THE Small and Medium Enterprises Association of Malaysia (SAMENTA) calls on the Government to prioritise the survival of our SMEs in the coming months as we go through a steep and difficult recovery.
We are facing a triple whammy of rising costs, labour challenges and an unstable political environment. Until and unless these are resolved or substantially mitigated, any hope of a full recovery to pre-pandemic level is an unrealistic illusion.
Recent policy announcements by the Government have ignored not only the 5.6% negative growth in 2020 but also the compounding effect of that contraction to our economy.
In order to catch-up on this compounded loss in the next five years based on the average of 4.88% GDP (gross domestic product) growth over the five years preceding the pandemic, we will need an average GDP growth of at least 7.5% over the next five years.
That is a tall, if not impossible, order.
As such, the Government must be realistic in trying to implement adjustments that would affect the SMEs. For example, justifications that wages increment or electricity bill hike ‘have been delayed for two years’ do not account for this compounded loss.
It makes little sense for SMEs to be warned not to increase prices or lay off redundant workers when costs are spiralling, coupled with our inability to operate at pre-pandemic levels.
We urge the Government to take immediate steps to save our SMEs. While we are thankful for the various initiatives announced, including wage subsidies, re-hiring initiatives and soft loans to help SMEs tide over the pandemic, we will need firmer policy interventions at this juncture if we are serious about helping push our SMEs – and by extension – the economy to pre-pandemic levels.
Safeguard measures
Some of the low-hanging fruits that we can implement now to save our SMEs are as follows:
- Immediately halt the increment in electricity bills: It is untenable to add this unnecessary costs pressure to our SMEs when Tenaga Nasional Bhd achieved a record 9.6% revenue growth in the first nine months of 2021.
The Government should also consider re-introducing the subsidy to commercial and industrial users. Economists Paolo Casadio and Geoffrey Williams have suggested that by bringing back the subsidy, our inflation can be brought to below 1.5% which would in turn ease the cost pressure on consumers and wage earners.
- Allow the market to dictate wages: The recent announcement by the Human Resources Minister of a proposed increment of minimum wage to “around RM 1,500” has been received by our members with disbelief. While SAMENTA do not object to any increment in wages, it is best left to the market to dictate wages for various industries and job roles.
Wages should be tied to productivity and output. A forced increment at this fragile stage of our economy is sending a mixed signal to businesses, especially SMEs, that any effort at recovery would be to dampen costs pressure on consumers rather than in saving our SMEs and to catch up on lost growth.
As it is, most businesses are already paying above RM 1,500 to local workers, so an increment in minimum wage is unnecessary and is counter-productive.
- Speed up transition to market-led financing: Our banks are tied down by rules set by Bank Negara Malaysia (BNM) which goes against the general trend towards market-led financing as championed by the peer-to-peer (P2P) players. While BNM has been pro-active in supporting SMEs, we need the Government to step in to take on more risks to allow more businesses to obtain financing through various sources.
Our traditional reliance on collateral rather than revenue or cash flow is hampering growth at a time when SMEs are ready to grow but has exhausted their cash flow and disposed of some assets to weather the pandemic.
Some of our P2P players are already dispensing short-term financing successfully via partnership with online marketplaces based on real-time revenue and cash flow data, so it makes sense to replicate this model to the larger SME community.
- Re-open the borders immediately: While the National Recovery Council has proposed the re-opening of our borders by March 1 to fully-vaccinated travellers without any quarantine requirement, the Government has not decided on this matter.
SAMENTA supports the re-opening of our borders to all travellers. If that is not feasible, then the Government should at least introduce a phase-in approach of first allowing fully-vaccinated business travellers to move-in and out of Malaysia without quarantine.
The vaccinated travel lane (VTL) should also be sped up to more markets and with its capacity to be increased significantly. Without free movement, our hope for a trade-based recovery will remain subdued, especially since our SMEs are competing with regional competitors in the global supply chains.
- Declare an endemic stage: Recent numbers in hospitalisation and percentage of infections leading to deaths have indicated that we are ready to enter an endemic stage in dealing with COVID-19. While we agree that health must take precedence over all else, we urge the Government to declare the COVID-19 as an endemic as soon as feasible to allow Malaysians and Malaysian businesses to resume some semblance of normalcy.
As consumer confidence remain highly subdued, the only way forward for a quick economic recovery is for Malaysians to accept that the virus is here to stay and to continue practicing safety and hygiene measures at all times in their daily lives.
SAMENTA remains supportive of the government in helping SMEs recover from the pandemic and is working with various government agencies to help ease this transition. – Feb 21, 2022
Datuk William Ng is chairman of the Small and Medium Enterprises Association of Malaysia (SAMENTA).
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
