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January 2022 Vol 2 No 7

  • When 2020 with its pandemic and lockdowns closed its curtain, cautious optimism was in the air that the coming 2021 will be the year Covid-19, along with lockdowns, which have affected severely the global economy, will both make a disappearing act.
  • This cautious optimism was solely hinged on the appearance of Covid vaccines on the scene.
  • After what seemed to be a long wait since April 2020, Covid-19 vaccine finally made its debut when the US started its rollout of the Pfizer vaccine in late December 2020.
  • This was actually ironical because the long wait of eight months was unprecedentedly very fast for a vaccine to be produced, as there was really a dire need for a vaccine to attain herd immunity to fight the virus.
  • In Southeast Asia, Singapore began its inoculation of the frontliners in December soon after the US’ rollout of the Pfizer vaccine.
  • This was followed by Malaysia in late February 2021. By March, many countries had started their vaccination programmes.
  • The vaccine euphoria had many experts predicting confidently the global economy would return to its pre pandemic level by the middle of 2021.
  • But all these were not to be.
  • The emergence of the more transmissible Delta variant had thrown a spanner in the works of eradicating the virus.
  • The Delta variant, which was first detected in India in October 2020, and then spread to more than 130 countries by the first half of 2021, had overwhelmed the healthcare system of many countries including Malaysia, resulting in a record rise in daily infections and deaths.
  • India itself suffered a deadly second wave in April and May with more than 400,000 daily cases at its peak.
  • While some countries were hard-hit by the Delta strain like India, the Covid situation seemed to be relatively all right in Malaysia as May entered the picture, with the daily infection on May 1 at 2,881 cases compared to 5,725 on Jan 29.
  • But this did not last long when on May 21 the daily cases hit 6,493 and for the first time on July 13, it became a five-digit figure of 11,079 cases.
  • But way before it hit this five-digit figure, then Prime Minister Tan Sri Muhyiddin Yassin announced on May 28 a nationwide “total lockdown” or Full Movement Control Order (FMCO) on all social and economic sectors from June 1 to 14.
  • Under this lockdown, only essential economic and social services listed by the National Security Council were allowed to operate.
  • This was followed by another two-week extension until June 28 under which more sectors of the economy were allowed to gradually reopen, provided these activities did not involve large gatherings.
  • However, on June 28, countrywide lockdown was extended indefinitely until daily cases fell below 4,000. Restaurants were allowed to operate from 6am until 10pm from June 28 onwards.
  • This seeming contradiction of a total lockdown coexisting with flexibility when restaurants were allowed to operate until 10pm was criticised by the opposition politicians, without realising the government was torn between saving lives (lockdown) and livelihood (flexibility), as the indefinite lockdown meant more and more lower-income households were running out of food and income.
  • As the government was preparing to announce more fiscal stimulus measures to assist the lower income that was badly affected by the indefinite lockdown, a silver lining appeared.
  • Some citizens without any prompting either from the government or the opposition began the white flag movement, calling the affected households to raise white flags to alert their neighbours and receive aids.
  • But sadly, this was politicised by the opposition to mean that Malaysia has a failed government, which must be brought down at all cost to ensure the well being of Malaysians during this hard time.
  • This was sweet music to the likes of the foreign media such as Bloomberg which produced an article on Malaysia being on the slippery road to a failed state contrary to the latest statistics at that time ranking Malaysia as in a not too bad position compared to the US for example in the annual ranking of fragile states in term of annual improvement.
  • But not all criticisms of the opposition were without merits when for example it vehemently criticised the government for its alleged discriminatory practice against those who breached the standard operating procedures (SOP), and in not calling Parliament to meet during the Emergency from January to August.
  • On June 15, Muhyiddin introduced a four-phase National Recovery Plan (NRP) to help the country emerge from the pandemic and its economic fallout.
  • It was based on three parameters – Covid-19 transmissions among the community based on the number of daily Covid-19 infections; capacity of the public healthcare system based on the bed utilisation rate in intensive care unit (ICU) wards; and the percentage of the population that has received two doses of vaccines.
  • From August 7 onwards, the number of new Covid cases with serious symptoms were used to indicate whether a state was ready to move up to Phases 2 and 3.
  • Asymptomatic cases were no longer counted, as over 40% of the adult population had been vaccinated by the time the policy was changed.
  • From August 10 onwards, the fully vaccinated in Phase 2 and 3 states had more freedoms 14 days after their second dose (or 28 days for single-dose vaccines).
