BACHELOR OF MANAGEMENT WITH HONOURS

JANUARY 20XX

BBEK 4203

PRINCIPLES OF MACROECONOMICS
 Prime Minister Tan Sri Muhyiddin Yassin recently launched an RM250 billion economic
stimulus package known as the Prihatin Rakyat Economic Stimulus Package or PRIHATIN. This
extensive budget for all Malaysians, also known as the caring program, aims to ease cash flow
problems and help companies weather the storm. The global pandemic caused by COVID-19 has
had a wide range of effects on the world and Malaysia. The Ringgit Malaysia has lost 9% of its
value, while the Kuala Lumpur Composite Index has lost 20% of its value. The average
Malaysian's household income has also decreased, resulting in a rise in poverty. The pandemic has
also placed frontline workers' mental health in jeopardy, as well as posed significant challenges to
many companies, including SMEs. We're in new territory, and PRIHATIN is a necessary safeguard
for extraordinary times. “This unprecedented situation necessitates unprecedented measures,”
(Wei, 2021) the Prime Minister said in his announcement. The RM250 billion allocated is more
than three times the amount allocated during the financial crisis of 2009. This reflects the
government's dedication to the people well-being while also ensuring the survival of companies
affected by COVID-19. The PRIHATIN program will provide immediate assistance to reduce the
stress that you are all experiencing. If you're a small farmer in Jeli, Kelantan, or a fisherman in
Kukup, Johor. You will benefit from this stimulus package that cares for the community, whether
you are a chalet operator in Charting or a trishaw operator in Malacca, a night market trader in
Kuala Lumpur or a market trader in Pasar Tamu, Kundasang. The government's biggest priority
now is to stop the COVID-19 outbreak from spreading. For this, I've declared an RM500 million
allocation to the Ministry of Health (MOH). The Government will allocate an additional RM1
billion to buy equipment and facilities to contain COVID-19, including acquiring medical
expertise from private healthcare services, to further improve MOH's capabilities. In addition, in
support of MOH's efforts to perform further COVID-19 studies, the insurance and takaful
industries will set aside RM8 million to cover the costs of up to RM300 per policy holder for
screening and a takaful medical certificate to undergo the test at private hospitals or laboratories,
as directed by MOH. In the meantime, family takaful and insurance providers will sell a three-
month premium suspension to donors whose source of income has been impacted by the pandemic.
The government given temporary allowances to physicians, nurses, and medical personnel who
were actively involved in containing and preventing the outbreak in the previous package. I am
aware that our healthcare workers are working nonstop under extreme stress and strain in this
difficult situation. In appreciation of their efforts, the government will raise the special allowance
from RM400 to RM600 a month from April 1, 2020, until the epidemic is over. At the same time,
the government decides to give military, police, customs, civil defence, and RELA members who
are directly involved in implementing the MCO a special allowance of RM200 per month. From
April 1, 2020, until the COVID-19 epidemic is over, this allowance will be charged. This program
is projected to support about 169,000 additional front-line staff.

Both external (global supply and demand shocks) and domestic factors would have
catastrophic effects on the Malaysian economy as a result of this pandemic (MCO). Smaller
companies and disadvantaged groups, such as low-income people and workers, would be
disproportionately affected. We recommend a new, extended, two-stage fiscal response
package in light of emerging risks. Stage 1 measures will boost incomes during the MCO, while
Stage 2 measures will help the economy get back on track once the constraints are lifted.
Liquidity funding for both individuals and companies is included in Stage 1 initiatives.
Individuals may be covered by extending EIS unemployment insurance and increasing BSH
benefits for a limited time. Low-interest concessionary lending, as well as wage assistance and
cost-cutting initiatives, would be needed by businesses. Stage 2 assesses efforts to boost the
economy after the MCO is lifted, assisting individuals and companies in regaining their footing.
Stage 2 proposals include increasing infrastructure investment in underdeveloped areas and
providing a one-time cash infusion to Malaysian households. By now, it is clear that this
pandemic would have serious consequences for both the Malaysian macroeconomy and the
society economic well-being. The key sources of economic damage in Malaysia are twofold:
the first is the negative effect from the coronavirus's effects abroad, and the second is caused
domestically as a result of the recently imposed movement control measures. First, the outbreak
of the latest coronavirus in China had caused wide-ranging supply and demand shocks that had
reverberated across the world well before the partial lockdown measures in Malaysia. As
Chinese demand fell, commodity exporters around the world braved lower prices, while global
manufacturers faced output cuts as Chinese factories were shut down. The implications of these
China shocks in Malaysia may be negative. The Malaysian economy is one of the most sensitive
in the region to both Chinese demand and supply. Malaysia's top trading partner, a major source
of foreign investment, and top tourist destination outside of ASEAN is China. Malaysian firms
have also become among the most deeply integrated in global production networks over the last
decade. This is caused by the fact that regional supply chains are increasingly focused on China.
Indeed, intermediate components account for more than a quarter of Malaysia-China trade
(roughly £20 billion in 2018)–exactly the type of product that suffers the most when global
supply chains are disrupted. Second, while the MCO steps are critical in preventing the spread
of the new coronavirus in Malaysia, they will come at a significant financial expense. On a
macro level, industry and service closures, as well as travel and movement restrictions, would
have a significant effect on private consumption and business investment. It will have even
more damaging consequences for individual livelihoods and businesses. Individuals and
companies impacted by the temporary closures are likely to experience immediate cash flow
problems as their earnings decline. Small and medium-sized businesses (SMEs) and
disadvantaged groups such as lower-income families, part-time and unemployed employees
would be disproportionately affected by the liquidity squeeze. This could have far-reaching
consequences for the entire economy, leaving companies bankrupt, individuals bankrupt, and
the financial system burdened with non-performing loans.

