Rising raw material costs and continuing logistical problems are hampering the recovery of local SMEs, who are also facing a worker’s shortage.
Small and Medium Enterprises Association (SAMENTA) central chairman Datuk William Ng said worker shortage is just the latest in a list of setbacks affecting small companies as they attempt to recover from the pandemic fallout from 2020.
He said small companies need to recruit foreign workers to overcome the shortage but will need government intervention in the short term as the SME sector moves towards automation.
“In the short term, we appeal for further relaxation for foreign workers, including allowing a change of employer or sector for those who are already here, and this should be a short-term measure.
“In the middle to long term, SMEs must automate even further and be fully digitalised to cut down on our reliance on workers and to improve productivity. Margins will continue to be compressed given the rising costs of raw materials and logistics, so the only way forward is to build scale and improve productivity,” he told The Malaysian Reserve recently.
EMIR Research head of social, law and human rights Jason Loh Seong Wei said inflation has impacted SMEs by raising the cost of raw and semi-processed materials.
Loh said overall inflation is expected to be stable this year, while core inflation is expected to come down in the first two quarters of the year.
“This is given the easing of supply bottlenecks and phasing off of supply-side shocks due to extreme weather patterns and climate change such as heavy flooding.
“Headline or Consumer Price Index inflation should moderate given the combination of price controls and subsidy, as well as continuous monitoring or surveillance and enforcement,” Loh said.
He said the current global inflation trend has nothing to do with some mythical “loose monetary policy”, but because people have lost jobs, had their income halved or suffered financial woes due to lockdowns.
“Covid-19 and heavy flooding haven’t destroyed our productive capacity, but they have caused supply-side and demand-side shocks. So, the productive potential is still there, but deficit spending by the government can revive overall spending in the economy,” he said.
Loh called on the government to continue with price controls as precondition, accompanied by subsidies and other forms of fiscal measures.
The government could use its bulk purchasing capacity either directly or indirectly and remove price caps to avoid supply-chain bottlenecks.
He said this includes the 30% cap of total logistic costs for export, to a maximum of RM15,000 per shipment under the temporary relief measures. “What the government can do to cushion excessively high shipping costs is to form a consortium to import on a bulk basis to reduce costs.
“Forming a special purpose vehicle to import certain categories of goods whereby the government bears 50% to 70% of the shipping costs which will be ‘compensated’ on a profit-sharing basis in agreement with the shippers on a long-term basis,” he said.
Last week, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) said there was a need for continued support for businesses, especially SMEs during the recovery phase to ensure they can get back firmly on their feet. ACCCIM president Datuk Low Kian Chuan said amid the continued vigilance against the threat of Omicron, there remain outstanding economic and business issues that require close attention by the policy makers to facilitate recovery.
“There are six economic and business issues including shortage of workers, rising cost pressures and inflation expectations, boosting domestic direct investment, credit facilities, deepening China-Malaysia’s economic and trade ties, and flood prevention, protection and mitigation.
“ACCCIM would certainly continue to work closely with the government and agencies in providing feedback on the ground in ensuring the implementation of public policies achieve better outcomes,” Low said.