THE threat of the third wave has intensified as fresh restrictions are enforced to curb the rising number of Covid-19 cases in the country. With business barely picking up from the first round of the movement control order (MCO), there is a need for sustained support for SMEs to ensure that they make it out of the pandemic still standing.
Already, Sunway University professor of economics Yeah Kim Leng sees increased risk of job losses and business closures, particularly among SMEs that have yet to emerge from the slums of the second wave of the pandemic.
Certain segments of the economy may be impacted more than others, but what is clear is that many businesses are struggling and require assistance now more than ever.
“The recovery momentum has been dented by the third wave. At this juncture, I think we will likely see this year’s gross domestic product (GDP) coming in at the lower end of the forecast range of -4% to -7%. The ability to manage the virus is a key factor to how the economy performs for 2020 as well as the recovery in 2021, ” says Yeah.
Notably, all eyes are on the upcoming Budget 2021 to see if there are further incentives and aids that will prop up businesses. To say the least, wish lists are aplenty this year given the extraordinary circumstances.
Yeah says the budget should focus on three main things – ensuring adequate resources for the healthcare sector, mitigating the impact of the slowdown on businesses and supporting consumer consumption.
“We must make sure that there is enough resources for the health frontliners until a vaccine is found and prepare for the rollout of the vaccine when it arrives.
“The government also needs to ensure that the restrictions and standard operating procedures imposed are the least disruptive to businesses. Support for distressed firms must continue such as relief financing and wage subsidies. Business support is important to minimise loss of jobs and income.
“Next is to boost consumer confidence. Private consumption accounts for about 60% of GDP, so this is an important sector. We need to ensure that consumers can sustain their spending, ” he says.
The Prime Minister had earlier said that Budget 2021 would continue the momentum of economic recovery achieved through the previous four Covid-related stimulus packages which amounted to almost RM300bil.
While these packages were a welcomed relief, the industry is hopeful that the government has sought feedback on the Covid-related measures which were most appreciated by businesses in formulating future plans.
EY’s partner and Malaysia tax markets leader Farah Rosley says SMEs will need support during the recovery stage, particularly in terms of financing, tax deductions and reliefs, and in reducing the cost of doing business.
Measures under the budget should also help stimulate investments, support adoption of digitalisation, create new job opportunities and encourage consumption that will help spur the economy.
“Businesses in sectors such as tourism, services and real estate may see a slow recovery, while the manufacturing, healthcare and technology sectors are seeing a growth in performance and may be quicker to bounce back. Hence, the Budget proposals should be tailored accordingly to assist those that need the most help.
“There must also be measures to support employment and protect jobs. The creation of new jobs is also very important as the country manages the uncertainties and moves towards the recovery stage, ” she says.
Farah adds that incentives to encourage mergers and acquisitions could help businesses survive during these difficult times and set themselves up for future expansion and success once things start to improve.
In line with the digital trend, there should also be further measures to encourage SMEs to adopt technology and adapt to the digitalisation of data and processes.
Farah notes a study done by the Association of Small & Medium Enterprises (ASME) and Microsoft Singapore which found that digitalisation helps businesses increase revenue by an average of 26% and achieve an average cost savings of 22%.
“Digitalisation will allow employees to be freed from doing manual work and to channel their time and efforts into activities that help grow the business.
“Consequently, there must also be assistance for reskilling or development of new skills so that the workforce will be equipped with skills which are in line with the requirements of the business, ” she adds.
In a statement, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) similarly urges the government to extend hiring and training assistance till the end of 2021 and to provide double tax deductions for human capital investment in upskilling and reskilling of employees.
Given that small businesses remain the bedrock of the economy, ACCCIM has also emphasised the need to craft a package specifically for SMEs that would offer assistance in the areas of financial, marketing, technology, digitalisation and automation, technical advisory, product and market development as well as human capital development.
The chamber has also asked the government to continue efforts to ease cash flow, cost and credit for businesses to help them get back on their feet amid lingering uncertainty about the pace and strength of the economic recovery.
“We propose to increase the amount of funding, ease the access to loan facilities as well as enhance the terms and conditions for these schemes. Also, increase the size and amount of loan of some existing loan schemes, especially for micro-enterprises, ” says ACCCIM.
They are also seeking the extension of the wage subsidy programme for another six months, a waiver and rebate on foreign worker levy and further discounts on utilities, among other things.
While the list of requests to policymakers may expand in view of the uncertainty ahead, SMEs themselves need to remain proactive in seizing opportunities to keep their operations running. Assistance and incentives can only do so much if entrepreneurs themselves are not motivated to adapt and change.
“The crisis is an accelerated opportunity to adapt to the multiple challenges faced by businesses, whether it’s economic, technological changes or new trends, so that they can be in a better position coming out of the crisis and be prepared for future challenges, ” says Yeah.
Certainly, those who were better prepared going into this crisis, especially in terms of technology enablement, were able to take advantage of the shift in consumer behaviour. Meanwhile, companies that did not fare as well in the last few months should take the initiative to embrace the digital age before they fall too far behind to recover.
“These businesses will need to relook their business model and strategy, or maybe if they can’t adapt, look at another type of business, or they will lose their relevance in the market, ” adds Yeah.
Meanwhile, Institute for Democracy and Economic Affairs (IDEAS) Malaysia research manager Lau Zheng Zhou opines that support for small businesses may also come in the form of other parties and not just from the government.
Hence, collaborations will be key in finding mutual solutions for businesses.
“Ongoing uncertainties with the Covid-19 pandemic will continue to weigh on some SMEs’ investment appetite for growth and diversification, so the opportunity to build resilience by innovating could be missed.
“The government has made significant budgetary allocation to protect income and jobs, as well as providing skills training to support the SMEs.
“Moving forward, the private sector such as start-ups and NGOs could be empowered to help SMEs digitalise and adapt better too, in addition to it just being done through government agencies, as these private actors will have better insights on changing market needs and trends, ” says Lau.
Farah urges SMEs to be quick in embracing technology and digitalisation to ensure they can continue to operate and function during these uncertain times.
“Being flexible and versatile is key. This includes transforming the business and adopting digitalisation across business processes such as electronic point of sale systems, finance functions, Enterprise Resource Planning and automated payroll systems.
“Another very important factor for SMEs is having the right workforce for the business, so it is important to continue to invest in and reskill their workforce, ” she says.
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