Industry that benefits from the stimulus packages is able to qualify if their name is not on
the LHDN database and that they are qualified for assistance. It's really straightforward. Simply
apply online on the LHDN website using your own smartphone. Please provide correct details,
click the send button, and wait for payment to be credited to their account. If your elderly
relative is inexperienced with using a smart phone, enlist the support of a child or grandchild to
fill out the necessary details. There is a lot of feedback from the public as soon as the
PRIHATIN was released. Many people agreed with and accepted the government's economic
stimulus plan. However, received input from organizations and chambers of commerce
representing SMEs, who have asked the government to reconsider the assistance they've
received as part of the economic stimulus package. Many people have written letters,
memorandums, and expressed their opinions. SME Association of Malaysia, Dewan Perniagaan
Malaysia, Majlis Tindakan Ekonomi Malaysia, Associated Chinese Chambers of Commerce
and Industry of Malaysia, and many others are among them. The majority of them stated that
their companies have been impacted and that they need additional government assistance. They
understand that SMEs are an important part of the country's economy. The SME sector employs
nearly two-thirds of the workforce in our country and accounts for nearly 40% of GDP. As a
result, it's important for the sector to stay stable in the face of the economic challenges that
we're all feeling. Problems with company cash flow have emerged as a result of the Movement
Management Order (MCO). Furthermore, SME businesses face administrative and legal
challenges, which have disrupted easy access to government assistance under the PRIHATIN
package. The following are the additional measures first, the wage subsidy program announced
on March 27 will be increased by RM7.9 billion from RM5.9 billion to RM13.8 billion. All
businesses with local workers receiving a monthly salary of RM4,000 or less will receive wage
subsidies under this additional program. They will have a wage subsidy of RM600 per month
for each retained worker for companies with a workforce of more than 200 employees.
However, the maximum number of workers for which a business can make a lawsuit would be
raised from 100 to 200. Companies of 75 to 200 workers would be qualified for a salary subsidy
of RM800 per month for each employee. They would offer a salary subsidy of RM1,200 per
month per employee to businesses with less than 75 workers. Companies can gain more
advantages and assistance as a result of this improvement. This assistance is for a three-month
period and is only available to employers who registered with the Malaysian Companies
Commission (SSM) or local governments before January 1, 2020, and who are also registered
with the Social Security Organization (SOCSO). This program would gain 4.8 million workers,
according to estimates. Second, an RM2.1 billion Special PRIHATIN Grant will be provided
for qualifying micro enterprises. Each organization will receive an RM3,000 grant, benefiting
nearly 700,000 micro businesses. To receive this assistance, micro-SMEs must first register
with LHDN. The list of qualified micro enterprises will be given to the government by local
governments and SSM. In addition, the government would like to encourage licensed money
lenders who provide credit facilities under the Money Lenders Act 1951 to offer SMEs 6-month
loan repayment moratoriums, similar to those offered by banks, starting April 2020. I hope that
these money lending organizations are similarly sympathetic to their clients' financial hardships
and that they will work together to alleviate their financial burden.

