AS we enter the fifth phase of the movement-control order (MCO), otherwise known as the conditional MCO, which has been extended till June 9, an “exit” strategy for the country looms large.

An exit strategy is necessary as otherwise, we would be muddling our way through. It would be bad for business and the rakyat’s confidence, which, in turn, would feed into a self-serving prophecy with damaging consequences for the economy.

The objectives of the exit strategy should be twofold:

1. To ensure that we have mitigated and managed well the impact of the Covid-19 crisis on public health safety and security; and,

2. To ensure that we are on the right track towards economic recovery.

So, what form of exit strategy can we pursue?

Currently, we are in the planning and preparation stage for the exit strategy, which should encompass both the economic and public health dimensions.

In other words, the need for an exit strategy must be balanced with the need for caution and vigilance on the public health part. This is especially so as there is always the risk of a new wave of infections (which are still in the double digits).

Both of these dimensions (economic and public health) have, of course, been in a delicate balance under the MCO, and even now as we gradually relax measures under the CMCO for businesses to resume operations.

A policy article by Eoin Daly of McKinsey Malaysia, titled “How emerging economies should navigate economic recovery post-pandemic”, described five phases countries are adopting to manage the Covid-19 crisis, among them being Resilience, Return and Reimagination.

Taking a cue from Reimagination, I would like to offer some thoughts, with a particular focus on small and medium enterprises. This is in line with calls for SMEs to digitalise or “go online”.

Post-crisis, this is the best way forward for SMEs to restart on a more sustainable footing, so as to thrive in the long term.

Therefore, I would like to propose that the government undertakes another stimulus package, aka “Prihatin 3.0”, which could be incorporated into its economic recovery plan at least for the medium to long term (within a five-year duration).

This time around, the target would be infrastructure, both digital and physical, that is geared towards digitalisation. For digital, it would comprise infrastructure that enables and empowers connectivity to take place at very high speeds, such as fibre-optic networks, 4G (and now, 5G wireless) technology, and cloud computing or virtual servers.

Complementing the effort, physical infrastructure geared towards digitalisation includes offices and plants hosting digital infrastructure, such as cables for fibre-optic networks and database centres hosting cloud computing.

And, the stimulus package should be limited to two rounds at most. This is to ensure it is timely, targeted and temporary. Temporary means higher deficits will not detract from the path of fiscal consolidation.

For instance, the first round of public investment would be limited to laying out the physical infrastructure, with the digital infrastructure coming in at a later stage.

Placing the physical infrastructure first, as the foundation, enables the private sector to “wait and see” for further developments. Once the foundation is in place, it signals readiness for the digital infrastructure to be installed. Private sector investment can also be induced, and this will enhance public-private partnerships (upstream and midstream) with further multiplier effects.

The physical infrastructure could take the form of digital free trade zones or e-commerce hubs as sites for new platforms servicing mainly SMEs. Additionally, there should be a digital and futurist hub located in every region to promote the creation of a new breed of tech-savvy SMEs.

The hub would contain green infrastructure hosting laboratories, incubators and pods for the creation of new technologies, drawing from and revolving around the various clusters of AI, nanotechnology, additive manufacturing, biomedical engineering, computer-aided surgery, geographic information system, global positioning system, internet of things, and big data.

This would complement existing sites, such as HLX in Kuala Lumpur, as a one-stop centre and “convergence point” for SMEs in the form of technopreneurs with their sponsors, such as venture capitalists.

The initiative could be a public-private partnership between SMEs and the Malaysian Digital Economy Corporation. Besides that, the digital infrastructure should complement and supplement the National Fiberisation and Connectivity Plan.

Finally, with many SMEs experiencing cash-flow problems and difficulties accessing bank credit, the government’s priorities when paving the way for an exit strategy should be as follows:

1. Reduce red tape and turnaround time, and fast-track and simplify the procedures for credit application processing. The Entrepreneur and Cooperative Development Ministry is implementing such measures through Bank Rakyat, SME Bank Bhd and Tekun Nasional; and,

2. Cut taxes for SMEs across the board. All in all, investment in digital infrastructure could serve as a catalyst and impetus for SMEs to make use of pre-existing allocations to digitalise under Budgets 2019 and 2020, as well as the Economic Stimulus Package.

* Jason Loh Seong Wei is head of social, law and human rights at Emir Research. – May 15, 2020.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.