  • They could also be quarantined at home after returning from overseas, instead of being sent to a quarantine centre, provided they showed they had no signs of infection within three days, and they presented their vaccination certificates.
  • From August 20 onwards, they were no longer affected by the 10-kilometre limit when travelling.
  • The government also made it easier for the people to understand and follow the SOPs by reducing them from 181 to just 10 in two weeks from Sept 14.
  • At the time the NRP was formulated in June, it was projected that by October, Malaysia will see the easing of the Covid-19 daily infections, where more economic sectors will be opened, and limited social gatherings will be allowed, and more states will move into Phase 3 or 4.
  • When Prime Minister Datuk Seri Ismail Sabri Yaakob came into power, he continued with implementing the NRP, appointing his predecessor to lead the Council, thus maintaining the same policy and strategy with changes made in response to the dynamics of the situation.
  • The result – by October 25, the daily cases were down to 4,743, the first time ever it dipped below 5,000 since June 22, and the positivity rate was at 5% whilst the infectivity rate posted a 0.88, thus paving the way for the pre-endemic phase to materialise.
  • According to the World Health Organisation, a positivity rate of 5% or less shows that a country is managing the spread of the virus relatively well, and an infectivity rate of below 1 shows that the spread of the disease is under control. At 1, it means a Covid-19 patient will infect one other person.
  • Things at the Covid front continued to get better from October onwards, as reflected in the lifting of the ban on inter-district and interstate travels which was a boon to domestic tourism, and 90% of the adult population had been fully vaccinated, one of the highest rate in the world, giving rise to another round of cautious optimism that the worst might just be over by the end of the year.
  • Moreover, by Jan 3 of the New Year, when Sarawak entered the 4th phase, all states including the three Federal Territories of Kuala Lumpur, Putrajaya and Labuan were in the 4th phase signalling that the lockdown was effectively ended.
  • Again, this was not to be, as the cautious optimism was marred when breakthrough infection defined as fully vaccinated people getting infected, and serious cases (Categories 3, 4 and 5) went on a surge in late October, primarily due to the waning effectiveness of all Covid vaccines, which for a while had threatened to overwhelm the capacity of hospitals to cope with the ICU admission.
  • It was around this time that the call for a third booster jab – introduced in early October – be speeded up was made in order to give the fully vaccinated higher immunity against hospitalisation and severe illness.
  • Just as all these were about to reach success as reflected in daily cases going down to below 3,000 and the Enhanced MCO wasn’t implemented at the district or area level for quite a long time, then suddenly a new strain, Omicron, believed to be more transmissible than Delta entered the picture in early December, dashing again the cautious optimism that had just resurfaced.
  • Not to mention the occurrence of the worst year-end flood in Selangor.
  • On the economic front, 2021 debuted with a big bang that can be described as more than cautious optimism, all because of the spectre of the widespread Covid-19 vaccine distribution providing the ultimate economic kick-start, offering a massive booster shot to corporate profits.
  • Here were two samples of the upbeat comments by analysts in the early days of 2021:
  • – Encouragingly, job losses have eased and manufacturers remain optimistic on balance that output will continue to recover in 2021, led by the rollout of vaccines helping to restore trading to more normal conditions.
  • – The market continued to build in boatloads of optimism about a global growth recovery in 2021 and an accompanying downward trajectory for the US dollar as the primary consensus view.
  • In Malaysia, there was already the positive carryover effect on the economy with the passage of Budget 2021 in December and the announcement on the availability of Covid-19 vaccine in February.
  • On Jan 4, the first trading day of 2021, the ringgit opened on a firm note trading higher against other major currencies and leading the regional charge against the US dollar on vaccine optimism by breaching RM4 against the greenback for the first time since June 2018.
  • It was quoted at RM3.995 against the US dollar compared with the previous close at 4.0200/0250. It was as if the ringgit also gave its blessing for the cancellation of the HSR project, despite the compensation that needs to be paid.
  • All these positive sentiments led to a smaller contraction of GDP in the first quarter (Q1) of 2021 – 0.5% contraction compared to 3.4% in the previous quarter (Q4 2020).
  • GDP growth reached its zenith in Q2 with a stellar performance of 16.1% growth.
  • Then came the Delta strain, along with the indefinite lockdown on June 28, which affected severely the Q3 growth, which was earlier expected to boost GDP growth further.
  • The Q3 growth went south with a contraction of 4.5% but the saving grace is GDP went north to 3% for the first nine months of 2021 due to the stellar performance in Q2.
