THE conditional movement-control order (CMCO) enforced in key hubs, such as the Klang Valley and its surrounding areas, will exact a heavy economic toll, said corporate players and economists.

While they acknowledged the move to contain the spread of the Covid-19 virus, they also urged Putrajaya to find mutually beneficial solutions that will protect both lives and livelihood.

Sunway University Business School Professor of Economics Dr Yeah Kim Leng said the CMCO, currently in effect in Selangor, Kuala Lumpur and Putrajaya, could delay the economic recovery process to next year.

“The recovery momentum will be dented by the CMCO given its impact on the country’s most populous areas,” Yeah told The Malaysian Insight.

“The overall economy will take a longer period to return to normal, stretching into 2021 and 2022.”

While the success in suppressing virus infections remains a key factor in the performance of the economy, the government will need to find ways to mitigate the impact of a third wave, said Yeah.

The government must devise better standard operating procedure to facilitate business-related travel for key personnel of Malaysian firms, multinational companies and foreign investors, he said.

There is a pressing need to overcome the debilitating effects of the pandemic on local and international business activities.

Apart from that, Putrajaya should also work with businesses and trade bodies to address the issues hampering operations, such as delays in issuance of permits and approvals, as a result of the CMCO.

“If the CMCO is widened to more areas or prolonged to year-end, the country’s gross domestic product (GDP) growth projected for this year will likely be at the lower end of the 4%-6% contraction range,” he said.

Malaysian Employers Federation executive director Shamsuddin Bardan told The Malaysian Insight the CMCO could wipe out the positive recovery in economic conditions attained over the last few months.

“This will also depend very much on how long (before) the current CMCO ends. Whether it is going to end at the end of the month or if it will be extended further,” he said.

Shamsuddin said it is likely the MCO will be extended, given the triple-digit growth in daily cases.

Fleeing investors

Foreign investors are also holding back from making major investment decisions, citing the data from the Malaysian Investment Development Authority.

According to Mida’s data, domestic direct investment (DDI) accounted for 69.8% or RM45.3 billion of the total investments approved in the first half of 2020, while foreign direct investment (FDI) only stood at RM19.5 billion.

“From there, you can see that foreign investors are taking their time to decide because of the lockdown and other restrictions,” he said.

They were commenting on the move by the National Security Council which ordered private and public sectors employees in management and supervisory roles in areas under the CMCO to work from home starting today.

Employers are allowed to have 10% of their management and supervisory employees work on site for four hours a day, three days a week.

This measure is aimed at getting about one million workers off the streets as the country battles the coronavirus.

Former deputy home minister Nur Jazlan Mohamed said an extended ban on travel and the delays in opening up the borders, coupled with the failure to establish travel bubbles and green lanes with important trading partners, will hinder foreign investors from making the decision to relocate to Malaysia.

Nur Jazlan, a prominent corporate figure, who served in several listed companies, said it’s important to look into factors, such as political stability, economic and health policies to gauge the impact of lockdowns on the economy and FDIs.

Malaysia stands to gain from the inflow of FDI from investors diversifying as a result of the US-China trade war, along with regional peers, such as Singapore, Thailand, Indonesia and Vietnam.

He, however, drew attention to the pullout of foreign funds from Bursa Malaysia in recent months.

From the start of the year until October 12, foreign funds have taken out RM22.3 billion net of local equities from Bursa.

“There seems to be a lack of confidence in the government’s management of the economy. Foreign investors need political stability. Currently in the absence of a general election, they know the PM (Prime Minister Muhyiddin Yassin) is weak and cannot drive the economic agenda.

“He is relying solely on Covid-19 management because he has not gotten a mandate from the people,” Nur Jazlan said.

The Perikatan Nasional ministers in charge of economy, finance and trade and Covid-19 matters have also yet to produce long-term policies and strategies to instil confidence and motivate foreign investors to locate to Malaysia.

“Even the frequent water supply disruptions in the crucial economic centre of the Klang Valley in recent months have focused public attention on the performance of this government,” Nur Jazlan said.

The enhanced MCO lockdown will hasten the closure of services-related SMI businesses which employ the majority of middle- and lower-income workers without direct government financial support.

“Tourism, transport, property, restaurant and leisure businesses will face a bleak future as a result of EMCO, too,” said the Kanger International Bhd chairman.

Seeking clarity

Federation of Malaysian Manufacturers (FMM) chairman Soh Thian Lai said while the manufacturing industry will do its part to facilitate the work-from-home (WFH) directive, there is still a lack of clarity in the requirements.

“FMM is concerned with the current spike in Covid-19 cases in the Klang Valley and supports the government’s actions to institute stricter controls to reduce the rate of infections and break the chain swiftly before there are more serious repercussions on both the rakyat and economy nationwide,” the steel magnate said.

There is, however, still a lack of clarity on the requirement for the swab test on whether it would be for all staff that continue to work in the office/factory, only for those from the red zone areas or only staff that are exempted from the WFH directive based on the flexibility provided, Soh said.

“There are also concerns on the process and time it would take to get the swab tests taken which could impact (on) the office/factory operations.”

However, senior minister Ismail Sabri Yaakob late yesterday said swab tests for red-zone employees are highly recommended but not mandatory.

Soh said the adverse impact on operations will not be too significant given the flexibility and discretion given to firms to decide on which employees should come in to work based on its own assessment and needs.

This, he said, will allow companies to cope with operations even if the government decides to prolong the CMCO until the infection rates abate.

“However, having said that, we foresee some challenges faced by smaller companies, including SMEs with a smaller number of non-production staff and limiting only 10% of the management and supervisory employees to work three days a week for four hours per day may impose some difficulties.”

Shamsuddin said that the absence of management and supervisory staff could impact operations, especially for smaller companies which have limited manpower.

He added that this will also add further financial stress for companies which are already grappling with cash-flow issues.

The CMCO is currently in force in Sabah until next Monday; in Selangor, Kuala Lumpur and Putrajaya until October 27; and in Labuan until October 30.

There are currently 3.1 million workers in the manufacturing, services and construction sectors, of whom more than 770,000 or around 25% are in the management and supervisory levels. – October 22, 2020.