We need to impose a moratorium on rent for commercial spaces

  • Letters
  • Tuesday, 14 Jul 2020

At the end of September, Malaysia will end its moratorium on bank loans. At that point, whether a business is struggling or not, its owners need to resume making loan repayments. Now, this is all fine and dandy if businesses are making money by then, but during the movement control order (MCO) period, a huge number of businesses had zero or negligible revenue, making it tremendously difficult to pay for things like rent on commercial spaces without the threat of bankruptcy.

You can imagine the situation. During the earlier stages of the MCO period, shopping malls and businesses in shop lots were not allowed to operate. But there is no law or regulation stopping landlords from demanding rents from tenants even during such difficult times. In shopping malls, not only do businesses need to pay rent, but they also need to pay a service charge and promotional fee, chargeable per square feet. Why do these businesses have to pay the promotional fee when there is nothing to promote? What services are the shopping mall offering the businesses when the malls are closed and there is not even central air-conditioning to pay for? Why are tenants bearing the full brunt while landlords, who still enjoy tax breaks, have the right to demand full payment of rent?

As we all know, the Covid-19 pandemic has gravely impacted trade and brought the economy to a grinding halt with most businesses reopening only recently. The effect on businesses has been devastating, as revenues froze, forcing massive layoffs and threatening bankruptcy. Statistics show that the Asia-Pacific region has the highest cases of insolvency, standing at 4.2%, by virtue of its trade intensity with China and as a result of its monetary and fiscal positions.

Between 2015 and 2019, Malaysia recorded close to 81,000 cases of insolvency. This figure will undoubtedly spike once we know the final numbers at the end of the loan moratorium in September. Even before the moratorium, we could already see a plethora of bankruptcy cases, and even big companies have made headlines in this regard of late.

This is very alarming since SMEs (small and medium enterprises), which will be the worst hit, employ 66% of the country’s total workforce. If they are not protected, the majority of SMEs will collapse and the massive unemployment that ensues will create a huge problem for the Malaysian economy from which it can recover only after many years. Hence the government must at all cost keep the businesses afloat so that employment is kept intact, thereby maintaining consumer spending and avoiding a damaging recession.

For this, the International Strategy Institute (ISI) recommends that the government enact a special Covid-19 Act on rental moratorium so that businesses do not need to pay rent for space that they have not been able to use since the MCO began in March and incentivise landlords, especially in shopping malls, to ease the burden on tenants.

The natural question is, who will pay for this massive undertaking to keep businesses afloat? It is the responsibility of the government and the central bank to ensure there are enough funds to finance this bid to save the private sector from collapsing – fiscal deficits can be dealt with when the country gets back on track after the recession.

Even if Malaysia has to resort to quantitative easing, nothing is more critical than making sure the private sector does not collapse because it is the nucleus of economic activity, of employment, and the impetus that maintains consumer spending that fuels economic growth. (Quantitative easing is when a central bank buys government bonds or other financial assets to inject money into the economy to expand economic activity.)

This intricate economic relationship is worth saving at all cost. Let’s hope Malaysia does the right thing in these difficult times.


Chairman, International Strategy Institute (ISI)

Note: ISI is a not-for-profit organisation that helps connect governments and businesses across Asia.

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