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CORONA VIRUS – The situation in Malaysia

1. General situation

On 16th March 2020, the Malaysian Prime Minister Muhyiddin Yassin made a televised speech and announced a Movement Control Order (MCO) for Malaysia, as a preventive measure in response to the COVID-19 pandemic in the country. Since then, Malaysia went through 5 Phases of Movement Control Order, with all the strict actions recommended by the World Health Organisation (WHO) to effectively contain the COVID-19 outbreak.

As of 7th May 2020, the Malaysian Minister of Health, Dr. Noor Hisham Abdullah clarified that Malaysia has met a few of the 6 criteria for a country to end a lockdown, as set by the World Health Organization (WHO). On 7th June 2020, Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced Recovery Movement Control Order (RMCO) would take effect from 10th June 2020 until 31st August 2020 with more lenient restrictions. From 10th June 2020 onwards, majority business sectors are allowed to resume their operations as usual with strict Standard Operating Procedures (SOPs).

On 9th June 2020, there are a total of 8,336 COVID-19 cases in Malaysia, breakdown into 117 Death cases, 1,244 cases in Hospitalisation, 6 cases in Intensive Care Unit (ICU) and 6,675 Recovered cases. which the ministry is working to address. Ministry of Health categorised COVID-19 zones into 3: Red (≥41 active cases), Yellow (≤40 active cases) and Green (No active case). As of 5th June 2020, there are 5 Red zones, 33 Yellow zones and 110 Green zones.

2. Preventive measures

  • Phase 1 - Movement Control Order (MCO) from 18th till 31st March 2020
  • Phase 2 - Movement Control Order (MCO) from 01st till 14th April 2020
  • Phase 3 - Movement Control Order (MCO) from 15th till 28th April 2020
  • Phase 4 - Movement Control Order (MCO) from 29th till 3rd May 2020
  • Phase 5 - Conditional Movement Control Order (CMCO) from 4th till 11th May 2020
  • Phase 6 - Conditional Movement Control Order (CMCO) from 12th May 2020 till 9th June 2020
  • Phase 7 - Recovery Movement Control Order (RMCO) from 10th June till 31th August 2020

The CMCO will be replaced with Recovery Movement Control Order (RMCO), which would take effect from 10th June 2020 to 31st August 2020 with more lenient restrictions. From 10th June 2020 onwards, majority business sectors are allowed to resume their operations as usual with strict Standard Operating Procedures (SOPs). Any changes to the SOPs or regulations will be announced from time to time.

Recovery Movement Control Order (RMCO) Regulations:

Allowed:

  • Interstate travel will be allowed, except for areas under Enhanced Movement Control Order (EMCO).
  • All Government services are fully operational.
  • Business operations will return as normal, with adherence to the necessary SOPs.
  • Meetings and Workshops, with adherence to the necessary SOPs and optimise space.
  • Outdoor Commercial Activities such as sales and promotional activities.
  • Motorcycle Convoys and group Bicycle Rides.
  • Haircuts and beauty treatments at salons.
  • Training activities for Sports Teams, and Non-Contact sports such as bowling, badminton, archery and shooting.
  • Open markets, Morning markets, Night markets, Bazaars, Food courts, Hawker centres, Food trucks and Food stalls will be allowed.
  • Museum visits, Indoor busking, Self-service laundry facilities, Recreational finishing and Film shoots.
  • Schools will be opened in phases, with the Ministry of Education (MoE) and Ministry of Health (Moh) providing further details.
  • Religious activities are allowed, with adherence to the necessary SOPs which soon to be announced by the government.

Not Allowed:

  • Foreign travel. Strict Border controls are maintained to keep out foreign visitors.
  • Pubs, Nightclubs, Entertainment centres, Reflexology centres, Karaoke centres, Theme parks, Mass religious gatherings, Mass social gatherings, Open houses and other activities which involve large amounts of people in one place.
  • Sports competitions or Games that require mass gatherings of supporters in stadiums, swimming pools and public swimming pools.
  • With contact sports such as rugby, wrestling, boxing, football, basketball and hockey not allowed as well.

Penalties

 Conditional Movement Control Order (CMCO) SOPs are still in force under the Prevention and Control of Infectious Diseases Act 1988 (Act 342), and that offenders could face maximum penalties of MYR1,000 fine and 6 months' jail for various offences.

