SMEs expect a gloomy 2022

Costs of raw material and transportation have gone up and many SMEs do not have the chance of furthering their loans 


2021 was a difficult year for most small and medium enterprises (SMEs), with prolonged lockdowns causing many who were already working on very lean margins to have to close shop and let employees go. 

SMEs have faced nearly two years of various pandemic-related uncertainties. Despite the government shedding a ray of sun by opening up economic sectors and offering financial aid, many business owners expect the dark skies to loom over into 2022. About 1.15 million SMEs make up 97.2% of the total number of business establishments in the country. 

On a whole, they contributed 38.2% or RM512.8 billion to the national GDP last year, which makes them the backbone of the Malaysian economy.

SME Association of Malaysia national secretary general Chin Chee Seong said although most SMEs are currently in the recovery stage, overall performance is worse than in 2020. 

He attributed this to the end of the moratorium and the fact that no wage subsidiaries will be provided by the government. Therefore, most SMEs are now facing a big cashflow problem. 

“Costs of raw material and transportation have gone up and many SMEs do not have the chance of furthering their loans. During the Movement Control Order (MCO), a lot of landlords provided some discounts for shoplot and factories, but now that the economy has fully opened, rents are back to normal. 

“Another issue is, of course, manpower as many SMEs rely on foreign workers. With the shortage of such workers, SMEs cannot run in full swing,” he told The Malaysian Reserve (TMR) recently. 

Chin said with most of the SMEs still facing cashflow and various other issues including low consumer confidence, the outlook for 2022 is still very gloomy. 

“With the new variants of Covid-19, consumer confidence has been severely affected and the situation will be worse if another lockdown takes place,” he added. 

Chin suggested the government allow SMEs to delay the statutory contributions like the Employees Provident Fund and income tax for at least six month to ease SMEs’ cashflow. 

“The government could work out another three-month wage subsidy programme to the affected SMEs. This is very important and would definitely help them. For those who are doing okay, they need a lot of other assistance such as digitalisation grants. 

“I received many complaints that the digitalisation grant provided by the Malaysia Digital Economy Corp is not very smooth. They need to speed it up and make it easier,” he said. 

Digitalisation Crucial for Recovery

Small and Medium Enterprises Association central chairman Datuk William Ng said even those who were allowed to operate at partial capacity are having a difficult time as supplies of raw materials and transportation have been uncertain. 

“Many had to reject orders from customers as a result. As the economy reopened fully in September, we saw many SMEs continuing to struggle to finance the restart of their business, a severe labour shortage, and spike in costs of raw materials and logistics. 

“We foresee this trend to continue in 2022; where a resurgent economy will be moderated by disruption due to shortage of labour and logistics,” he told TMR. 

Ng said SMEs should look into automating their business as much as possible as Malaysia’s Digital Adoption Index stood at 69% compared to Singapore (87%) and South Korea (86%). 

“What is even more worrying is that our business sub-index for digital adoption stood at 55%, lower than our regional neighbours such as Singapore at 86%, Brunei at 66%, 

Vietnam at 59% and both the Philippines and Thailand at 57% each. 

“This has always been a difficult decision, because of the substantial costs involved, but the pandemic has shown that the only way for SMEs to survive is to cut down on reliance on manpower, digitise business and diversify streams of income,” he added. 

SMEs On a Roller Coaster Ride

Malaysian Entrepreneurs Foundation chairman Nitesh Malani said the multiple MCOs have clearly caused damage to businesses. 

“This has been a year filled with trials, errors and lessons. As entrepreneurs, try to diversify or look for options amid the uncertainties. Entrepreneurs are creative, and we see many new ventures adapting to the current situation. 

“I believe the recovery for SMEs will pick up in 2022, but it will be a slow progress. We have to live with the new variants and many businesses have now developed their own unique ways to continue thriving,” he concluded.