Defending livelihoods in response to Covid-19

Achim Schmillen

As Malaysia faces the coronavirus pandemic (Covid-19), the battle is on to defend the welfare and livelihoods of people in the bottom 40 percent of household income.

Three economic support packages have been announced. The latest two are called Prihatin (which translates to “care”), and these focus on supporting Malaysians who risk falling through the cracks. These include street vendors, micro-entrepreneurs, artists and other informal workers who have been gravely impacted by the crisis.

While these proactive measures will afford at-risk Malaysians some breathing space, it will be worthwhile to consider the country’s overall strategy for social protection during the ongoing Movement Control Order, the ensuing recovery phase, and in the long-term.

Many expect this crisis to bring big changes to the world, calling it “the new normal.” Changes will abound. Life as we know it will change. The world of work is expected to change, but as yet in unknown ways.

One big change for Malaysia is to find ways that the existing social protection system can better cover the informal jobs where most lower-income workers find their livelihoods.

A recent survey by the country’s Department of Statistics revealed that in the first phase of Malaysia’s lockdown during the second half of March, the rate of job displacements was particularly high in the agriculture and services sectors and among the self-employed.

These are the sectors and types of work that employ lower-income workers, for whom telework or working from home is not an option. Therefore, the primary challenge will be for social protection to reach as many of those in need as effectively as possible, both in the Covid-19 crisis and beyond.

Three aspects are of primary importance here:

First, protection through cash transfers is key.

The form of direct income support provides short-term relief to mitigate acute financial strains, supports more medium-term recovery efforts, and stimulates consumption during an economic downturn. To protect the lower-income households affected by the Covid-19 crisis, especially those who work informally, income protection needs to be independent of coverage by formal social insurance like the Employees Provident Fund (EPF) or the Social Security Organization (SOCSO).

While, in principle, one might channel income support specifically to informal sector workers who have lost their jobs or livelihoods during the crisis, the very nature of informality would make this direct targeting extremely challenging – beyond specific groups such as ride-hailing workers – and would risk leaving many unprotected. This crisis has dragged many into economic vulnerability.

Thus, the recently introduced Bantuan Prihatin Nasional (BPN) program as part of the Prihatin package is an important step in the right direction, as it is both progressive and places a strong emphasis on protecting the bottom 40 percent.

Further, enrollment is automatic for all existing beneficiaries of the Bantuan Sara Hidup (BSH) program and for qualified Malaysians who completed a tax return in recent years. Enrollment of new beneficiaries can also be done relatively easily through the website of the Inland Revenue Board, making it possible to have quick payouts.

Second, further rounds of cash transfers may be needed.

The economic support packages implicitly assume that the COVID-19 crisis will pass within the next two to three months.  Hence all BPN payments are scheduled to cease after May 2020. However, many anticipate the impact of the crisis on lower-income households to last longer. If further rounds of cash transfers are needed, it will be worthwhile to consider channeling these to the beneficiaries of the BSH program instead of the wider group of beneficiaries that the BPN program covers.

This would ensure that a higher share of transfers goes to the bottom 40 percent – the group in the most urgent need of support.

According to World Bank estimates, the previous Bantuan Rakyat 1 Malaysia (BR1M) program – which had similar eligibility criteria to the BSH program – reached around 85 percent of bottom 40 percent households in 2016.

Transmitting further rounds of cash transfers to BSH recipients would also better complement other measures in the support packages that use EPF and SOCSO and thus already offer some income protection to middle-income households.

Third, more can be done to increase the coverage of BSH and BPN among lower-income households.

Getting the word out is important. An effective communications campaign will use conventional forms of broadcast media and newspapers and can be boosted by coverage over digital platforms, such as social media and mobile payment applications.

Good deployment of media isn’t enough. Communications in concert with those on the ground – state and local governments, religious groups, charity and civil society organisations – will also be important to ensure those who are not digitally literate will be aware of the assistance available.

Communications will also need to focus with more precision on specific groups and areas with relatively low coverage rates, thus contributing to cost-efficient implementation.

Communications efforts need to be paired with a simplified delivery process. It’s important to make the BSH and BPN intake process less burdensome, and to facilitate registration of those without internet access, especially for rural communities and villages located off the grid.

Also, given the high risk of contagion from the virus, it’s imperative to assure that the delivery of income support measures doesn’t increase this risk for recipients. In the spirit of social distancing, all payments should be electronic wherever feasible.

The Covid-19 crisis is a shared global challenge, and Malaysia is not alone in this battle. The encouraging thing is that the country’s social protection gears are engaged. But as policymakers find their footing in fighting the fire, the new normal presents an opportunity for the country to bolster the system and emerge stronger, more resilient and better protected.

Achim Schmillen is a Senior Economist with the World Bank’s Social Protection and Jobs Global Practice

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