Following Prime Minister Muhyiddin Yassin’s announcement of an economic stimulus package to counter the expected economic fallout from the COVID-19 pandemic, many SMEs have expressed their dissatisfaction that their plight have more or less been overlooked.
In response to that, the Prime Minister is expected to announce a slew of new assistance programmes for SMEs at 4pm Monday.
With the COVID-19 outbreak ravaging the economy, governments around the world are rushing to get stimulus packages out.
As customers stay home due to the Movement Control Order (MCO), business has ground to a halt. Cash flow, already exacerbated since the economy started cooling in 2019, has now stopped for most SMEs. Malaysia’s central bank, Bank Negara is stating that GDP growth is likely to fall between -2.0 per cent and 0.5 per cent. This represents a recession – the likes of which will hit SMEs and their employees hard.
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. Exports will stay weak, while commodity prices will be soft. Bankruptcies and bad loans are concerning factors. Job losses are also a concern, although these are expected to vary considerably according to the age and size of the business.
Hence, SMEs need good news, fast. In the economic stimulus package announced on 27 March 2020, Prime Minister Muhyiddin Yassin had already announced steps to alleviate the burden of the COVID-19 pandemic on SMEs, including wage subsidies, loosened loan eligibility requirements, delayed or rescheduled EPF contributions, as well as a RM500 million micro-credit scheme.
Nevertheless, SMEs have felt this to be inadequate. The SME Association of Malaysia president, Datuk Michael Kang said that SMEs were facing the burden of having to pay full salaries to workers, as well as rental but did not have the means to do so. “Why would SMEs take loans to pay salaries and rental when they don’t have any income to sustain their businesses?” he said.
Similarly, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) in an open letter to the government said, “The financial assistance package must be further enhanced to provide the much-needed relief to businesses struggling to survive as many are facing severe cash flows, no or sharp dip in revenue, and high overhead expenses.”
Earlier this week, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the government has spent the week engaging with micro businesses and SMEs to deliberate a special stimulus package for SMEs. The package, worth RM10 billion, will be announced at 4pm by the Prime Minister.
A wish list for SMEs include:
- A increase in wage subsidies across the board
- Faster approval processes
- Allowing businesses more flexibility in employee management
- Waived or reduced income tax for the year 2020
While each wish may not be fully granted by the government, SMEs are bracing themselves for a full-on recession that may last through to 2021. For this, quick, decisive action needs to be taken to ensure that the recovery is fast and sustainable. But will the measures to be announced sufficient to placate the SMEs and keep our economy from tanking?