PETALING JAYA: While the additional stimulus for small and medium enterprises (SMEs) is a welcomed relief, response from the industry has been somewhat tepid as these additional measures will likely only be sufficient to help soothe the pain until the end of the movement control order (MCO) in mid-April.
If the MCO is extended, the supplemental stimulus will not be enough to keep businesses going and the likelihood of them shuttering their operations will still be on the cards as they brace for a recession.
In an announcement yesterday, the Prime Minister presented an additional stimulus of RM10bil to ease the financial burdens of the SMEs following calls from the industry to provide greater support for the business community.
SME Association of Malaysia president Datuk Michael Kang took the stimulus positively but noted that there were other issues not addressed in yesterday’s announcement.
“We welcome these measures. But the measures are not really enough. They should allow SMEs to do business to get their income and cashflow during this MCO period. But if the MCO is extended, these measures are definitely not enough, ” he said.
For now, though, Kang is just grateful that the industry, at the very least, “got something”.
“This shows that the government is understanding and they are trying to help so that the SMEs can survive and can retain as many jobs as possible.
“It didn’t fully meet our expectations. But of course, we proposed a lot of things, ” he added.
One of the important issues which was not addressed in the stimulus is statutory payments, which many employers have said are among the main burdens on their monthly cashflow. Many business associations had asked for a waiver on EPF contributions – or a deferment till year end – and a deferment of monthly tax deductions to the end of the year.
“We hope this will be addressed later, ” said Kang.
He also pointed out that there is a lack of impetus to stimulate the economy, moving forward, and this would continue to affect market demand post-MCO, making it even more difficult for businesses to get back on their feet.
The new package saw an increase in allocation for the wage subsidy programme to RM13.8bil from RM5.9bil previously, with changes made to the payout amount based on the number of workers in a company.
For companies with more than 200 employees, a subsidy of RM600 per employee is maintained and the maximum number of workers eligible for subsidies will be increased from 100 to 200 workers.
For companies with 76 to 200 employees, the company will receive a subsidy of RM800 per employee while companies with up to 75 employees will receive a subsidy of RM1,200 per employee.
The expanded initiative is expected to benefit 4.8 million workers.
Special grants have also been doled out to micro businesses, which make up the largest portion of SMEs and are the hardest hit.
The government has also incentivised owners of private premises to reduce rental rates for the duration of the MCO plus, three months after, with tax deductions. While this will help businesses in the services industry, particularly those in food and beverage, retail and accommodation – which make up about 63.9% of the services-based SMEs – it remains to be seen if landlords will indeed take the bait.
Meanwhile, AmBank Group chief economist Anthony Dass said the additional stimulus measures supporting the SMEs is positive, given that many are experiencing tight cashflow due to no or minimal sales revenue.
“However, the tight cashflow is not just because of the MCO. Businesses were also affected by the poor implementation and policy inconsistencies in the past. Besides, they were affected by the trade war and other domestic challenges.
“Even if the MCO is lifted by mid-April or end April, demand is expected to be weak for some time due to travel aversion and social distancing.
“The drop in consumer and corporate spending will intensify the adverse chain reaction that will fuel the collapse of micro businesses, especially the younger and smaller businesses, due to their highly vulnerable situation, ” he said.
Not every small business is equipped to survive this downturn, said Dass. And because small businesses contribute disproportionately to job loss during recessions, policy responses are necessary.
“Many SMEs have been forced to close their doors and some may not reopen. Apart from revenue loss, they will be impacted by poor credit standings, ” he added.
The additional measures will more likely help reduce bankruptcies and bad loans but job losses will remain a major concern.
Apart from rolling out effective measures to help SMEs, another crucial point that policymakers will have to take note of is fast and smooth delivery of these measures. With most companies’ cashflow lasting only for two months or so, they cannot afford to weave through a mountain of red tape for a meagre sum.
A few companies that have tried to apply for aid under the Special Relief Facility announced last month said that not all banks are offering the loan and many of those that were, imposed a lot of conditions such as they have to be existing customers to qualify. Additionally, most bankers are unsure about how to handle the applications.
“The procedures and documents are proving to be quite a challenge, ” said one food manufacturer.
These loans will also take time to be approved and are further subjected to the approval of Bank Negara and Credit Guarantee Corp Malaysia.
The Prime Minister has assured that the initiatives under the stimulus package will be monitored and implemented quickly and efficiently under a new implementation unit set up in the Finance Ministry. The unit will report directly to the Finance Minister and the Prime Minister.
https://www.thestar.com.my/business/business-news/2020/04/07/stimulus-package-a-welcome-relief
