Bad Times Ahead For SMEs

(The Sun Daily) – Thousands of companies could fold and millions of people would lose their jobs in a matter of weeks if the embargo on business activities is prolonged, according to entrepreneurs.

Small and medium enterprises (SMEs), which account for about 38.3% of the nation’s gross domestic product and 66% of the total workforce, will be hit hardest, according to players in the sector.

Thong Hoo Teik, who is in the metal processing business, said he has to fork out RM300,000 a month just to pay his employees’ salaries.

“I may be able to sustain it for a month or so. Then I will have no choice but to close shop.”

Under the rules of the movement control order, non-essential businesses are required to stop operations.

Those that produce items or offer services that are considered essential are permitted to continue operating but at a much lower capacity. This is to ensure social distancing among employees who have to be present at their workplace.

For Thong, the main worry is how long he can carry on with zero income. He has about 100 employees.

Datuk Jason Yap, who is in the retail business, said it could take at least six months for businesses to recover from the shock.

He pointed out that if SMEs are unable to make enough money to sustain themselves, they would not be able to pay their suppliers, resulting in a negative chain reaction effect.

Yap said apart from salaries, businesses must also contribute to the Employees Provident Fund, pay rentals and other incidental costs. “These are fixed costs, and they amount to RM450,000 a month for me.”

Both Thong and Yap are appealing to the government to step in with some assistance.

Thong said there are several options for the government. “One way is to help us pay the salaries.”

This is already being practiced by many governments. In some countries, the government subsidizes 75% to 80% of SME workers’ salaries.

He commended the government for imposing a six-month moratorium on bank loan repayments. “Fixed costs such as rental can be sorted out with property owners, but the payroll is our main concern at a time when there is no business.”

Yap said the government has already introduced measures to help employees, so now is the time to help employers. “The earlier the government comes up with a solution, the better it is for everyone.”

The Electrical and Electronics Association of Malaysia noted that the MCO has had an adverse impact on its industry.

The association said while its members had to continue offering critical services and support to various industries, most of the companies are experiencing cashflow problems.

Credit by MT Webmaster, Wednesday, 1st April 2020.