Mixed responses from SMEs on the budget


SME Association of Malaysia president Datuk Michael Kang believes the focus on helping SMEs to survive this pandemic and transform is not there.

PETALING JAYA: With 2020 taking on a decidedly disappointing turn for businesses, small and medium enterprises (SMEs) were counting on Budget 2021 for more support to survive the current challenging economy and be positioned for recovery.

But for many, the budget seems to fall short of expectations.

SME Association of Malaysia president Datuk Michael Kang believes the focus on helping SMEs to survive this pandemic and transform is not there.

“These measures will help a little but this is not what we were expecting. We want a targeted fund or efforts to help SMEs survive and grow. I don’t think this will have a big impact on SMEs.

“We are looking at 2021 as the year of recovery and transformation. But if SMEs can’t survive 2020, they can’t recover or transform, ” said Kang.

Prior to the tabling of the budget, there were long wish lists from the industry to boost businesses, particularly for small firms. Popular measures hoped for included additional financing, tax deductions, reliefs, assistance in digitalisation and reduction in cost of doing business.

Many of them were not met.

Cash flow and sales recovery continue to bog down SMEs with tighter restrictions implemented to curb the pandemic.

And while the wage subsidy programme was extended, it is more targeted this time.

The government will extend the implementation of the Wage Subsidy Programme for another three months, specifically for the tourism sector, which includes the retail sector, at a rate of RM600 per month for workers earning RM4,000 and below. In addition, the limit of 200 employees per application will be increased to 500 employees.

A total of RM1.5bil will be allocated for this purpose and it is expected to help about 70,000 employers and 900,000 employees.

Although tax deductions for companies are lacking in the budget, EY partner and private tax and financial services leader Bernard Yap notes that this is of little significance.

“For 2020 and 2021, I don’t think companies are looking at profits. We are talking about sustaining the business. So, reducing the corporate tax would only benefit those that are making profits. The measures are now targeted at the survival of businesses.

“In the past, we talked about reducing the corporate tax to encourage more companies to look at Malaysia as their base of operation. But this is not the focus now.

“So I think it is right that the government is not looking at corporate taxes at the moment and are more focused on using grants to neutralise the impact of the pandemic on targeted sectors, ” he said.

One of the things that stakeholders are satisfied with in Budget 2021 is the ongoing focus on automation and digitalisation. The government is looking at long-term productivity through the use of new technology to accelerate the transformation towards a high-income economy.

Through Bank Pembangunan Malaysia Bhd (BPMB), the government has provided the Industrial Digitalisation Transformation Scheme valued at RM1bil, which is aimed at boosting digitalisation activities. The availability of these funds will be extended until Dec 31,2023.

Additional funds amounting to RM150mil will also be provided under the SME Digitalisation Grant Scheme and the Automation Grant. The eligibility conditions for these grants have also been relaxed for micro SMEs and start-ups that have been operating for at least six months.

Yap said these initiatives would help SMEs improve automation and increase efficiency and in the longer run, reduce their reliance on foreign workers, which is an ongoing challenge for local businesses.

He added that another highlight of Budget 2021 is the focus on upskilling and reskilling of workers which will help equip SMEs with the skills necessary to adapt to digitalisation.

For the year 2021, a total of RM1bil will be allocated for upskilling and reskilling programmes that will benefit 200,000 trainees.

“There is also focus on connecting SMEs, especially the micro, to consumers and other stakeholders in the supply chain. This is through campaigns like Shop Malaysia Online.

“Hopefully, this will bring a positive impact on local businesses where there will be stronger connection among local SMEs in Malaysia and raise awareness on their products and services.

“So in the longer run, this could reduce our reliance on imports as local businesses will be more aware of similar products that they could source locally instead of importing them, ” he said.

Yap believes the government has done a fair job of balancing funds allocated to SMEs and their limited resources.

Kang, on the other hand, said the government could do more.

“What we want is something that can really help the SMEs transform and help build the economy. SMEs play a vital role in the economy, so there is a need to really develop them to see a real impact on the economy.

“But there is not much impetus to encourage domestic investment for local businesses to invest, especially in high tech. We need to build SME capacity so that we don’t always rely on government-linked companies or foreign direct investments only, ” said Kang.

Meanwhile, the Federation of Malaysian Manufacturers (FMM) said incentives for Industry 4.0 adoption needed to be focused and more government resources should be allocated to promote and encourage Industry 4.0 and digitalisation in Malaysia.

“SMEs in particular continue to need assistance to close their automation gaps, review and identify the right technologies which would bring them towards the next level of industrialisation.

“It is important to upgrade SMEs’ technical capabilities and capacities concurrently to strengthen backward linkages and thereon, to help SMEs transform and grow their operations to become more competitive suppliers and world-class manufacturers.

“In this respect, the Industrial Linkage Programme managed by Mida and Vendor Development Programme under MEDAC can be the vehicles to drive this transformation more aggressively and specific allocation must be given to support these programmes, ” said FMM in a statement.

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