  • Despite headwinds throughout Q3, various key economic indicators point to strong recovery momentum, especially as the country entered Q4 and into 2022.
  • This includes improvements in the labour market, as the unemployment rate declined to 4.5% in September, and to 4.3% in October, as well as a 24.7% increase in exports and an 11.6% increase in manufacturing sales during September.
  • Furthermore, in Q3 there were an increase in both business and consumer confidence as tracked by the Malaysian Institute of Economic Research, as well as RM12.8 billion in net foreign direct investments (FDI), bringing the total net FDI for the first nine months of 2021 to more than RM30 billion.
  • In a statement on Nov 12, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said: “With the recovery momentum seen during the first nine months of 2021, Malaysia’s GDP is on track to achieve growth of between 3% and 4% in 2021, and further expand between 5.5% and 6.5% in 2022, in line with projections by the IMF and World Bank.
  • “Growth will be driven primarily by an expansionary Budget 2022, normalisation in economic and social activities premised on high vaccination rates, resumption of projects with high multiplier effects and strong external demand, especially from major trading partners.”
  • Other positive indicators include:
    • The banking system has a healthy liquidity coverage ratio, which stood at 154.4% in September 2021, with gross and net impaired loan ratios remaining relatively stable at 1.6% and 1.0%, respectively;
    • Malaysia’sinternational reserves remained high at USD116.1 billion as at end-October 2021, sufficient to finance 8.1 months of retained imports and is 1.3 times total short-term external debt;
    • Outstanding business loans increased by 2.4% in Q3 2021 (2Q 2021: 1.3%), supported by higher working capital loan growth. This was driven by the wholesale and retail trade, restaurants and hotels subsector, and manufacturing sector, in line with the resumption of more economic activities;
    • The FBMKLCI rose 2.2% in Q3 2021, with retail investors contributing RM11.3 billion in net investment. The unit trust segment also saw the Net Asset Value increase by 3.5% to RM537.9 billion as of end-September 2021, accounting for nearly 30% of the total Bursa Malaysia market capitalisation. Since August, net inflows of RM3.5 billion has been recorded from foreign investors; and with retail investors contributing RM11.3 billion in net investment. The unit trust segment also saw the Net Asset Value increase by 3.5% to RM537.9 billion as of end-September 2021, accounting for nearly 30% of the total Bursa Malaysia market capitalisation. Since August, net inflows of RM3.5 billion has been recorded from foreign investors; and
    • The Ringgit bond market has also seen a marked increase in foreign investors’ confidence. Notably, foreign holdings in Malaysian government bonds accounted for RM231 billion or 25% of the total outstanding long-term government bonds. The secondary market remains resilient and government primary issuances continue to be supported with year-to-date average bid-to-cover ratio of 2.1 times.
  • Although the statement was made in early November before the Omicron variant and the worst year-end flood in Selangor in December took place, with this kind of recovery momentum, the economy could just be resilient enough to face any unexpected event.
Read more on the Malaysian economy in 2021:
  • In the political arena, the first half of 2021 was consumed with the political shenanigans between Umno and Bersatu where both are members of the governing coalition Perikatan Nasional (PN) helmed by Bersatu’s Tan Sri Muhyiddin Yassin.
  • This led to political uncertainties and instability where the longevity of the Muhyiddin Administration till the 15thGeneral Election (GE 15) was called into question amid the country facing a myriad of problems brought about by the pandemic and its economic fallout.
  • This ultimately led to the fall of PN government on August 16.
  • In a last ditch attempt, Muhyiddin promised political and electoral reforms, and increased funds for opposition lawmakers to spend on their constituencies if they supported him.
  • He also said he would amend the constitution to limit a prime minister’s term to two five-year terms, introduce an anti-hopping law to prevent defections and ensure the minimum voting age was lowered immediately from 21 to 18.
  • The proposals, he said, were also designed to prevent “kleptocratic” rule if his government fell.
  • The opposition flatly rejected this, and so Muhyiddin resigned, saying: “I will never conspire with the kleptocrat group, interfere with the independence of the judiciary and turn my back on the federal constitution merely to remain in power.”
  • But when PM Datuk Seri Ismail Sabri Yaakub came to power, he revived Muhyiddin’s proposal under the memorandum of understanding (MoU) on transformation and political stability between the government and leaders of Pakatan Harapan (PH) that was never meant to hinder the Opposition’s basic role of check and balance.
