JUST when businesses thought 2020 was done and dusted, the resurgence in Covid-19 cases and the reimposition of stricter movement controls may have brought about a sense of deja vu.
Many had entered the year with optimism and were pinning their hopes on a great recovery in 2021 following the disruption to the economy last year.
While economists remain somewhat optimistic about the country’s gross domestic product (GDP) growth this year, there is no denying that the second round of movement control order (MCO) will have a significant impact on small businesses, especially with many expecting it to be extended beyond the initial two weeks.
Note that the six states – Penang, Selangor, the Federal Territories, Malacca, Johor and Sabah – under the MCO contribute 66.3% of the total national GDP output and the movement restrictions would result in some loss in output and demand.
The latest development has certainly thrown a spanner in many companies’ recovery efforts.
As it stands, businesses are still reeling from the impact of the first lockdown and the ongoing Covid-19 pandemic.
Most have yet to rebuild their business back to pre-Covid-19 levels and consumers remain cautious about their spending.
Many had feared that another round of restrictions would cause a deeper dent on SMEs as most would have already exhausted their reserves and whatever government assistance they could get.
While business saw a slight uptick last July-August when restrictions were eased, sales dropped again towards the end of 2020 when the conditional MCO was reintroduced. Domestic travels were reduced, parents did not rush to stock up on school supplies and Christmas was a subdued affair.
And from the looks of it, the Chinese New Year festive period will be another missed opportunity for sales.
So businesses couldn’t really recover, says Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) SMEs committee chairman Koong Lin Loong.
“We did a survey and found that SMEs can’t survive more than four months with no cash flow. Generally, they can only do three months. Those that can survive six months and above are rare.
“But the SMEs managed to survive 2020 because of all the aids, like the wage subsidy programme and loan moratorium. The loan moratorium also helped individuals so they could spend, ” explains Koong.
However, he adds that many would not have made it if they were not supported by these aids.
“People thought the cash flow would come back at the end of last year, but it did not. And now, a lot of businesses have already used up all the government initiatives to pay rent and salaries, took out loans, deferred certain payments and all that.
“So obviously, this MCO 2.0 will have an effect on them, compounded by the effects already felt last year, ” he says.
Fortunately, though, it is not a full lockdown this time around. The economy is still running and the Prime Minister has given assurances that Malaysia remains open for business.
Those in the essential economic sectors – manufacturing, construction, services, trade and distribution and plantations and commodities – are allowed to operate as well as those related to their supply chains.
As such, SMEs can still generate some income, albeit at a smaller capacity to sustain themselves for the time being.
Some may also opt to stop their operations for the next few months to stop any further bleeding.
One of the silver linings in MCO 2.0 is that businesses are better prepared for such restrictive measures. Most would have been familiar with the new standard operating procedures and have purchased necessary tools to monitor employee health and for sanitation.
Additionally, many have put in place certain systems to sell their products and services online and to enable work-from-home. This would ensure less disruption to their operations compared to March last year.
Also, many SMEs have found new opportunities over the course of the pandemic. Some have diversified their products and services to serve new customers while others have found new markets for their products and services.
In the longer run, this would open up new revenue streams for them and add value to local companies.
The current landscape also forces small businesses to innovate and look into incorporating more digital technologies into their operations. If done right, it would put them on a better footing in preparation for a more open market.
No doubt, there are also many SMEs that are hanging by a thread, particularly those in the tourism, hospitality and retail sectors as well as micro-SMEs.
Last November, the Entrepreneurship Development and Cooperatives Ministry said a total of 50,269 SMEs had folded since March 2020 based on statistics by the Companies Commission of Malaysia. SME Association of Malaysia president Datuk Michael Kang pegs the figure closer to 100,000.
Kang hopes the government can quickly come up with a solution to help SMEs pay for their rent, salaries and bank loans.
The Federation of Malaysian Manufacturers has similarly urged the government to continue with relief assistance, particularly for those not allowed to operate, in the form of the wage subsidy, targeted loan moratorium and consideration to exempt, reduce or delay some of the statutory payments.
But Koong points out that many of the relief measures under the previous stimulus packages are still ongoing.
“The problem is in the execution. For example, a lot of SMEs still haven’t gotten their wage subsidy even though it has already been approved. So there is a mismatch in terms of the timing for these assistance. Cash flow cannot wait. So the existing assistance needs to be timely.
“There are also measures under Budget 2021 to help businesses. But they have to be quickly implemented to ensure that this assistance is also timely, ” he says.
He adds that the government should take a closer look at affected sectors, like tourism and those with supply chain disruption, to render a more effective aid rather than provide blanket assistance.
“You need to give the right assistance to targeted people. Most businesses are more prepared for this round of MCO, so they know what they need to do to survive. So there must be targeted help and that means helping those that really need it to go over this period, ” says Koong.
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