[COLUMNIST] Malaysia's care economy: An urgent investment for a sustainable future

Malaysia's demographic shifts—marked by an aging population and a surge in dual-income households—have intensified the demand for quality childcare services. Yet, our existing ecosystem remains fragmented and insufficient. Many parents grapple with limited access to affordable, reliable childcare, often relying on informal arrangements that lack regulatory oversight.

Current government policies offer some relief but are insufficient to meet the burgeoning needs. Employers who establish on-site childcare facilities can claim double tax deductions on operating expenses, and employees receive tax exemptions on childcare allowances. Parents can also claim a tax relief of up to RM2,000 per year for childcare fees for children under six years old. However, these measures barely scratch the surface. The average annual cost of full-time childcare can far exceed RM5,000 per child, rendering the tax relief inadequate.

The underdevelopment of the care economy has significant economic repercussions. Women's labour force participation in Malaysia stands at approximately 55%, lagging behind the global average of 62% and far below male participation rates of around 80%, according to the Department of Statistics Malaysia. This gap represents not just a social inequity but a substantial loss in economic productivity.

A report by the United Nations Development Programme (UNDP) titled "Enabling Investments in the Malaysian Care Economy" highlights that increasing investment in this sector could add up to RM52 billion to the economy by 2030. The report underscores that every RM 1 invested in care services can yield a return of up to RM7 through increased employment and productivity.

Investing in the care economy is investing in our nation's future. It's a catalyst for economic growth and a cornerstone for building a more inclusive society.

Countries that have prioritized the care economy offer valuable lessons. Sweden, for instance, boasts a female labour force participation rate exceeding 60%, thanks in part to comprehensive childcare policies. The Swedish government provides heavily subsidized childcare services, capping fees at a percentage of household income and ensuring that no family pays more than a fixed maximum amount. This approach not only alleviates financial burdens on families but also promotes gender equality in the workforce.

South Korea offers another instructive example. Faced with low birth rates and a shrinking workforce, the government implemented policies that provide substantial childcare subsidies and mandated that large companies establish workplace childcare centres. These initiatives have led to increased female employment and have begun to address demographic challenges.

As former UN Secretary-General Ban Ki-moon remarked, "Investing in women's employment and childcare services is not just the right thing to do; it's the smart thing to do for economic development."

In Malaysia, innovative solutions are beginning to bridge the gaps. Platforms offering on-demand childcare services have enabled parents to find reliable care while providing employment opportunities for caregivers. Notably, at Kiddocare we have paid out over RM15 million in income to carers, empowering thousands of women to join or re-enter the workforce. Notably, 20% of these carers are the primary breadwinners for their families, illustrating the profound social impact of investing in care services.

However, to harness the full potential of the care economy, we must implement bold and comprehensive policies.

1. Increase Financial Support for Families: Raise the childcare tax relief from RM2,000 to RM5,000 per child annually to better reflect the actual costs families incur. Crucially, extend this relief to encompass all forms of childcare solutions—including innovative platforms like Kiddocare and other non-traditional providers—not just traditional taska (childcare centers). This expansion acknowledges the evolving needs of working families and the diverse childcare options they rely on. Additionally, introduce direct subsidies or childcare vouchers for low- and middle-income families to improve access to quality services. These changes would alleviate the financial strain on families and enable more parents to remain in the workforce, thereby boosting economic productivity.

2. Enhance Incentives for Employers: Offer higher tax deductions or grants to companies that establish on-site childcare facilities or partner with certified care providers. Mandate that corporations above a certain size provide childcare support as part of their corporate responsibility. These measures would encourage more workplaces to support employees with families, boosting productivity and retention.

3. Invest in Caregiver Training and Professionalization: Allocate funds to develop standardized training programs and certifications for caregivers. This will elevate the profession, improve service quality, and attract more talent to the sector. A well-trained workforce ensures that our children receive the best care possible.

4. Support Innovative Care Solutions: Encourage public-private partnerships that leverage technology to expand access to care services, especially in underserved areas. Providing seed funding or grants to start-ups in this space can accelerate innovation, benefiting both providers and recipients of care.

5. Strengthen Regulatory Frameworks: Update and streamline regulations to ensure safety and quality without stifling innovation. A clear, supportive regulatory environment can encourage investment and growth in the sector, ensuring that care services are both accessible and reliable.

Failing to invest in the care economy risks perpetuating gender disparities, limiting economic growth, and straining social welfare systems. The UNDP report warns that without significant policy shifts, Malaysia may face increased unemployment and a less competitive workforce on the global stage.

Moreover, the recent global health crisis has exposed vulnerabilities in care infrastructures worldwide. We have the opportunity to fortify our care economy, enhancing resilience against future shocks and promoting long-term sustainable development.

The upcoming budget is more than a financial plan; it is a statement of priorities and a vision for Malaysia's future. By significantly investing in the care economy, the government can stimulate economic growth, promote gender equality, and improve the quality of life for countless families.

The evidence is clear, the models are available, and the benefits are manifold. It is time for Malaysia to act decisively, embracing the care economy as a cornerstone of national development. The returns on such investments are not just economic; they are social dividends that will be reaped for generations to come. The moment to act is now, and the path forward is clear. The cost of inaction is too high. We cannot afford to overlook the care economy if we aim to build a prosperous and equitable Malaysia.

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* Rahman Hussin interests is in public affairs, politics and stakeholder managements. He runs his own firm that serves a wide range of clients focusing on strategy and government affairs. He is also advising Kiddocare on regulatory, public affairs and growth strategy.