By Dato' Seri Amirudin Shari

More than 40 days into the Movement Control Order (MCO), Malaysia is finally emerging from the dark tunnel of the coronavirus pandemic. Infection rates have dropped to more manageable levels, prompting the return to work for key economic sectors and re-opening of restaurants and other essential services. Our daily lives are coming out of stasis, albeit slowly and very carefully.

Looking beyond our own borders, the crisis that once seemed local to China has blossomed into a global geopolitical story affecting nearly everyone, everywhere. Any grand predictions about the future would thus be premature since the story (and global response) is still unfolding and taking more definitive shape.

But while it is hard to make predictions, positive or negative, about what comes next, the experiences of other recovering nations may be instructive for charting our way forward. Indeed, this much is already apparent – a post COVID-19 world is now actively under construction, and it will look very different from the world of today.

Life on the other side of the curve

History has shown us that large-scale pandemics tend to alter economies for decades, fundamentally transforming how businesses and consumers make decisions. When the Black Death claimed an estimated 200 million people in the 14th century for example¹, the significant loss of manpower forced populations to transition from growing crops to rearing livestock, since it depended much less on human labor. 

So far, the COVID-19 pandemic has resulted in about 200,000 deaths worldwide–far less lethal in contrast to the Black Death. Yet experts anticipate the socioeconomic impact of the modern pandemic to be unprecedented. As countries implement necessary quarantines and social distancing measures to contain the pandemic, the magnitude and speed of collapse in economic activity is unlike anything we have experienced in our lifetimes.

The International Monetary Fund (IMF) projects global growth in 2020 to fall to -3 percent, under the assumption that the pandemic and required containment peaks in Q2 for most countries and recedes in the second half of this year². This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis of 2007-2008.

If we look at the scenario in China, the path after lockdown is riddled with challenges even for this economic giant of the East. Despite reopening its economy after 10 weeks of restricted movement, life still happens under the shadow of the virus, with temperature checks, app monitoring, and other biosecurity measures in place. Movie theaters and karaoke bars remain closed (in fact, karaoke might just be a dead art in China³).

If China's experience is any indication, the time is high for Malaysians to realize that we are no longer facing a mere temporary disruption, even after the MCO is fully lifted in Malaysia. While the local economy will eventually recover from the coronavirus outbreak, the crisis would have reshaped consumer habits and business practices, in some ways permanently moving forward.

Our economic survival and recovery once the MCO is completely lifted will thus depend on the ability of Malaysians to adapt to this "new normal".

COVID-19's impact on Malaysian SMEs

Since the earliest days of our economic transformation journey, SMEs have been a major driver of employment and growth, forming almost ninety-eight percent⁴ of total business establishments in Malaysia. They are responsible for nearly 36% of the country's GDP, 65% of employment, and nearly 18% of total exports.⁵

However, SMEs are now among the hardest hit by the COVID-19 crisis as they face the tough realities of work-from-home policies, cleaning or sanitation, and other unanticipated costs that are further compressing their profit margins. A survey by the SME Association of Malaysia found that most SMEs expect no cash inflow for at least three months due to the ongoing MCO⁶.    

Given the bleak situation facing SMEs, they would not be able to survive without booster steps taken to support their business continuity plans. The federal government's PRIHATIN stimulus package, which allocates RM10 billion to ease the financial burden of SMEs, was hence a timely and critical move to help strengthen the national economy.

However, the impact from funds and financial assistance provided to SMEs by the government is only intended as a short-term solution to sustain them throughout the MCO. But to survive and maintain growth beyond this period, SMEs must embrace digitization to future proof their operations.

Digital is now a critical, not alternative need

If the COVID-19 pandemic occurred 20 years ago, there would have been no alternative to the traditional models of work, education, shopping, entertainment, or healthcare–all of which rely on physical interaction. But today, each of these activities has a digital twin, which typically exists as an "alternative" model facing off the entrenched status quo.

