Deep diving on Covid-19 Act — should govt set preconditions on commercial rent?

The Act must progress away from rental moratorium to rental waivers to be shouldered by the govt, landlord and tenant


THE private sector is the nucleus of economic activities and must be protected at all costs.

Since the Covid-19 pandemic is still lingering in our midst, it is uncertain how long the government can sustain its stimulus package with limited options in its hands.

This pandemic affects everyone, and during these difficult times, the only way to survive is for all parts of society to work together to shoulder the responsibility of keeping the economy afloat.

In the case of commercial rent, having a loan moratorium only delays the payment of mounting rental arrears, and for small and medium enterprises (SMEs) making zero or negligible revenue, paying off the piled-up debt at the end of September is a sure recipe for bankruptcy.

Therefore, Malaysia’s Covid-19 Act must progress away from rental moratorium to rental waivers to be shouldered by three parties — the government, landlord and tenant.

Since the Movement Control Order came into effect on March 18, with the repercussions on business to be felt up until July, there are essentially 4.5 months during which most businesses are gravely affected by the pandemic.

As such, the International Strategy Institute would like to suggest that the government provides cash grants in the form of a two-month waiver on base rental (excluding variable charges) for eligible SMEs for April and May, while the landlord absorbs the rental for June and July (which can be offset by a property tax rebate at a later date), and the tenant pays only for March, of which was already paid earlier in that month.

This way, the burden of paying the 4.5 critical months during MCO, is shouldered equally by a tripartite relationship.

In order to ensure that the government’s cash grants go to paying off the accrued rental, the government should send a Covid-19 Act notice to landlords detailing the tripartite payment of 4.5 months, with the government transferring the money directly for April and May into the landlord’s account.

The notice should also make it mandatory that all landlords will need to absorb the two months’ rental for June and July (which can be redeemed as property tax rebate in the near future) and for tenants to cover only one month’s rent for March.

To ensure that the tenant’s overall exposure to debt is limited, the government should impose a cap on interest charges on late payment for debt under these special circumstances.

We understand that not all businesses are suffering during this pandemic and in fact, some businesses thrive since their sectors are most active during the lockdown, such as e-commerce and essential services.

As such, the government should set preconditions to the disbursement of the rental waivers on two fronts, namely how badly the businesses suffer, and how much revenue they make.

For the first, it should rightfully be given to businesses that have seen a certain drop in their monthly revenue during this period.

In Singapore, eligible SMEs for rental waiver are those who have experienced at least a 35% drop in their monthly revenue during the affected period. Malaysia can determine its threshold according to its specific context.

For the second, the government can set a threshold for what it deems as revenue that will not be able to withstand the Covid-19 storm.

In Singapore, the waiver applies to businesses with annual turnover of not more than S$100 million (RM307 million) in 2019. Malaysia can determine its threshold given its circumstances.

To further ease the burden of financing by the government, the government can boost another economic sector, namely the insurance industry.

Under this scheme, the government can encourage insurance companies to create a new Covid-19 policy coverage that employers and individuals can purchase to cover the medical cost should employees contract the virus during work hours.

All the measures above should help protect the private sector and ease the government’s financial burden during these critical times, but it should not continue indefinitely as it would not be sustainable otherwise.

This is also because the economy has now returned to near normal, as businesses are allowed to open and can recuperate its revenue from months of inactivity.

However, threats of another explosive new wave of outbreak is lingering on the horizon, and if we are not careful and do not follow the stipulated standard operating procedures, we might have to return to the rigid lockdown that has devastated our lives and economy once again.

Let us work together as Malaysians to keep the virus at bay and save our economy and livelihoods from a further meltdown.

Our constant prayers are for the medical and humanitarian frontliners who have been instrumental in keeping our country safe.

Cheah Chyuan Yong is the chairman of the International Strategy Institute. The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.