Foreign Travel Restriction

Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced on 7th June 2020 that the country’s borders remain closed and Malaysian are still barred from travelling overseas under the RMCO period from 10th June 2020 until 31st August 2020. The border at the Johor Causeway to Singapore is only open to Malaysians returning home from Singapore.

All entries into Malaysia are compulsory to undergo health screening at the entry point and will be direct to the hospital if exhibit severe symptoms of COVID-19. On 9th June 2020, Senior Minister for Security Datuk Seri Ismail Sabri Yaakob announced that from 10th June 2020 onwards, Malaysians returning from abroad would be allowed to undergo 14 days' compulsory self-quarantine at home if their COVID-19 swab tests at airports showed negative. If tested positive for COVID-19, they will be sent to hospitals for treatment.

Malaysian Government had agreed to allow specific categories of foreigners to enter the country, subject to the standard operating procedures:

  • Diplomats
  • All members of the Malaysia My Second Home (MM2H) programme
  • Expatriate/ Skilled worker/ Knowledge worker with an active pass
  • New Expatriate/ Skilled worker/ Knowledge worker
  • Dependents, including foreign maids to the Expatriate/ Skilled worker/ Knowledge worker

Key Standard Operating Procedure:

  • The related Approving Agency and Regulatory Body are responsible to assess and make decisions to the entry permit application submitted by the company, and to provide a Support Letter to the Expatriate/ Skilled worker/ Knowledge worker who will be entering the country.
  • For MM2H members from high-risk countries, the Council and Ministry of Health will determine if their applications should be approved. They are mandatory to undergo COVID-19 testing at the place they are presently in and must be certified free of the disease before they are allowed to fly back.
  • For foreigners, If the foreigner tested positive COVID-19 result, they will be denied entry and subject to other immigration procedures.
  • All foreigners who decided to enter Malaysia would have to sign a Letter of Undertaking which states their agreement to bear the compulsory 14-days quarantine costs. Non-citizens, including spouses and family members of Malaysian citizens, had to bear the full cost of quarantine services.

For more information, please refer to the link below:

3. Exit strategy

The control of the COVID-19 pandemic in Malaysia is still tightened as well as other actions are taken following the WHO exit strategy. However, according to Malaysian Minister of Health Dr. Noor Hisham Abdullah said Malaysia is not poised to enter COVID-19 "Exit Strategy Phase" yet as the number of positive cases continues to remain at 2 digits. The main contributor is the low compliance rate on the SOPs among migrants, which the ministry is working to address. The protocol for infectious diseases at immigration depots would have to be tightened and authorities would also monitor the situation at prisons and police departments.

On 7th June 2020, Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced a Recovery Movement Control Order (RMCO) from 10th June 2020 to 31st August 2020, as Malaysia’s strategy in exiting the Movement Control Order implemented since March 2020.

4. Economy

a. Economic impact

Prime Minister Muhyiddin Yassin mentioned that Malaysia’s economy is losing an estimated MYR 2.4 billion daily during the MCO, a total of MYR 63 billion, as all the business activities are suspended. The implementation and subsequent extension of the Movement Control Order (MCO) have greatly affected Malaysia’s economic performance:

  • The broad-based travel restrictions and travel risk aversion have affected all tourism-related sectors.
  • Production disruptions in the global supply chain will pressure the production and trade activities of the manufacturing sector. The cumulative losses incurred by the Electrical and Electronics (E&E) sector is estimated at MYR 7.28 billion of GDP while the impact on exports is estimated at MYR 29.12 billion.
  • The decline in consumption and investment activity. Many Malaysian companies recorded relatively lower revenue in the 1Q2020, such as AEON Co (M) Berhad (2019: MYR 7.47 million; 2018: MYR 32.64 million) and Leong Hup International Berhad (2019: MYR 21.79 million; 2018: MYR 60.58 million).
  • Heightened financial market volatility due to ongoing external uncertainties may lead to tighter domestic financial market conditions.
  • According to the Department of Statistics Malaysia (DOSM), as of 1st May 2020, 67.8% of the total 4,094 Malaysian companies responded no sales/revenue during the MCO period. The main challenges faced by the companies are the financial source for salary and rental payment and low customer flow.
  • The rise in unemployment rates has caused a decline in private consumption, which in turn disrupts business sentiment.

