Measures to spur business activity would help companies, industries

Small businesses and manufacturers welcomed measures under Budget 2021 to spur and inject life into the business community following the extension of the Penjana special tax incentives to attract foreign direct investments (FDIs) to relocate manufacturing to Malaysia from 2021 until 2022.

“The incentives should be extended to existing investors which had received approvals for expansion, diversification or new projects in 2019 as well as to domestic investments.

“These are “captive” investments which can immediately take advantage of the incentives to deliver the desired results more quickly, especially in terms of multiplier effect on their existing suppliers i.e. SMEs and realised project implementation, ” said FMM president Tan Sri Soh Thian Lai.

Soh said the government’s financial assistance programmes should be provided upfront, not on a reimbursement basis or matching basis as SMEs are already cash-strapped.

“Grants are preferred compared to tax incentives.

“There should be a transparent eligibility criteria and evaluation process including a pre-scoped list of eligible expenses.”

Soh also said FMM had called on the government to expedite implementation of the online collateral registry to include moveable assets such as machines, inventory, tangible assets and receivables.

“We hope that the JanaNiaga facility is an indication as the forerunner of this online collateral registry.”

He also said the National Supply Chain Finance Platform or JanaNiaga will help to address cash flow for SMEs supplying to the government and government-linked companies as well as help SMEs to obtain loans from financial institutions.

“We hope this means that the sales orders can be used as surety against loans.”

Regarding the historic Regional Comprehensive Economic Partnership (RCEP) Agreement, Soh said it is very timely and besides lowering trade barriers, RCEP is expected to attract foreign companies keen on entering into an integrated Asean market.“The entry of foreign investments can provide additional market opportunities to SMEs, especially if there is aggressive promotion of the Industrial Linkage Programme, including incentives to foreign investors as well as local large companies to participate as anchors to help SMEs access new and existing supply chains.”

SME Association of Malaysia president Datuk Michael Kang also said the RCEP will benefit local SMEs as they will be able to access much larger markets and also source for raw materials and services at more competitive rates.

Soh also called on the government to allow automatic double deduction incentive for research and development (R&D) expenses.

He said the government should set up a Technical & Vocational Education and Training (TVET) Apprenticeship Fund utilising foreign workers’ levy.

“Such training will help to close the skills gaps among locals, upgrade the earning capacity of the B40 group and reduce dependence on foreign workers.”

Kang praised Budget 2021 which saw an extension of a more targeted wage subsidy programme for the tourism sector, targeted loan repayment assistance for micro enterprises, additional funds for micro SME and an additional RM150mil for the SME Digitalisation Grant Scheme and the Automation Grant, among other things.

In the new budget, RM150mil has been allocated to a Shop Malaysia Online programme together with the e-commerce platform. It is expected to benefit 500,000 local sellers.

Another RM150mil will go to a training and equipment aid programme under the E-Commerce SME Campaign, which can help them transition to a digital business.

There is also a RM35mil allocation to promote Malaysian-made products and services under the Trade And Investment Mission.

Meanwhile, statistics by the Companies Commission of Malaysia (CCM) showed that 50,269 small and medium enterprises had folded

since March this year when the movement control order was first implemented to stem the Covid-19 pandemic.

Soh said this number is about 5.5% of the more than 907,000 SMEs in the country, but it is “more important to evaluate the profile of SMEs which have closed down before making a conclusion.”

Malaysia Retail Chain Association (MRCA) president Shirley Tay proposed that other measures to help SMEs can include tax incentives for local retailers – 50% reduction in sales and service tax (SST) and special rebate on corporate tax for six months, special incentives for malls that allow for rent royalty arrangement with existing tenants, and a 1% income tax reduction across all income tiers to stimulate consumer spending.

“A dedicated one-stop centre for all SMEs should be established to streamline the funding programmes across different ministries. This allows SMEs to focus on the business aspect instead of the fund application process. By simplifying the process, we believe the success rate for SMEs in obtaining financing can be further improved.”

To encourage SMEs to adopt digitalisation, Tay said the government could provide professional and technical advisory help for business transformation, create a pool of talent for the new digital workforce and reduce legal barriers.

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