The first so-called stimulus package of RM20 billion was more of easing the employee contributions to EPF. That took about half of the sum (RM10b) suggested. It presumed people will spend because they have a higher disposable income. Propensity to consume for the low-income earner may not happen in these challenging times, even though basic economics may suggest that.
Muhammed Abdul Khalid, the former economic advisor to Mahathir, called for a bigger stimulus package focused on:
i. aid to self-employed and lower income workers;
ii. reduction of income tax and easing of loan repayments; and
iii. allocation of RM10 billion for food production.
The Government needs to support those who earn less than RM5,000, who make 72% of the workforce. Muhammad believes it will cost RM26 billion if implemented for 3 months beginning April. If 10% of SMEs were to close shop, it would see one million lose their jobs. He then adds for a step-up of food production to ensure food security. This last point will not change the immediate situation but perhaps improves food supply in the medium term. Why? Food production will take time and any step-up will only see fruits in 18-24 months, at best.
On 23rd March, the Government came up with the idea of withdrawal from Account 2 of your EPF account to meet your living needs. But that is your savings for retirement. Isn’t this the contributor’s own money?
On a macro level, the Government has to focus on 3% - 5% of GDP as the stimulus required. That roughly translates to RM45billion – RM75 billion. It looks colossal but that is what is required. Then focus on two things (i) where, who and what will be impacted most; and, (ii) which critical sectors/industries could be “saved” from this extraordinary (Covid-19) situation. The money could be channeled through banks and EPF. Banks for stabilization of businesses. And EPF for living support of contributors.
Doesn’t that look simple? A good plan is always simple.
For more details you can kindly contact MP Capital Advisory Sdn Bhd.
Povera A. & Yunus A. PM: Additional measures to lessen people's burden, enhance healthcare capabilities, https://www.nst.com.my/news/nation/2020/03/577387/pm-additional-measures-lessen-peoples-burden-enhance-healthcare