On March 27, Malaysian Prime Minister Tan Sri Muhyiddin Yassin announced a RM250bil economic stimulus package to cushion the economic fallout from the Covid-19 outbreak. This staggering boost is more than 10 times the RM20bil allocated in the first package announced by previous PM Tun Dr Mahathir Mohamad in February.
The wide-ranging measures in this new package include direct cash payouts to affected citizens, discounted rates for basic necessities, loan payment moratoriums, financial guarantees, and additional allocations for critical sectors like healthcare. The agony of the general public has been answered. Hats off to you, Prime Minister Sir, you have taken care of the people!
But how about the very backbone of the Malaysian economy, the SMEs (small and medium enterprises)? SMEs are in a world of pain right now, with many forced to close their doors and others struggling to keep afloat in the face of the Covid-19 outbreak and the imposition of the movement control order.
According to the Statistics Department, 98.5% of business establishments in Malaysia are SMEs. They contribute about 40% to the country’s GDP, hire almost two-thirds of our workforce. Basically, SMEs are “too big to fail” as we are so dependent on small businesses. If SMEs go down, many would lose their jobs.
What any stimulus package needs to do is simple: Help businesses get through this crisis so they can hit the ground running when the outbreak eases and the movement control order is lifted. This means helping businesses stay afloat without substantial liabilities and without having to lay off employees to cope with near term challenges.
The government can take both a targeted and broad-based approach. Here are six suggestions how to support businesses, including charities, during this period.
> Subsidise working capital: Cash flow is almost always the No.1 concern for SME owners in normal times, and right now a cash injection is the only thing that will keep many SMEs alive. Subsidise 50% of fixed costs that include wages, rent and utilities for SMEs with an annual turnover of less than RM500,000.
> Offer industry-specific support to severely affected industries: Additional support is necessary for sectors that are particularly severely affected, such as aviation, tourism, land transport, food and beverage, and arts and culture industries, to help defray business costs and protect jobs.
> Allow temporary changes to bankruptcy law: The Insolvency Act 1967 says the amount needed for one to be declared a bankrupt is a minimum of RM50,000. Increase the threshold to RM80,000 before a person is declared bankrupt.
> Upskilling opportunities and wage support for retrenched workers: Provide information, advice and skills assessment to assist retrenched workers. The the Human Resources Development Fund could play a major role in upskilling retrenched workers with future skills so that the workforce will be ready once the situation improves. Meanwhile, offer retrenched workers temporary financial assistance up to six months based on a scaled amount under the Employment Insurance System by Socso (Social Security Organisation).
> Offer business grants so industries can diversify, access new markets and digitalise their business: In 2003, SARS (severe acute respiratory syndrome) was a defining moment for two online retail leaders, Alibaba and JD.com, as the epidemic helped boost e-commerce in China. Could Covid-19 be a similar game changer for Malaysian businesses? Like it or not, this pandemic is changing the way we live and work. The vast majority of companies will consider digitalisation to future-proof themselves. Hence, grants for infrastructure migration, e-commerce set ups and overseas market access would be much welcomed.
> An SME advice and support service: Offer business management advice, mentoring and access to online resources. Let us not overlook the fact that the current situation is extremely stressful and can have a significant impact on the mental health of business owners – support is important to help them weather the uncertainty.
This is a very unusual world that we are living in now. The government will have to respond to changing situations in unconventional ways and with speed to support the business community from the worst economic impacts of the Covid-19 outbreak.
Managing director, TinkTank
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