  • This was accepted by the leaders of PH and the memorandum was duly signed on Sept 13, heralding the dawn of a new era in strategic partnership between both parties that will cool the political temperature of the country, while adding an element of stability after two prime ministers were ditched within one and half years.
  • So far, as we ushered in the New Year, the memorandum has kept to its name (the part on stability) when Budget 2022 and the 12th Malaysia Plan was passed by Parliament, and no vote of confidence/no confidence was surreptitiously planned.
  • It is common knowledge the political instability in 2021 that led to the resignation of Muhyiddin has its root in the earlier collapse of the PH government in February 2020 over infighting on the issue of when should Anwar Ibrahim take over the premiership from Tun Dr Mahathir Mohamad among supporters of the two PH politicians.
  • A gentleman agreement forged before GE 14 on May 2018 was that in the event PH won the election, Mahathir would be the prime minister and Anwar would take over two years i.e. May 2020 after Mahathir had become the PM.
  • But rumblings over whether Mahathir will relinquish his post after two years of his premiership had begun in the middle of 2019 or much earlier as some would allege.
  • By February 2020, this issue came to a standoff between their respective supporters that it led to Bersatu pulling out from the coalition on February 24. On the same day too, Mahathir resigned.
  • These two events threw the country into a political crisis, which ended on Feb 29 when through a constitutional process, Muhyiddin was appointed by the Agong as the new PM and sworn in on March 1.
  • But as subsequent events showed the simple, tenuous majority that PN had, has become a bane in Malaysian politics in which it is no longer the opposition that is in a position to bring down the government but the party with the most seats in the coalition government i.e. Umno with 38 parliamentary seats.
  • Because of the tenuous majority, all it took was for just three to five Umno MPs to withdraw support for the government to be brought down.
  • To make matter worse, under a tenuous majority, it is very easy to bring down the government but very difficult to form a new government unless a new alliance with the opposition is forged or a minority government is formed.
  • This kind of tenuous majority will be stable only when all political parties in the government are solidly united in not withdrawing their support until the next general election.
  • There was solid unity between Umno and Bersatu during the early days of the PN government but the situation started to change after July 2020 onwards when an Umno stalwart, former premier Datuk Seri Najib Razak was convicted for abusing power and misappropriating RM42 million from SRC International, and sentenced to a jail term of 12 years and a fine of RM210 million.
  • Thing took a turn for the worse when, at the height of the on-going saga of opposition leader Anwar Ibrahim dropping his bombshell in September 2020 that he had strong, formidable and convincing numbers to form the government, it was alleged that Umno leaders Najib and Zahid Hamidi had written to the Istana of their support for Anwar as the new prime minister.
  • It was at this time the possibility of Umno working with Anwar and DAP to form a new government was up in the air but this was later squelched when Umno grassroots was adamant in observing Umno’s known policy stance of “No Anwar, No DAP”.
  • The Emergency – from January to August 1 – had checkmated Umno in bringing down the PN government under Muhyiddin. But as soon as the Emergency was lifted, 11 Umno MPs withdrew their support, bringing down the Muhyiddin government.
  • Ironically, the new government helmed by Ismail Sabri from Umno whom Muhyiddin has made his deputy, has the support of PN led by Muhyiddin himself, which formed the largest bloc in the new governing coalition, and is a PN government led by Umno.
  • The situation has come to full circle, just that this time around with still a tenuous majority, instead of Umno, the Bersatu-led PN is the kingmaker, which has demanded the exclusion of the kleptocrats in the government as a condition of its support.  
Read more on Mahathir’s resignation, Umno-Bersatu tiff, Muhyiddin’s resignation and the memorandum of understanding on transformation and political stability:  

Media, media … what telah happened …

  • One media, quoting an unnamed source reported on Dec 28 that Prime Minister Datuk Seri Ismail Sabri Yaakub is expected to reshuffle the Cabinet and appoint a deputy in the coming week.
  • Another media said there has been recent speculation that the prime minister would be appointing a deputy prime minister and dropping three ministers from the Cabinet.
  • But what an anti-climax this was when the premier squashed this rumour on Jan 4 when he said his main focus is to solve flood woes and curb the spread of Covid-19.
  • “I have said it before, my focus is now on the floods, so I don’t want to talk about whether or not there will be a cabinet reshuffle. I didn’t announce any, so there’s none!” added Ismail, who was sworn in as prime minister in August.
  • This is what happened when the “scoop” culture – the first to break the news – of the media/journalism is not managed judiciously.And no unnamed sources please, unless the media is sure of its fact!
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