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz mentioned that the online sales of fast-moving consumer goods growing rapidly by 40% due to the pandemic. Malaysian consumer behaviour has possibly changed due to the Covid-19 pandemic and making the new normal permanent, such as become more comfortable buying online and cashless/ contactless payment transactions. Postal and Courier Services are recognised as one of the sectors least impacted by the COVID-19 pandemic.

Apart from the pandemic, the domestic economy will also be affected by the sharp decline and volatile shifts in crude oil prices and continued supply disruption in the commodities sector due to unfavourable weather conditions, continued maintenance works and to a certain extent, reduced operating capacity due to the MCO. In summary, the COVID-19 pandemic has introduced new challenges to Malaysia’s business environment which call for a measured, practical and informed approach from political and business leaders. The full impact of COVID-19 pandemic to the economy of Malaysia and the world is still fully clear and it will be a challenge for economies to navigate in the post-COVID-19 world.

b. Trade barriers

There are no new trade barriers added at this time but the Malaysian government has banned exports of Face Masks as listed below:

  • Face Mask (Surgical/Medical) 1 Ply (Ear Loop)
  • Face Mask (Surgical/Medical) 2 Ply (Ear Loop)
  • Face Mask (Surgical/Medical) 3 Ply (Ear Loop/ Head Loop/Head Tie-On)
  • Face Mask (Surgical/Medical) N95

A letter of approval issued by the Controller of Supplies, Ministry of Domestic Trade and Consumer Affairs under the Control of Supplies Act 1961 is required for any export of prohibited goods.

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c. Measures for economic relaunch

1. PRIHATIN Economic Stimulus Package

On 27th March 2020, Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced Economic Stimulus Package - PRIHATIN (Pakej Rangsangan Ekonomi Prihatin Rakyat) worth MYR250 billion. On 6th April 2020, Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced PRIHATIN SME Packages, an economic stimulus package aimed especially at small and medium-sized enterprises (SMEs) during the pandemic. To date, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz mentioned PRIHATIN had helped to relieve Malaysia economic pressures in the past few months. The key takeaways in PRIHATIN package are as follow:

  • Special Prihatin Grant (GKP) amounting to MYR 2.1bn, a Government initiative of providing an MYR3,000 worth one-off financial grant to support the micro-SMEs in terms of cash flow during the pandemic. As of 15th May 2020, over 640,000 micro-enterprises had applied for the GKP.
  • Micro Credit Scheme: The Government will be abolishing the 2% interest rate for the MYR 500mil Micro Credit Scheme under Bank Simpanan Nasional. A loan under TEKUN Nasional with a maximum borrowing of MYR10,000 per SME at 0% interest.
  • A 25% reduction in foreign employee’s levy payments is given for work permits expiring between the period of 1st April 2020 and 31st December 2020.
  • MYR13.8 billion worth wage subsidy programme.
  • MYR 500 million is allocated for a discount on electricity tariffs for commercial, industrial, and agriculture sectors (Effective date: 1st April 2020 to 30th Sept 2020).

Bank initiatives:

  • Malaysia’s Central Bank - Bank Negara Malaysia (BNM) cut its Overnight Policy Rate (OPR)/ interest rates by 50 basis points (bps) to 2% on 5th May 2020 to encourage individuals and businesses to take new loans and theoretically will increase domestic trade transactions.
  • The Commercial Banks have also introduced support packages that include emergency loans to support the SMEs, as well as flexibility for repayments of existing loans in addition to a decrease in the Policy rate.
  • The banking sector will offer an additional MYR2 billion of funding to assist SMEs in sustain business operations at a concession rate of 3.5%, targeting new SME customers to Banks. (Effective date: Mid-June 2020)

2. National Economic Recovery Plan – PENJANA (Pelan Jana Semula Ekonomi Negara)

On 5th June 2020, Malaysian Prime Minister Tan Sri Muhyiddin Yassin noted that Malaysia is currently in the 4th Phase: Recovery, under the 6-Phase Plan (6Rs): Resolve, Resilience, Restart, Recovery, Revitalise and Reform. The Malaysian Government is planning to revive the economic activities by formulating a comprehensive Short, Medium and Long-term Economic Recovery Plan, which will complement the various announced economic stimulus packages.

