Next, provide incentives for businesses to adapt, reskill, says IDEAS

A man withdraws money from the ATM after receiving approval for the Prihatin aid package in Kuala Lumpur April 6, 2020. — Bernama pic
A man withdraws money from the ATM after receiving approval for the Prihatin aid package in Kuala Lumpur April 6, 2020. — Bernama pic

KUALA LUMPUR, April 7 — After introducing the Additional Prihatin Package for Small and Medium Enterprises (Prihatin SME Plus), the government should next look at providing targeted incentives for businesses to adapt and reskill, says the Institute for Democracy and Economics Affairs (IDEAS).

IDEAS research manager Lau Zheng Zhou sees the SME stimulus package as primarily a ‘stop-gap’ measure and that encouraging businesses to reskill particularly in the area of innovative technology such as digital solutions would help pave the way for an eventual recovery. 

On the Prihatin SME Plus unveiled yesterday, he acknowledged that it is intended to expand the government’s stimulus package coverage to include the different sizes of SMEs as a means to address short-term liquidity concerns. 

“This is crucial to minimise the risk of mass business insolvency, which will create more issues with unemployment and damage to the economy’s productivity capacity.

“Of course, businesses will continue to ask for more from the government, but it is important to emphasise the need for risk-sharing as businesses must also adapt to the new environment,” he told Bernama. 

The Prihatin SME Plus introduced by Prime Minister Tan Sri Muhyiddin Yassin is an additional RM10 billion to help the target group. The allocation is on top of the RM250 billion Prihatin Rakyat Economic Stimulus Package announced on March 27 to buffer the economic trauma from Covid-19 and the movement control order (MCO). 

On worker layoffs by SMEs, Lau said the government should consider attaching positive conditionalities as part of the stimulus application progress.

“For instance, a credit-score system, where businesses that manage to retain employees after receiving stimulus support, can have priority or advantage in future funding programmes. This will give business operators incentives to think long-term,” he said.

The government, he said, should also prepare for the worst as termination is inevitable for some businesses, “especially if the business turns insolvent”. 

He opined that business recipients of stimulus measures should be enrolled in an SME recovery programme, which may entail creating a special job database and reskilling programme.

As to the MCO, Lau believes the government might extend it, “considering the limited announcements on how mass testing was going to be conducted as one of the potential ways to return to normalcy”.

“The question is, will there be a plan for a gradual loosening of the MCO to allow more industries to resume operations. Economic activities are usually organised around geographical clusters — would it be possible for a more targeted approach based on locations or a zoning system?” he asked.

On whether the SME stimulus package should include the self-employed and informals, Lau replied, “Ideally, yes, as they form a part of the supply chain too.”

“But existing measures may not be straightforward to many of these self-employed and informals as their businesses are not necessarily registered under the Inland Revenue Board or Companies Commission of Malaysia; therefore they may not have access to the distribution channels of these stimulus measures,” he added. 

Meanwhile, Lau said it was important for the government to consider a longer-term economic strategy, at least for the next six to 12 months.

“This is so that it could communicate its ‘exit strategy’ from the stimulus package, and that it would not be a prolonged one.

“Measures that the government will take to speed up business adaptability and reskilling leading to a recovery is fundamental to demonstrate capacity to generate tax revenue in future,” he asserted.

According to Lau, a recovery plan would also help bolster market confidence on fiscal consolidation objectives when the economy eventually recovers.

“It is not unreasonable to project a relatively high budget deficit as a percentage of gross domestic product (GDP) for the year, given the three-way impact of rising fiscal spending, falling fiscal revenue, and a slowing domestic economy. These factors will push up the budget deficit as a percentage of GDP,” he said.

Finance Minister Tengku Datuk Seri Zafrul Aziz was reported as saying yesterday that the country’s budget deficit would be higher at 4.7 per cent from an initial forecast of 4.0 per cent owing to the additional RM10 billion allocation under the Prihatin SME Plus. — Bernama

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