WHAT TO EXPECT AFTER ANNOUNCEMENT OF PRIHATIN ECONOMIC STIMULUS PACKAGE FOR SMEs?

Published by Lavinesh @ 14/04/2020

The National Flag of Malaysia

The country has been on lockdown for about four weeks now, resulting in the inevitable economic downfall in Malaysia. SMEs primarily have taken a huge blow, as they are forced to stop operations during the Movement Control Order (MCO) period, following critical cash flow issues. The Government of Malaysia has responded by introducing the Special Stimulus Package directed towards SMEs. 

Closure of businesses during MCO

Financial and tax experts say that the uncertainty of the MCO duration adds up to the problems faced by businesses that are having no sales, having to pay wages and staff accommodation, high rental, SST, EPF, and more. A waiver of several of these statutory payments will help many businesses sustain themselves and allow them to stay afloat during these trying times. Dato' Seri Raymond Liew, Founder and President of McMillan Woods, bring to light on the fact that it has been about two years since SST replaced GST, yet many business owners are yet to receive their refunds. He appeals to the Government to carry out the refund process as soon as possible, with hopes to soften the blow of the severe cash flow issues faced by SMEs and SMPs. He fears the worst for Malaysia, as it is expected that with all these issues add up, companies will start to reduce headcount from Top-Down, leading to a massive increase in the unemployment rate in the country. 

Dato' Seri Raymond Liew said that business owners must focus on surviving for the next 6 months and should consider:

  • Cost-cutting exercise - reduce monthly operating expenses
  • Keeping business loses to a minimum
  • Consider letting go of non-essential staff OR 20% pay cut across the board

Man reading a notice of operation suspension due to MCO

Economic, trade and regional integration analyst, Calvin Cheng of the Institute of Strategic and International Studies (ISIS) insists that the Government provides a more substantial grant for SMEs instead of loans. The Special Prihatin Grant of RM3,000 for micro SMEs with less than five employees is a meager amount and is barely enough to cover the losses. Loans on top of the current financial situation in Malaysia would only add to the burdens faced by SMEs. Datuk Michael Kang, National President of SME Association of Malaysia, added by saying, "If the bank loan process drags on for a few more weeks, I think by April or May, no matter what the Government can give, like wage subsidy for them to continue their business, they'd rather shut down and lay off their employees," 

Food courts are left empty, Micro SMEs are facing huge loses

The International Chamber of Commerce (ICC), claims that "The imperative to Save Our SMEs cannot be understated; this agenda is of paramount importance to safeguard the current and future functioning of the global economy and the livelihoods of billions of workers throughout the world," and suggested several measures to be considered by the Government. Among them are - 

  • providing direct and immediate support to workers
  • ongoing social protection schemes and funding of government-led social programs should be extended to secure economic recovery
  • ensure open trade and the expedited flow of essential goods across borders
  • formal and informal channels for dialogue between Government, employers, and workers

SMEs struggling to stay afloat

Numerous NGOs and associations in Malaysia have played a crucial role in encouraging and communicating with the Government to establish stimulus packages for SMEs. The Government of Malaysia, led by Prime Minister YAB Tan Sri Muhyiddin bin Haji Muhammad Yassin, has done a commendable job in making improvements to the Economic Stimulus Package during this pandemic, and in co-operating with the NGOs (MRCA, SME Association, among others). These NGOs will continue to play a vital position in addressing measures of improving the economy in Malaysia to the authorities. Muhyiddin truly upholds his saying that 'No one will be left behind'.