On 5th Jun 2020, Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced the Short-term National Economic Recovery Plan – PENJANA (Pelan Jana Semula Ekonomi Negara). PENJANA has 40 initiatives worth MYR35 billion, focusing on 3 key thrusts - Empower People, Propel Businesses and Stimulate the Economy. PENJANA is expected to stimulate Malaysia’s economy, save over 2.4 million jobs, reduced the cash flow burden of around 10 million people and support over 300,000 companies. The key takeaways in PENJANA plan are as follow: 

  • Investment fund worth MYR1.2 billion to support the digitalisation of Malaysian businesses by channelling funding from international investors into the local venture capital space.
  • Allocation of MYR50 million to the Malaysian Investment Development Authority (MIDA) for promotional and marketing activities.
  • Tax incentives for the Tourism sector, such as Tourism tax exemption, Income tax relief
  • MYR600 million worth investment fund to drive the process of digitalisation of businesses and innovation.
  • Attractive incentives for the Property Sector to stimulate the property market and provide financial relief to home buyers.
  • 100% sales tax exemption on locally-assembled passenger cars and 50% on fully-imported passenger car

For more information, please refer to the link below: https://penjana.treasury.gov.my/pdf/PENJANA-Booklet-En.pdf

3. Malaysia Proposed Post-COVID-19 ASEAN Economy Recovery Plan

In the Special ASEAN Summit on Covid-19 held on 14th April 2020, Malaysia proposed to the members of ASEAN to formulate a post-COVID-19 Economic Recovery Plan for ASEAN which focuses on the financial, social safety nets, food security and education aspects. This is to ensure a robust supply chain of medical supplies, food and essential goods for the region’s over 600 million inhabitants.

Malaysia also supports the establishment of the COVID-19 ASEAN Response Fund, which aims to boost the existing emergency stockpiles for any future outbreaks. ASEAN should continue to develop the region’s reserves of medical supplies to support the needs of other member nations in public health emergencies.

d. Economic outlook

It is known that the COVID-19 pandemic has greatly impacted the Malaysian economy, more so, the Global economy. According to Malaysia’s Central Bank - Bank Negara Malaysia (BNM), Malaysia’s 1Q2020 GDP moderated sharply to 0.7% due to the impact of measures taken both globally and domestically to contain the spread of the Covid-19 pandemic. It is expected that the overall growth of GDP for 2020 to be as low as -4.7%. Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz mentioned that the country’s fiscal deficit will nearly double, rise to around 6% of annual economic output in 2020 due to the finance in the government's aid projects in regards to COVID-19 pandemic.

Economic recovery is dependent on public and private consumption which are dynamically intertwined, feeding into a virtuous cycle of social and economic benefit. During MCO alone, 66% of businesses experienced a drastic drop in demand that made it difficult to sustain a business. Malaysian Government has proactively taken many initiatives to stimulate and boost the economy, as well as increase private consumption, such as the PRIHATIN Economic Stimulus Packages and PENJANA plan. PRIHATIN is expected to contribute an estimated 2.8% to the GDP growth. 

With international agencies forecasting Malaysia’s GDP growth to be between 4.7% and 9%, subject to the public health situation is under control. Malaysia’s economic performance is expected to gradually improve in 2H2020 and register a positive recovery in 2021, supported by the sizeable fiscal, monetary and financial measures and progress in transport-related public infrastructure projects.

e. Short term opportunities

1. Manufacturing Sector

Malaysia has a well-established manufacturing sector but has too much reliance on the oil and gas Sector. Malaysia remains an attractive investment destination, with the availability of well-educated labour, investor-friendly policies and incentives, well-developed Infrastructure and preferred gateway to enter the ASEAN market. Malaysia’s technologically-inclined economy is proven by the country's involvement in advanced industries such as E&E manufacturing, R&D, biotechnology, photonics, logistics, design, innovation, automotive and others.

The COVID-19 pandemic has triggered the Malaysian Government’s actions in ensuring smooth supplies of medicine, food and other essential goods. This shows short and long-term opportunities for the Manufacturing sector, especially for the Medical & Health industry and the Food & Beverages industry. The PENJANA Short-term Economic Recovery Plan announced on5th June 2020 has highlighted attractive tax incentives for a company relocating into Malaysia, including:

  • 0% tax rate for 10 years for new investment in manufacturing sectors with capital investment between MYR300 – MYR500 million.
  • 0% tax rate for 15 years for new investment in manufacturing sectors with capital investment above MYR500 million.
  • 100% Investment Tax Allowance for 3 years for an existing company in Malaysia relocating overseas facilities into Malaysia with capital investment above MYR300 million.
  • Special Reinvestment Allowance for manufacturing and selected agriculture activity, from YA 2020 to YA 2021.
  • Manufacturing License approval for non-sensitive industry within 2 working days.

