World Bank: Productivity-driven growth crucial to return to pre-crisis levels

As most businesses in Malaysia have been allowed to resume operations tomorrow, the World Bank expects the government to set the foundations for longer-term productivity-driven growth, resilience and competitiveness.

The policy objective is to ensure companies return to their pre-crisis production and employment levels as rapidly and safely as possible, its senior economist Smita Kuriakose said in a statement today.

“A detailed plan for the post-Movement Control Order (MCO) phase would require close coordination between the private sector and the government to prevent further waves of infection,” she said.

Smita said it is also important to ensure that the burden of COVID-19 prevention is not placed solely on small and medium enterprises (SMEs) which are already struggling to stay in business.

It is crucial that the government provides SMEs with standard operating procedures for employees to follow social distancing norms to ensure safe work conditions.

She said SMEs are likely to have lower capacity than larger companies to scale up the kind of management response necessary and to put in place adequate mitigation measures.

To alleviate some of the uncertainty and lack of confidence from workers and customers as businesses seek to reopen, she said targeted scaling up of testing to identify positive infections may help.

“Support to SMEs could also include co-financing for professional cleaning of premises in line with confirmed COVID-19 cases and access to business continuity insurance,” she said.

Smita also advised identifying measures to further increase the rate of digitalisation among SMEs as the current crisis has increased the benefits from using new technologies.

She said subsidised or free broadband access and direct technical support could be provided to them to accelerate the transition to digital platforms, including business-to-consumer and business-to-business.

“Renewed efforts to support workers’ reskilling and upskilling will be particularly important,” she added.

Moving forward, she said the government should boost demand and reactivate supply chains once businesses can safely operate by adopting broad-based fiscal stimulus, consistent with available fiscal space.

Large public investment projects and programmes such as the East Coast Rail Link, Mass Rapid Transit Two and the National Fiberisation and Connectivity Plan should have a positive impact on demand during construction and could benefit growth in the longer run, Smita said.

As SMEs tend to be disadvantaged from accessing public procurement contracts without the government support, she said, e-procurement could be encouraged to further level the playing field for them.

On foreign direct investment, the economist said immediate efforts should focus on the retention of existing foreign investors and the preservation of supply chains connecting foreign and domestic suppliers, which are mostly SMEs.

According to her, government agencies can help SMEs reintegrate into supply chains and find new domestic and export markets to help reduce the time to recovery after the supply chains and client relations disrupted by the crisis.

In preventing an exodus of investments and subsequent job losses, special
attention should be placed to ensure firms in the electrical and electronics
industry, retail and tourism sectors are supported, Smita said.

She said government should communicate how the current financial support measures for companies will evolve as the post-MCO reopening phase continues.

“Measures should also be scalable and time-bound, allowing the government to increase the scope of assistance provided, reduce it as the crisis subsides and increase it again if the virus surges,” she added.

Source: Bernama