The financial assistance is a better remedy than a supplementary budget, says expert

by DASHVEENJIT KAUR/ pic by TMR FILE

THE additional RM10 billion allocation for small and medium enterprises (SMEs) could save millions of jobs, prevent the collapse of the sector and increase the number of people below the breadline.

Putrajaya yesterday announced an additional RM10 billion for SMEs as the one-month Movement Control Order (MCO) shuttered thousands of businesses and left millions with the prospects of unemployment.

The additional incentives, besides the previously announced RM250 billion economic stimulus package, could protect two-thirds of the country’s total employment.

Singapore Institute of International Affairs senior fellow Oh Ei Sun said the RM10 billion financial assistance is a better remedy than a supplementary budget which would require the lower house approval.

He said the additional incentives suggest that everyone gets a slice of the pie, especially SMEs, micro businesses and those with 75 employees or fewer, of which would get a respite in the next three months.

“This will cushion the impact of the MCO period. However, it is hard to grasp what it’ll be like beyond the three months as businesses are doing badly in general,” he told The Malaysian Reserve (TMR).

He said the RM10 billion additional package is the best the government could roll out without having to opt for a supplementary budget and the country’s limited financial resources.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the effectiveness of the additional measures would greatly depend on when the MCO would be over.

“As it is now, the companies are operating at extremely low capacity and some are at 0% (revenues). This is happening as we are on the path to break the chain of Covid-19 infection,” he told TMR.

Mohd Afzanizam said the measures and incentives for SMEs are meant to ensure that companies retain their employees.

“Wage subsidies have been bumped up from RM5.9 billion to RM13.8 billion. There are also measures to give discount or deferment in rental for premises owned by government-linked companies.

“The government has done their level best to ensure the cashflow and access to cheap financing for SMEs and that employees in the SME sector will continue to be retained,” he said, adding that the priority is for the assistance to reach the targeted group in a timely manner.

“For SMEs which have yet to register themselves with relevant authorities such as the Companies Commission of Malaysia and the Inland Revenue Board, perhaps this is the best time to do, so their businesses become legitimate and (they can) improve the chances of getting access to financing or financial assistance,” he said.

AmBank Group chief economist and head of research Dr Anthony Dass said the additional measures would benefit SMEs experiencing minimal or no sales revenue.

He said many businesses have been affected before the pandemic. “The tight cashflow is not just because of the MCO. They were affected by the trade war and other domestic challenges.

“Even if the MCO is lifted by mid-April or end-April, demand is expected to be weak for some time due to travel aversion and social distancing,” he said.

He did not rule out the collapse of micro businesses, especially the smaller and new businesses.

“Generally, the older and larger small businesses are likely to withstand an economic crisis. Exports will stay weak from lockdowns and commodity prices will be soft.

“Not every small business is equipped to survive this downturn,” he said, adding that the timely distribution of the assistance is critical.

“In our current crisis, these measures must occur immediately. It means that speed and simplicity are the important considerations,” he said.

Dass said the government should also look into rebuilding the economy post-Covid-19.

“There must be a single government-backed public-private partnership agency tasked to rebuild the SME economy. It will be vital to look back at what happened to SMEs during the 2008 global financial crisis and probably as far back as the 1997 Asian financial crisis,” he said.