For people of age around 60 and above, they have experienced three recessions, one financial crisis and one Coronavirus (SARS) epidemic in our lifetime.
We are about to witness the biggest (three-in-one) economic disaster ever if the world is not able to contain the transmission of Covid-19 within three months.
Covid-19 is easily transmitted and has now spread to more than 200 countries （as of 30 Mar 2020）. The only way to stop it is via social distancing, which means a lockdown – basically staying at home and closing businesses.
In times of crises, exchange rates worldwide become erratic and massive devaluation adds unique problems to countries.
As industrial and economic output plummets, severe cash-flow deficits and non-performing loans (NPLs) will increase. All factors point to a financial crisis in the making.
A global recession is definitely on the way. Just like how Covid-19 made its way to Malaysia, we are seeping into an economic and financial crisis as our financial institutions become plagued with NPLs from failed businesses and unemployment.
Keeping Malaysians employed must be the main consideration. I have no clue what we can offer the illegal immigrants, who are a burden to our health system and the social fabric of our society.
To ensure employment for Malaysians, we need to ensure employers can survive this recession. The biggest employers are the SMEs. How can we help them?
The most severe paycuts are normally in the range of 30% to 50%. For employers, a paycut of 30% plus 12% in EPF savings would mean saving cash flow by 42% instead of retrenching 42% of employees. For the more severe cut of 50%, the savings would be 62% of total payroll.
For employees who suffer paycuts of 30%, their take-home pay will only decline by 21% (EPF not deducted), which can still sustain their current lifestyle, albeit with some tightening of the belt.
Employers who make decent profits at the end of the year can always make it up to the employees by paying higher bonuses to replace lost savings.
There are some industries which are displaying Covid-19 symptoms – respiratory problems and difficulty in breathing, with some already in the intensive care unit suffering from severe no sales-no cash flow syndrome. The aviation, tourism and retail industries need a direct injection of immediate help in cash flow.
I believe the government needs to set up a Covid-19 rescue fund of at least RM20bil to tide things over. Khazanah Nasional Bhd, famed for its generosity, could pump another billion into Malaysia Airlines Bhd perhaps.
This fund should be implemented with full transparency and be fully recoverable from the beneficiaries. It should not be diverted into unintended pockets.
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