SMEs face plummeting demand, cashflow woes

  • Business
  • Thursday, 19 Mar 2009

PETALING JAYA: Local small and medium enterprises (SMEs) are generally disappointed with the RM60bil mini budget as it does not address the concerns of small businesses, said SMI Association of Malaysia president Chua Tiam Wee.

He said the immediate problems for SMEs in the current downturn were the sharp fall in demand and lack of cashflow to cover their fixed operational costs.

“SMEs are hoping to get more assistance and incentives to boost the local consumption of Malaysian-made products and help companies diversify into new overseas markets.

“The mini budget should focus on short-term measures that can bring immediate effect in easing the burden of both manufacturers and consumers,” he told StarBiz.

The industry feels that many of the measures in the mini budget might take a few months to show any impact.

“SMEs are already feeling the pinch of the deteriorating economy. Most of them have only limited resources and reserves to last about six months.

“Our concern is that if the Government does not take immediate action and the downturn lasts longer than expected, many SMEs would need to take drastic measures to downsize or worse, close down,” he said.

Currently, 99.2% or 548,267 of the businesses in Malaysia are SMEs, of which 90% are in small and micro-sized sectors, according to Chua.

He said SMEs employed 5.6 million or 56% of the total workforce in the country, so the closure of a mere 5% of SMEs meant over 250,000 workers would face retrenchment.

“Exports to the US, Europe and Japan had slowed drastically in the previous quarter. New orders have dropped by 50% to 60% in the last three months.

“Local consumption also fell, especially after the Chinese New Year,” he added.

Some association members in the food and beverage sector reported that demand had dropped 25% during the same period while sales of products like garments and textile have declined by 30% to 50%.

Some players said they had orders up to April only, Chua said.

Thus, the association has proposed to the Government to reduce personal income tax, service tax, stamp duty for housing loans and electricity tariffs.

It also proposed the Government gave cash vouchers to individuals whose monthly income is below RM2,500.

“This will not only help companies save to improve cashflow but also stimulate consumer spending,” Chua said.

The association hopes the Government could hold more trade fairs and provide more support in advertising and promotion of local-made products regionally.

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