KUALA LUMPUR, May 13 — The rise of digital economy has reshaped the way business is done with consumer behaviour evolving with more options becoming available, amidst unstoppable competition among businesses as barriers to entry are greatly reduced during Covid-19.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said evidently that would leave businesses with limited choices but to continuously review their business strategies.
“With or without Covid-19, the business landscape has been constantly challenging.
“The Covid-19 pandemic could be seen as a catalyst for businesses, big or small, to relook their playbook. Perhaps, Covid-19 is a blessing in disguise,” he told Bernama today.
“Little did we know that the Covid-19 spread will blow into such a grand scale,” he added.
It all started in Wuhan City, Hubei, China in late December 2019, Back then, all the people could think of was the disruption to the industrial supply chain. The perception was somewhat naive although it was not totally unfounded as China is the largest economy in the world now, said Mohd Afzanizam.
China is the largest by the International Monetary Fund standard with its gross domestic product (GDP) on purchasing power parity standing at US$27.3 trillion in 2019, surpassing the United States (US) at US$21.4 trillion.
“The recent contraction in China’s first-quarter GDP was also unheard of, with economic activities declining by a massive 6.8 per cent.
“The US economy also recorded 4.8 per cent contraction in the first three months of 2020,” he said.
Mohd Afzanizam said being an open economy, Malaysia’s GDP print would likely disappoint.
Despite that, he said, the government across the globe had responded accordingly with measures mostly centered to alleviate the financial burden among the small businesses and households.
Central banks too have revisited their quantitative easing toolkit to ensure the financial system is appropriately and sufficiently lubricated.
“In that regard, the Malaysian government has done their part, as indeed, the health crisis presents a great challenge to all. The choices are never easy and decisions have to be made as time is of the essence,” he said.
He noted that the movement control order (MCO) would likely result in higher unemployment among Malaysians.
The unemployment rate has gone up to 3.9 per cent in March this year, the highest since 2009 when the country was plagued with the US’ subprime crisis back in 2008 and 2009.
“Other jurisdictions have also demonstrated significant jump in the jobless rate, the most recent one was in the US when its unemployment rate shot up to 14.7 per cent as of April, which is an all-time high since 2010.
“The trade-off between health and economy is similar between life or death situation. One casualty is too many,” said Mohd Afzanizam.
Notwithstanding the situation, he said there could also be some silver lining coming out from this catastrophe.
A survey done by the Department of Statistics Malaysia (DOSM) on working conditions during the MCO recently showed that 42.6 per cent of the total respondents work from home (WFH).
“What was once deemed as the unthinkable has happened.
“Who would have thought WFH can be embraced in a matter of days? This goes to show businesses are adapting to their environment almost immediately and thanks to the state of technology, meetings can be done online and important decisions can be reached,” he said.
Meanwhile, the proliferation of webinars have been rapidly accepted for training and seminars.
However, to a large degree, business is as usual for some quarters, he noted.
“This is a very forthcoming trend emerging from the pandemic as it seems that there is a paradigm shift among the employers and employees to ensure productivity can never be compromised, while at the same time keeping everyone safe from harm is the number one priority,” he said when posing a scenario of Malaysians’ WFH becoming the accepted norms going forward.
In another development, he said the amount of carbon emission can be significantly reduced as employees do not have to travel to work, at least as frequently as before.
The strain on public transport demand can be removed, therefore, the public sector spending can be rechannelled for other purposes.
“Workers with young children or those who need to take care of their elderly parents will not feel stressful as they can perform both tasks more conveniently,” he said.
On the the other hand, businesses can save on office rental, utilities and office equipment, and this will lead to better cost management which could enhance their profit margins and pricing power.
Meanwhile, employees would have more time to do their morning run and this can help improve health.
“Therefore, expenditure on healthcare especially for non-communicable diseases such as cardiovascular, diabetic and hypertension can be kept to a minimum,” he said.
However, some prerequisites need to be observed. Investment in digitalisation will have to double as companies would need to ensure their security and confidentiality will not be breached.
“There must be a systematic way to gauge the productivity of a worker. Otherwise, the per unit cost produced will be rising and this can defeat the whole purpose of WFH,” he emphasised.
Above all, Mohd Afzanizam said it is the trust between the supervisors and the employees which are deemed pivotal.
“Therefore, it is important to have suitable standard operating procedures so that everyone will be on the same page,” he added.
Mohd Afzanizam’s views can also be read here. — Bernama