parliamentary majority in the short term, it cannot hope to just continue with the status quo until GE15. BERSATU knows that UMNO and PAS has no incentive to have a PN coalition contest in GE15. It knows that it is much weaker in terms of its political machinery and branding compared to UMNO and PAS.

Hence, it has only one option for survival which is to replace UMNO as the main Malay party in a ruling coalition. To do this, BERSATU has to do the following:

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