By Ayub Ali
“I don’t take responsibility at all.” – Donald Trump (and politicians like him everywhere) on the coronavirus.
No one wanted this. But, we have to face the consequences and reality. Will I survive ? That is the existential question of the day.
We waited with bated breath for the government cavalry to come out charging to the rescue. It came in the form of a RM250 bil headline package. Very impressive number. Some 20% of Malaysian GDP.
Students of Keynes, however, will say it is only a RM25 bil fiscal stimulus – the direct amount the government is spending. Pick your number. Both can co-exist as true. Sorry, I have no interest in picking a bone here.
Let me comment on parts of the package and which part helps my business – and which don’t. We know businesses need a) liquidity (cash flow), b) credit (loans) or c) a very rich uncle. Let’s look at parts of the package in turn.
a) The RM100 bil directive by Bank Negara Malaysia to the financial institutions to defer all personal mortgage and other loans for six months. Absolutely brilliant. Buys us six months’ lifeline of liquidity. What happens at the end of six months? We shall cross the mythical Biforst when we arrive.
b) The one-off cash payments to B40, pensioners, allowances to front liners etc of RM10 bil. Least controversial. Brilliant. Can we plan another in the third quarter, please? We must support the most vulnerable members of our society. And, this is actual cash into the economy. Applause from Keynes.
c) Another big number is RM40 bil. Allowing members to withdraw up-to RM500 from Account B of the Employees Provident Fund. There are many detractors. I am a simple guy. Why care for retirement if I cannot put food on the table for my family today?
d) Next is the RM100 bil support package for SMEs (small and medium enterprises) which includes RM50 bil through Danajamin. This is a credit guarantee from the government. It is a big number. SMEs deserve it as they account for two-thirds of employment and one-third of GDP. It is complicated though.
e) The RM50 bil 80% government guaranteed facility administered through Danajamin. Minimum amount is RM25 mil. Most helpful for larger SMEs. Thus it helps determine business viability. It does not help smaller SMEs.
f) Wage subsidy of RM600 per month for workers earning less than RM4,000 for three months. This is the part which I was looking forward most to. And, disappointed me most. The condition is that the business must have suffered a 50% drop in revenue. We need clarity. Interpreting the numbers can be ambiguous and subject to abuse. The implementation and approval process can become cumbersome.
Why was I looking at this most? Because it will help keep millions of Malaysians employed. Perhaps lower the threshold. But make it available to all SMEs and small businesses for six months. The condition should be no retrenchment for three months.
There is a saying, “Give a man a fish and you can feed him for a day. Teach a man to fish and you feed him for a lifetime”. So help small businesses stay afloat.
Revenues are down. Margins, if any are non existent. Wages, rentals and raw material are the three main costs of business. Government assistance is needed to subsidise one part of the expense to keep Malaysians employed.
We have been told that we are fighting a war with an invisible enemy. We issue a one-off “Coronavirus War Bond” to fund this fight to keep jobs. It will break the budget deficit ceilings. What alternative do we have?
g) What puzzles me is the one off payment of RM500 for e-hailing drivers. Granted that the food delivery boys on motor bikes are at the front lines. I hope these unheralded heroes get the bulk of the money.
But, why does the taxpayer foot this bill? One of the few growth industries in this pandemic is the food delivery companies. Did you know that they take around 30% of revenue from restaurants? Just do your own maths on how much money these companies are raking in.
In New York this has been seen as price gouging. NYC is moving to crack down on food delivery apps. The proposed legislation will enable restaurants to pay smaller commissions to delivery companies. In fact, a 10% commission number has been proposed.
I would like Malaysia to immediately impose a 10% commission ceiling on these food delivery companies (which pay very little or no income taxes ) to assist restaurants which are now on ventilators. Remember, they also take a delivery charge from customers.
Restaurants have seen revenue destruction as we close in-cafe dining. They can ill afford the exorbitant fees. I shall not refrain from suggesting that these companies should do Malaysian taxpayers a favour and pay the compensation from their own pockets.
h) Rental waiver has been granted by the government on properties they own. However, it is much more complicated for the government to interfere with private contracts. Moral suasion is certainly required by the Federal and state government to call for a three-month no eviction period. Let us not forget, Bank Negara has given six months’ moratorium on loan repayments. Can landlords pass on some of these benefits?
What can large, deep-pockete landlords like a shopping centre or a REIT do? They may impose up to five months in deposits from their tenants. The deposits are recognised as rental income only when there is default. Landlords can give waivers or reduce rental rates or use existing deposits to pay the lease. Perhaps tax benefits can be given to those landlords who have utilised deposits to recognise rental income.
As an individual, there is a very high probability we will be alive when the pandemic ends at current observed mortality rates. How about my business?
This is not a typical financial crisis where normal fiscal and monetary stimulus should do the job over time. No. The timetable is set by the virus. It is an unknown unknown. There is no certainty on when the battle with the virus will be over. No one knows.
Business owners have to ask themselves if one can survive 12-18 months on lower revenues. Do I want to keep going? Do I want to take on loans? It is going to be even more difficult.
Make no mistake. Most of us will fail. Many will go into bankruptcy in the next 12-36 months.
So, what are we going to do? Here is where the government can write the final chapter. Rewrite the laws on personal bankruptcy. Move it to a system like the US which has Chapter 11 Provisions for companies. Only then can we survive.
I even have a slogan for slogan-loving politicians: Give Everyone A Second Chance. To paraphrase Donald Trump, it was not my fault. Give me a second chance to succeed. – March 29, 2020
Ayub Ali is CEO of a local restaurant business