2. Food Agriculture (Agri-food) Sector

The COVID-19 pandemic has triggered Malaysian Government actions to address food security issues, as the country is highly relying on the imports of F&B products, animal feeds for livestock and poultry sectors and raw materials for further food processing. The emphasis on food security has opened up promising opportunities in the Agri-food Sector for FDI, such as knowledge exchange and assistance in modernising the Agri-food Sector. This has sparked Malaysia to invest in the R&D of the Agrifood Sector to develop a food self-sufficient nation. The available opportunities including potential collaboration between Malaysian and Flemish companies in Agri-related knowledge transfer, adoption or selling of advanced technologies and machinery to modernise the Sector.

The PENJANA Short-term Economic Recovery Plan announced on5th June 2020 has highlighted few supports for the Agriculture and Food sector, including:

  • 100% exemption on export duty on Crude Palm Oil, Crude Palm Kernel Oil and Refined Bleached Deodorised Palm Kernel Oil (Effective date: 1st July 2020 – 31st December 2020).
  • Incentives to pioneer companies to train and educate the people to venture into agriculture and plantation.
  • Micro Credit Financing for Agropreneurs under Agrobank (including commodity players) totalling of RM350 million with an interest rate of 3.5%.

3. Drivers of the Logistics Sector

Malaysia has the 2nd highest e-commerce penetration rate in the ASEAN region. During the COVID-19 pandemic, Malaysia’s e-commerce industry has expanded at a fast pace. This accelerated growth is mainly due to the increase in the number of online shoppers. The growth has also triggered the transformation of the Malaysian retailers’ business strategy toward e-commerce and Internet-Of-Things (IoT). This has opened opportunities for the main logistics drivers in the country such as manufacturing, pharmaceuticals, food and beverages, e-commerce, and third-party logistics sectors.

The PENJANA Short-term Economic Recovery Plan announced on 5th June 2020 has highlighted few supports for the Agriculture and Food sector, including:

  • 100% exemption on export duty on Crude Palm Oil, Crude Palm Kernel Oil and Refined Bleached Deodorised Palm Kernel Oil (Effective date: 1st July 2020 – 31st December 2020).

f. Long term opportunities

While Malaysia is concentrating on the immediate economic outcomes after COVID-19, TAPiO Management Advisory (a leading advisory company in Malaysia) has an alternative view that Malaysia should be seriously look into revamping future-ready sectors to stay competitive:

  • Diversify and modernise the healthcare sector by investing in the R&D Sector and establish partnerships with key foreign stakeholders.  
  • Enhance the quality of Malaysia’s education system. Partnering with foreign higher education institutions to promote students’ international perspective.
  • Diversify and modernise the sectors related to food, farming and agriculture from simply planting commodities to a new/existing commodity with wider job opportunities and downstream activities.
  • Diversify the Foreign Direct Investments (FDI) into the country, which is mainly contributed by the oil and gas sector. This can be done by promoting the adoption of innovative and advanced technologies in all existing or new industries.
  • Encourage foreign investors to establish or relocate subsidiary in/to Malaysia. Malaysia could take advantage of the current disruption in the global supply chain, as several Multinational Corporations looking to relocate their companies from China.
  • Despite the current economic uncertainties, Malaysia is still firmly preparing for the implementation of the National Fiberisation and Connectivity Plan (NFCP), which aims to improve the country’s digital connectivity by rolling out 5G in Q32020. Minister of Communications and Multimedia mentioned that a reliable and affordable high-speed broadband connectivity is the key catalyst for bringing in FDI into Malaysia’s digital economy. The NFCP is also expected to have a positive impact on the Global Business Services (GBS) in Malaysia by empowering the employees to work from home.
  • In the COVID-19 aftermath, the Malaysian Government is expected to improve the national competitiveness, in terms of FDI by introducing more investor-friendly policies and incentives.

5. Useful links

6. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

10 juni 2020