Retrenchment in tourism, aviation sectors and SMEs on the cards

by ASILA JALIL/ graphic by MZUKRI

RETRENCHMENT in the tourism and aviation sectors, as well as small and medium enterprises (SMEs), is inevitable as they have been the hardest hit segments as the coronavirus pandemic drags the world into an unprecedented crisis in modern times.

Many companies, especially in tourism and non-essential retail and services segments, have practically almost zero income as their operation had come to a standstill.

Malaysian Employers Federation ED Datuk Shamsuddin Bardan said the pandemic had badly hurt the tourism industry from the beginning as countries imposed travel restrictions to curb the spread of the pathogen.

He said the situation has worsened and there is no way the industry could survive after the Movement Control Order (MCO) was enforced and later extended.

“The other sector that is very much impacted is aviation. When planes are grounded, where will the revenue come from,” he told The Malaysian Reserve (TMR).

Shamsuddin said these industries and companies still have to pay employees’ wages, a huge expenditure for them to bear. He warned that these sectors would go bust during the MCO period.

The MCO was first imposed for two weeks starting March 18 until the end of the month. It was extended for another two weeks until April 14, starting today.

Shamsuddin said the government should assist employers to prevent massive retrenchment.

“Many quarters are saying there could be another extension of the MCO. It would be difficult for employers if that situation occurs as they are still required to pay full wages and allowances to employees,” he said.

University of Malaya political economist Prof Dr Edmund Terence Gomez highlighted that the condition of SMEs should also be a concern during the pandemic as they account for 65% of the country’s employment.

“That is a huge number of people that can be badly affected if the SMEs are not given the assistance to keep these people employed,” he told TMR.

Manufacturing, tourism and construction sectors would be among the main sectors which would see major retrenchment as there were almost no activities and productions during the MCO period, he said.

Gomez said there are still uncertainties regarding the duration of the MCO as the situation could get worse.

The country’s economic recovery largely depends on the duration of the MCO and to avoid a standstill, Gomez said the government should allow several sectors or areas that could improve the economy to return to work.

He said smaller companies cannot afford to pay their employees full wages when many people are not able to work.

“Some countries allow several sectors to go back to work and these are possible with monitoring. Maybe our government can start thinking along these lines.

“The longer we are in a standstill, the longer it will take for us to improve the economy,” he added.

In a research report by MIDF Investment, it said Malaysia’s unemployment rate will maintain under state of full employment in 2020, but with an upward tick to 3.6%.

“The newly-introduced Wage Subsidy Programme in ESP (economic stimulus package) worth RM600 for each employee for a period of three months with certain terms and conditions is viewed to be less significant in retrenchment for companies, especially SMEs who face a huge drop in revenue.”

Malaysian Trades Union Congress secretary general J Solomon said retrenchment would not take place during the pandemic just because of the temporary closure of operations experienced by most sectors.

Businesses that are forced to close down temporarily could only be revived if the workers are retained, he said, and therefore retrenchment or deduction in salaries cannot take place.

“The temporary drawback for these businesses could be overcome with the available human resources once the crisis is over.

“Under normal circumstances, businesses seek financial assistance from the bank to overcome the cashflow difficulties in the event of a drawback in the business.

“In this instance, the government has made arrangements for financial facilities inter alia at concessionary rates of interest with easy repayment programmes and lesser restrictions.

“In addition, the government has arranged with the banks to defer the existing loan instalments for six months automatically. These facilities will eventually accrue to the cashflow of the affected businesses,” he told TMR.