The fairy tale of the national emergency

 

When the government announced a national emergency, shares on Bursa Malaysia tumbled. Global analysts instantly shaved off 1.5 percent from their forecast of the annual economic growth in the country. 

Covid-19 cases showed no sign of slowing down, with hospital beds reaching a “breaking point”. RHB Bank estimated that this lockdown could translate to RM3 billion in losses in private consumption per week.

Tens of thousands of companies have shut down and more will follow; almost a million jobs have been lost and counting. Our democratic institutions stifled, our economic recovery stymied.

But in the small constituency of Gerik in Perak and in the hilly Bugaya of Sabah, all is calm. According to Senior Minister Azmin Ali, the state of emergency imposed here has no negative effects. There was no weakening of investors’ confidence; presumably no retraction of the economy. No suffering.

So much so that these two states should serve as macroeconomic evidence that the emergency nationwide will not weaken investors’ confidence to invest in Malaysia.

I know what you’re thinking: How could these two (unheard of) places serve as proof that the emergency has no effect on investors’ confidence in the country as a whole? Isn’t this a gross misrepresentation and oversimplification? Isn’t this misleading and unempirical? Isn’t this a temporal suspension of logic?

Health or the economy: Choose one

Before you make your judgment, let Azmin explain. To Azmin, who also happens to be our international trade and industry minister, foreign investors will buy into the well-meaning intentions of his government. 

They will take the emergency declaration as an indication of the government’s seriousness in containing the pandemic.

Never mind how contradictory this is against Prime Minister Muhyiddin Yassin’s justifications. If it is true that the emergency is a display of the government’s seriousness in fighting the pandemic, surely that means stricter movement policies are imposed to reduce the numbers. 

However, Muhyiddin and Azmin stated clearly that the movement policies this time around are less strict compared to the first time in March 2020 – even though the number of Covid-19 cases is at least 10 times higher now.

If the government is more serious, then movement controls should have been tighter. If movement controls are tighter, then the cases could be reduced. At no point would an emergency prove its necessity in this – the connection between an emergency and the reduction in Covid-19 cases is simply absent.

The quicker we are able to flatten the curve, the quicker our economy recovers. An emergency alone would not help us. Having lax movement controls inside an emergency is like having a car with little fuel – everyone knows it is not going far.

Worse, the general logic of investment is totally ignored. Investments primarily rely on this abstract feeling called confidence. And to have the confidence to invest in a country, they look at the government and the economy.

It matters less that businesses are still allowed to operate in an emergency. Simply having an emergency is an erosion of investors’ trust. The greatest enemy to confidence is uncertainty, and a national emergency invites uncertainty because nobody knows what the government is about to do next.

Investments rely on confidence, not short-termism

You may argue that the emergency may provide arsenals for the government to take drastic measures to improve the economy. 

The problem is, however, the emergency has rarely been a source of comfort for investors. What more for a government that has proven that its insecurity to hold on to power is the primary motivation.

In fact, the timing of the emergency tells the truth. The declaration came after a series of political threats, rather than an economic collapse.

But you may argue even further. Taking from the popular narratives of the government apologists, you may say that the emergency increases political stability because no one could pull down the government during this period. More stability also means that there is more certainty for investors to inject capital.

This relies on a false and flimsy premise. It assumes that investments are short-term and investors are willing to put their money into Malaysia as long as the emergency is around. 

Since it is likely to last until August, for now, it is highly unlikely that investors would seize this golden opportunity to put their money here for a solid seven months and then pull out again.

Furthermore, the emergency does not remove political instability – it merely postpones it. Once the emergency is lifted, political brawls will resume like a spectre lurking in the dark.

The mistake is to assume that the investors are unaware of this. They know that the ringgit has stalled against the US dollar and the currency has slumped to a one-month low. 

They know that the country will likely miss its growth forecast again, postponing the date of economic recovery indefinitely. 

They know that consumer spending and small businesses are on a free fall, searching for a hard landing instead of an instant death.

But of course, all of us could count on that mystical, free-for-all Gerik and Bugaya miracle.  

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JAMES CHAI is a legal consultant and researcher working for Invoke, among others. He also blogs at jameschai.com.my. You may reach him at jameschai.mpuk@gmail.com. - Mkini

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.

✍ Credit given to the original owner of this post : ☕ Malaysians Must Know the TRUTH

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