Posted Date: July 29, 2021

MARC has published a policy paper titled "Lockdown without being locked in", which consists of four parts: one, the alternative meaning of the Movement Control Order (MCO) 1.0; two, the projected economic costs due to MCO 3.0; three, two broad principles, namely reciprocal transaction and channel-variable, to improve the existing lockdown application; and finally, a conclusion where we argue that lockdowns incur quantitative and qualitative costs, are grossly inefficient and, if the situation persists, may even lead to full-blown financial and political crises. We believe that the proposed principles are paramount in resuming economic activities. The government should quickly recoup output losses and place the economy on a stronger recovery path.

In this paper, we define lockdown as the implementation of pandemic-containment measures that consequently constrain both market demand and supply. We assume social distancing measures as a subset of a lockdown if businesses are forced to operate below full capacity. However, if companies can operate at their pre-pandemic capacity (or higher) through technological adoption or an increased workforce despite social distancing measures being in place, social distancing measures cannot be considered as a subset of a lockdown; rather, we take it as the "new norm" of doing business.

The underlying purpose of a lockdown is to "flatten the curve", i.e. to slow down infections so that the healthcare system will not be overburdened by the rapid rise in positive COVID-19 cases. Furthermore, lockdowns will provide ample breathing space for the authorities to undertake a mass deployment of COVID-19 vaccines. A lockdown cannot stop the virus' spread, although other countries may appear to have successfully done so. However, prolonged lockdowns have failed as the number of positive COVID-19 cases keeps rising. Although a lockdown is vital to ensure that public policies are undertaken in a predictable and orderly manner, they must be communicated clearly to the public as the situation changes.

We believe that the present lockdown cannot instil the required behavioural changes in the COVID-19 era. As soon as a lockdown is lifted, members of the society will return to their original behavioural state and shun other lockdowns in the future.

We forecast that the overall national output losses due to lockdowns in 2021 will amount to RM23.2 billion, at the very least. In other words, these are the opportunity costs of not allowing the economy to reopen. As mentioned in Part One of this paper, the qualitative economic costs of a lockdown remain unclear and would require a time-based study.

Notwithstanding the lockdown costs, we believe that mobility restrictions cannot be dismantled/reversed in practice amid its wide-reaching application in the overall global pandemic response. As a democratic society, the government needs to provide ample reasoning to ensure the public is aware of the consequences of a crisis-mode public policy. The real policy challenge is to either phase it out entirely over a long period of time or improve the existing lockdown implementation. We prefer the latter, considering the emergence of newer and more contagious COVID-19 variants over time.

All in all, we assume that achieving zero positive COVID-19 case is ambitious in the foreseeable future. The government must find ways to "live with the virus" as the COVID-19 virus may not be entirely eradicated unless the world population is adequately protected.
The full report can be accessed here.

Firdaos Rosli, +603-2717 2936/ firdaos@marc.com.my.