But with social distancing forcibly driving significant changes in key areas of our lives, going digital is now proving to be a critical need and not just an alternative to be postponed. COVID-19 has paved the way for digital transformation as businesses are forced to cope with new challenges from physical space closures, restricted movement and supply interruptions. 

Returning to China as an example, food and grocery delivery services have especially leveled up in the face of COVID-19. The high-speed rail infrastructure present in China, combined with the e-commerce infrastructure built by players like Alibaba, have quickly enabled online grocery delivery to be the fastest, cheapest, and easiest option for Chinese consumers. This new commerce habit is expected to stick for the long-term. 

But we need not venture so far as China to see how digital technologies can fulfill a critical need in the pandemic climate. We know the highly anticipated annual Ramadhan bazaars in Malaysia had to be canceled due to risk of coronavirus transmission in large gatherings. This situation led to distress for many bazaar traders, as they had already spent significant amounts of money in the form of licenses, management costs and deposits to prepare for the bazaar season.

Fortunately, many bazaar traders quickly transitioned onto social media platforms and mobile messaging services with multiple groups of "online bazaars" mushrooming across Facebook, Twitter and WhatsApp. Some of the larger neighborhood bazaars also partnered with popular brands like FashionValet and Foodpanda to provide an avenue for stall owners to operate without breaching the MCO.

The Selangor State Government also pioneered a partnership with Grab Malaysia to deploy innovative "e-Kitchens" in 10 locations throughout the state. The space shared by micro SMEs is based on the "central kitchen" model whereby customers can order their favorite Bazaar Ramadhan delicacies and have them delivered through Grab's delivery network and platform partners.

Not only can smaller players save almost 10 percent on staffing and food costs⁷, e-Kitchens also enable greater consistency in terms of food safety and quality control. Restaurant partners will prepare their meals under strict guidelines provided by the Ministry of Health, so customers can rest assured that their food is being delivered from safe and trusted sources.

The first week of Ramadan alone showed a positive outcome as some restaurant partners experienced up to 30% growth in their daily orders and majority of the local delicacies sold out before reaching 5.30pm. With Grab obtaining an average gross merchandise volume close to RM4000 a day, and news reports⁸ showing that some restaurant partners are able to earn up to RM1,000 a day, this innovative technology solution has successfully proven to be beneficial for both the digital platforms and the partners onboarded.

It is clear the rapid evolution of digital processes has sparked a new mindset that focuses on the future with an openness to try new technology. But while businesses should take this opportunity to go digital, they should also keep in mind that digitization alone is not a miracle cure for all problems. Instead, businesses should continue innovating and improving their online presence without reverting to their traditional models once the COVID-19 situation improves to remain resilient against future challenges.

Shared responsibility in building Digital Malaysia

We have seen how digital solutions can contribute in creative and unexpected ways to improve the people's well-being and help resume the functioning of society. The experience of Selangor also proves that these solutions can be harnessed for the greater good of society through strategic partnerships with the government built on the spirit of innovation. More of this will be essential for expanding the application of technologies in meeting our post-pandemic needs.

Only by better utilizing the role of digital technologies in national governance, social governance, and economic development will it be possible to cope with similar crises like COVID-19 in the future. Beyond stabilizing consumption and the economy, digital transformation will eventually lead to the growth of more sophisticated technologies in larger industries like AI, 5G, and cloud computing, to usher in a new digital era for Malaysia.

¹ The Guardian, "Pandemics that changed the course of history"

² IMF, The Great Lockdown: Worst economic downturn since the Great Depression

³ Pyments.com, "What will business look like post COVID-19? Ask China"

⁴ CompareHero.my, SME landscape of Malaysia

⁵ Building a Digital Future for Malaysia: Speeches of Prime Minister Najib Razak 2016-2017

⁶ COVID-19: Malaysia SMEs see zero cash inflow for at least three months due to MCO

⁷ Hospitality Review, A look at restaurant commissaries

⁸ Harian Metro, Sambutan luar biasa

(YAB Dato' Seri Amirudin Shari is Menteri Besar of Selangor.)