Photo: A soldier and a police officer inspect road users at a roadblock to enforce the movement control order during the COVID-19 outbreak, on March 22, 2020. Abdul Razak Latif/Shutterstock

Islamic Finance

Malaysian SMEs feel neglected by government’s latest COVID-19 stimulus


KUALA LUMPUR - The Malaysian government’s stimulus package to ward off economic disaster in the face of the COVID-19 pandemic gives too much help to staff, and not enough to the small businesses that employ most of them, and the self-employed, bosses have told Salaam Gateway.

On Friday (Mar 27), prime minister Muhyiddin Yassin outlined a 230 billion Malaysian ringgit ($53 billion) “comprehensive, people-oriented” package of economic measures to shield workers who are forced to stay at home and businesses that are struggling because of the lockdown that was extended two weeks to Apr 14. The package follows the first, of 20 billion ringgit, announced on Feb 27.

The latest stimulus package offers cash handouts of about 10 billion ringgit to workers in the middle and lower income groups, as well as launching a 50 billion ringgit government guarantee scheme for the corporate sector, under the pledge that no one will be left behind”.

Of the total, 128 billion ringgit will be spent on public welfare, 100 billion ringgit will be used to support businesses and 2 billion ringgit will be used to strengthen the country's economy.

But three entrepreneurs complain that the measures do not go far enough to protect SMEs and the self-employed, particularly if a movement order that prevents most Malaysians from going outside is extended by many more weeks.

Small business owner Haidar bin Badrul hopes the government will balance its support more in favour of employers.

The founder of ATS Automobile, a performance car tuning and repair business in Selangor, stressed that workers still need help from the government, but employers also require support to stay open and continue employing them.

“Employees have been allocated funds on top of their current wages, which is very helpful for them. But it could have been done in such a way that the money subsidises a portion of their current full wage. In this way, both sides would gain the needed stability,” Haidar said.

“This is definitely an issue for most companies given the fact that they are not able to operate due to the lockdown restrictions, then they face going straight into a predicted recession after the lockdown.”

STIMULUS PACKAGE BREAKDOWN

In its assessment of the stimulus package, credit ratings agency MARC said it views the additional assistance to the public as critical as it can help cushion the drop in private consumption, what it calls Malaysias “major pillar of growth”.

MARC said it “applauds” the government’s proposal to implement the wage subsidy programme to help struggling businesses. However, it says the measures aren’t enough.

“Notwithstanding this (the wage subsidy programme), we feel that additional support for businesses would help sustain their cash flows and retain employees,” said MARC.

Among the measures for workers, in the latest package:

  • Workers are entitled to defer loan repayments to the Skills Development Fund Corporation, PTPK, for six months, giving some borrowers a monthly cash boost of hundreds of ringgit.
  • Members of the government’s Private Retirement Scheme can withdraw up to 1,500 ringgit without penalty.
  • The B40 group, which represents the bottom 40% of wage earners, with an average monthly salary of 2,848 ringgit, has been given a six-month exemption from public housing rents.
  • Electricity is being subsidised at rates ranging from 15-50%, while internet is free throughout the time Malaysians are forced to isolate at home.
  • A salary of 600 ringgit a month is being paid to all workers earning less than 4,000 ringgit monthly and whose employers have seen a 50% drop in revenue since the start of the year.

SMEs:

  • SMEs receive a six-month moratorium on some government loans
  • 5 billion ringgit worth of guarantees for SMEs that face difficulties in obtaining loans
  • 4.5 billion ringgit of additional funds coming through three facilities targeted at micro credit schemes, all-sector facilities, and a special relief facility.
  • Employers are also entitled to deferred payments, restructuring and rescheduling of employer contributions to the employees’ provident fund and a moratorium on Human Resources Development Fund payments for six months.

WORKERS’ WELFARE

Rosman Hussin, founder of Humble Chef budget pasta restaurants and central kitchen in Kuala Lumpur, says he continues to have enough delivery orders to keep his business afloat, but he has still been forced to cut staff hours.

Many of his staff are in the M40 (middle 40%) group whose household income are between 4,360 ringgit and 9,619 ringgit per month. These workers have been allocated 10 billion ringgit in one-off payments of between 500 and 800 ringgit from the government’s stimulus.

“This is additional money but it still doesn’t lower my gaji payments,” he said, referring to his payroll.

“They get extra money, which is very good. Right now they can withdraw money from the employees’ providence fund. On my side, we don’t get any allowance for our own payments.”

This, Rosman says, is “upside down”, though 250 billion is an impressive amount for the government to be spending on the crisis.

“It seems like a lot as a headline figure, but when the majority of it is to protect workers’ welfare, and a smaller amount is for SMEs and entrepreneurs, they have got it the wrong way round.”

In a country with an estimated 98.5% of businesses grouped as SMEs, two thirds of workers are employed by them. And with three-quarters of these companies on the micro-end of the scale, their sustainability is directly linked to millions of jobs.

The government’s package smacks of “outdated thinking”, according to Rosman, whereby in the past, larger companies and government-linked corporations employed the most workers.

“Maybe during our parents’ time, when it was big corporations running the country, it might work. A lot of these workers are not working for big corporations now, they are working for smaller SMEs, and how will they survive?” Rosman said.

SELF-EMPLOYED IN THE LURCH

KL-based entertainment personality Zahamin Baki Zainal says he and many other self-employed members of the creative industry will be lucky if they get any more than the 15-50% discount on utility payments the government has outlined.

“Nothing else falls onto my plate and I dont think Im the only one who is feeling like this. You have performers, actors, self-employed people who are not benefitting from this whole budget,” he said.

“I’m not complaining, though. I’m thankful that the government has come up with this for our front-line workers and small entrepreneurs, and I’m really happy for them. On the other hand, there are also many people who don’t fit into any of this stimulus either.

As he isolates himself, like much of the rest of Malaysia, Zahamin Baki has been seeing bookings as an event host and television presenter dry up. Indeed, he anticipates having spent his life savings by the time the coronavirus crisis is over.

“Everyone is living in the moment and feeling the pinch. Senior [industry figures] like myself really need to haul on, keeping ourselves relevant through social media so we are still heard out there. And when it all settles down you have to re-pick-up where you left off.”

NEED FOR FISCAL MEASURES

The entrepreneurs polled by Salaam Gateway also called for the government to take more fiscal measures to ease the pressure on their businesses.

Using the tax system to temporarily lower operating costs will be one less worry for businesses and will not require the government to borrow to implement it.

According to credit ratings agency MARC, the government should consider an extension for the deferment of income tax instalments for all SMEs until December 2020.

Deferring tax for up to a year and putting a hold on sales and services tax “would take a lot of the burden off us while we all go through this,” Rosman said.

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim [email protected])

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Richard Whitehead