Extra $2.2 billion aid for Malaysia SMEs, but 20 percent face demise, said association

08, Apr. 2020

Petaling Jaya
Petaling Jaya

By Charlotte Chong

KUALA LUMPUR, NNA - A special stimulus package worth more than $2.2 billion will help small and medium-sized enterprises (SMEs), the key driver of the Malaysian economy, cushion the impact of the economic fallout from the coronavirus pandemic and the continuing nationwide lockdown.

Announced on Monday, the latest package includes 7.9 billion ringgit ($1.8 billion) to increase wage subsidies for businesses largely hit by the two-week movement control order (MCO) enforced to contain the spread of the COVID-19 contagion since March 18. It has since been extended to April 14.

The amount would top up the 5.9 billion ringgit wage subsidy announced on March 27 to 13.8 billion ringgit. This is welcome news to many vulnerable business owners who had felt the earlier amount was sorely inadequate.

In addition, the government has also allocated 2.1 billion ringgit to give a special grant of 3,000 ringgit to registered micro-SMEs -- those with a turnover of less than 300,000 ringgit or employ fewer than five workers.

Dr Anthony Dass, chief economist of AmBank Group, said in a statement on Monday that the extra measures would "more likely help reduce bankruptcies and bad loans.”

Unveiling the additional package on Monday, Prime Minister Tan Sri Muhyiddin Yassin hoped it would "ease the financial burden of SMEs and subsequently assure two thirds of the workforce will remain employed."

It follows two stimulus packages worth a total of 250 billion ringgit announced in the last two months.

Business leaders are pleased that the government has heeded their advice for more measures to prevent business closures and to help retain staff.

The subsidy for those employing one to 75 employees has been raised from 600 ringgit to 1,200 ringgit on condition that they must retain their staff for at least six months.

SMEs with bigger staff strength will get enhanced subsidies of 600 ringgit and 800 ringgit.

Clearly, the smallest players in the market which also form the biggest SMEs segment would stand to gain the most from the additional subsidies.

Ipoh, the capital of northern state of Perak
Ipoh, the capital of northern state of Perak

Datuk Michael Kang Hua Keong, the National President of the SME Association of Malaysia, said the enhanced package would definitely help micro businesses who make up 76 percent or about 700,000 SMEs in the country.

“The main idea is to take care of the lower income group,” he added.

While the latest boost would help most SMEs tide over the crisis, the closure of more businesses seems inevitable.

Datuk Kang believes up to 20 percent of SMEs, particularly those who have zero income or problems with cash flow, still risk winding up.

“In any crisis, definitely there are SMEs which would go bust no matter what kind of assistance the government is giving,” Kang told NNA in a phone interview.

To prevent business owners from falling through the cracks, the government's 3,000 ringgit grant is expected to benefit nearly 700,000 micro businesses nationwide.

Following feedback from members, Kang is appealing to the government to remove any red tape to make it easier for business owners to obtain the grant urgently

While lauding the government for helping the micro-SMEs, Datuk Seri Garry Chua, President of Malaysia Retail Chain Association (MRCA), felt bigger companies employing more than 200 workers would need more help too.

The government is now giving them a wage subsidy of 600 ringgit a month for every retained worker up to 200 workers only, even though the cap has been increased by 100.

The amount is still "very insufficient", Chua said, adding that he foresaw "a lot of unemployment" as such companies have bigger burdens as they employ the most people.

In making another appeal, Chua reiterated that more than 80 percent of SMEs and retailers hit by the crisis employ about 70 percent or 12 million workers in Malaysia.

He called for landlords and malls to give at least two months of free rental. "Malls have bigger stamina and can withstand the blow. The smaller businesses will be affected the most,” he said.

Chua is also appealing to Tenaga Nasional Bhd (TNB), the largest utility, to give at least 50 percent discount on electricity bills during the lockdown period and 30 per cent for the subsequent month. This would encourage malls to give tenants more rebates, he said.