There is some economic stimulus package will provide by government during MCO. Firstly,
was Beginning April 1, the government and telecommunication companies will provide free
internet data use to their customers during the Movement Control Order (MCO) era. Prime
Minister Tan Sri Muhyiddin Yassin said the government has set aside RM600 million for this
project as part of the Prihatin Rakyat Economic Stimulus Package. “With the help of
telecommunication services providers, some special packages for the telecommunication and
multimedia industry will be launched (Povera, 2020). Prime Minister Tan Sri Muhyiddin Yassin
said the government has set aside RM600 million for this project as part of the Prihatin Rakyat
Economic Stimulus Package. With the help of telecommunication services providers, some
special packages for the telecommunication and multimedia industry will be launched. One of
the packages that will be implemented is free internet data access for all customers priced at
RM600 million over the MCO span starting April 1. In addition, an additional RM400 million
will be invested to boost network coverage and capabilities in order to provide high capacity
and quality telecommunications networks. The government has also set aside RM530 million
to provide additional discounts ranging from 15% to 50% in stages for electricity bills up to
600 kilowatts per month. The sum was in addition to the RM500 million set aside during the
previous economic stimulus to provide a 15% discount on electricity bills to the tourism sector
and a 2% discount (on electricity bills) to commercial, manufacturing, agriculture, and
households in Peninsular beginning April 1. A 50% discount (on energy bills) for electricity
consumption under 200 kilowatts, 25% for electricity usage from 201 to 300 kilowatts, and
15% for use from 301 to 600 kilowatts. Beginning next month, these discounts will be in place
for a six-month duration. Meanwhile, all households will continue to benefit from the 2%
discount (on energy bills for the sectors involved) declared under the previous economic
stimulus package. Secondly, following a series of meetings with the Finance Ministry and Bank
Negara Malaysia, he stated that the government has decided that banks will impose a six-month
moratorium or postponement of repayments to individuals and small businesses beginning
April 1 this year. Meanwhile, credit card holders who are having trouble paying their balances
can choose to make scheduled payments between April 1 and December 31. Corporate clients
may also work with banks to restructure loan repayments to suit their specific business needs.
This is critical in ensuring that businesses are able to retain their manpower and carry on with
their operations. Muhyiddin thanked the Malaysian Finance Ministry, the Bank Negara
Malaysia (BNM), and the banking industry for the move, which is expected to cost about
RM100 billion. He also stated that the government would investigate numerous other methods
to relieve people's pressures as part of a new economic stimulus plan to be announced soon.
The Finance Ministry and the Bank of New Zealand (BNM) to look into the announcement (of
the stimulus package) in depth so that the people can benefit from it (Daim, 2020). Thirdly,
Prime Minister Tan Sri Muhyiddin Yassin has proposed steps to ease three employer
obligations in order to reduce the cash flow constraint that the COVID-19 outbreak has placed
on companies. The first is the implementation of a program that would enable employers to
delay, restructure, or reschedule their workers' mandatory Employees Provident Fund
contributions. On April 15, the EPF will initiate this initiative. This would save employers an
estimated RM10 billion in cash flow and profit over 480,000 SMEs and other companies. About
eight million jobs are projected to be saved as a result of it. The government would also exclude
employers' contributions to the Human Resource Development Fund (HRDF) for six months
starting April 1 — for all industries — resulting in RM440 million in cash flow relief. Starting
April 1, all SMEs' income tax payments will be delayed for three months. This is an upgrade
on a similar measure announced as part of the first stimulus package, in which companies in
impacted industries like tourism will have their income tax payments postponed for six months.
In order to protect the interests of both employers and workers in Malaysia, the government has
implemented the Wage Subsidy Program, which aims to assist employers in retaining their
employees and preventing the loss of employment and livelihoods. Under the plan, each
employee earning less than RM4,000 per month for a span of three months and whose
employers have seen a 50% decrease in income since January 1 will receive RM600 (Hamdan,
2020). Fourthly, as part of the Prihatin Rakyat Economic Stimulus Package announced to
cushion the economic effect of the Covid-19 outbreak, higher education students will receive a
one-time payment of RM200 each. The government has set aside RM270 million from the
RM250 billion stimulus package for this project. A total of RM270 million will be distributed
to students at different levels of higher education, including matriculation, community colleges,
polytechnics, public universities, and private universities also announced that borrowers of the
Skills Development Fund Corporation, or PTPK, will have their loan repayments deferred from
April 1, 2020 to September 30, 2020. This initiative would support 174,500 borrowers, with an
approximate collection of RM149.2 million. The government has postponed repayment of the
National Higher Education Fund Corporation (PTPTN) loans to all borrowers for six months, a
total of RM750 million, as part of the RM20 billion Economic Stimulus Package (Arumugam,
2020).
 In summary, PRIHATIN is a more detailed, community-focused package aimed at reducing
the impact of the COVID-19 outbreak, which is increasingly being felt across all sectors and
divides across the country. It also complements the Economic Stimulus Package 2020, which
was announced in February. More initiatives should be taken if the economic condition
worsens. Given that the COVID-19 outbreak is unlikely to be a short-term event, the emphasis
should be on helping private sector companies this time. In any case, we assume it is vital to
ensure that the PRIHATIN and any subsequent economic packages are properly implemented.
This is due to the fact that adverse results would result in a mass exodus.

References

Wei, L. S. (5 February, 2021). Unprecedented measures needed by industries & businesses at this time.
Retrieved from Astro Awani news: https://www.astroawani.com/berita-
malaysia/unprecedented-measures-needed-industries-businesses-time-281373

Arumugam, T. (27 March, 2020). Higher Education students to receive one-off RM200 each. Retrieved
from New Straits Times: Tharanya Arumugam

Daim, N. (25 March, 2020). Six-month moratorium on bank loans, restructuring of credit card payments.
Retrieved from New Straits Times: https://www.nst.com.my/news/government-public-
policy/2020/03/577922/six-month-moratorium-bank-loans-restructuring-credit

Hamdan, A. A. (27 March, 2020). COVID-19 stimulus package: Rescue aid to ease private sector cashflow.
Retrieved from theedgemarkets.com: https://www.theedgemarkets.com/article/govt-moves-
lighten-three-employer-commitments-ease-business-cash-flow

Povera, A. (27 March, 2020). Free internet usage during MCO from April 1. Retrieved from New Straits
Times: https://www.nst.com.my/news/nation/2020/03/578733/free-internet-usage-during-
mco-april-1