Retailers, malls plead for Budget 2021’s urgent review to save jobs, prevent companies from collapsing

The pandemic has seen SMEs and particularly the retail sector being hit hard. ― Picture by Miera Zulyana
The pandemic has seen SMEs and particularly the retail sector being hit hard. ― Picture by Miera Zulyana

KUALA LUMPUR, Nov 14 — Shopping mall operators and retail stores today banded today to urge the government to urgently revise Budget 2021 and add on new measures that will be able to help the industry survive the Covid-19 pandemic and prevent their employees from losing their jobs. 

The plea was issued today by the Malaysia Retail Chain Association, SME Association of Malaysia, Bumiputra Retailers Organisation, and the Malaysia Shopping Malls Association.

In the five-page memorandum, the four organisations highlighted the importance of businesses in providing jobs and tax revenue to the government, while also highlighting the grave situation that small and medium enterprises (SMEs) and businesses — especially in the retail and tourism sector — are facing due to the unconducive business environment brought about the movement control order (MCO) and its variations.

The four groups cited recent government data of 32,000 SMEs having ceased operations between March and September despite the government’s economic stimulus packages, noting their own observation that this figure could be higher by now.

“Without any sustainable and meaningful intervention by the Government, we fear that the number of business casualties will continue to rise to an unprecedented number and eventually lead to significant loss of employment for the rakyat,” they said in the memorandum.

Noting that SMEs currently provide jobs for almost half or 48.4 per cent of working Malaysians, the four groups pointed out that the Social Security Organisation’s (Socso) data showed the highest loss of employment in August to be in manufacturing (24 per cent), accommodation and food and beverages (15 per cent), wholesale and retail (14 per cent).

They pointed out that the restriction of the public from moving about during the reintroduced conditional movement control order (CMCO) has put businesses  — especially retailers and restaurants — in a difficult predicament, warning that it was possible that more jobs would be lost.

“If these business fundamental issues are not addressed immediately, it is inevitable that the rate of loss of employment will increase abruptly from October onwards.

“This in turn will have a cascading effect on the economy due to the high rate of unemployment and when more companies fold, Government will automatically lose a sizeable chunk of revenue from corporate income tax (Note that SMEs contribute 38.9 per cent to the country’s gross domestic product or GDP in 2019),” the four said. 

Voicing disappointment over Budget 2021 which the groups said had failed to live up to the expectations and hopes of businesses for a “lifeline” to sustain themselves throughout the current unprecedented health and economic crisis, the groups said this crisis is even worse than the Asian Financial Crisis in 1998 and the Global Financial Crisis in 2008. 

“Hence to prevent an economic catastrophe as a result of annihilation of SME businesses, we humbly urge the Government to take urgent steps to revise the Budget accordingly,” they said.

The nine proposals

In the same memorandum, the four groups proposed nine measures for the government to take to address the Budget 2021 shortcomings and to respond to the immediate challenges caused by the Covid-19 pandemic.

1. Tenant relief assistance through financial aid to shopping mall owners, landlords

With shopping mall owners and landlords having already incurred heavy losses during the MCO via rent discounts to help retailers that had to stay closed then, it will be financially difficult for them to continue subsidising rent during the CMCO period as they will lead to cashflow problems, the groups said.

They appealed to the government to give conditional financial relief to shopping mall owners and landlords to enable the savings to be used to help retailers in their premises, including by waiving or reducing land assessment tax and utilities payment such as by extending the previously-announced electricity discount (which expired in September) to December 2021. 

The two other measures proposed are for direct financial aid to SME tenants to cover rental cost for at least two months during the CMCO and two months during the recovery period, and for the government to grant tax rebates to landlords that give rent rebates or rent reduction to tenants.

2. Waiver of statutory payment for businesses

While most businesses have already cut costs to conserve cash flow and to survive this current crisis, the four groups said there has been no changes to statutory payments which is one of the biggest components of business costs.       

“So that companies can continue to stay afloat,we wish to propose to the Government to consider waiving all these statutory payment obligations until 31 Dec 2021 or for 1 year after the lifting of the MCO, whichever is later. We also proposed that this waiver should include the collection of music copyright royalty fees until the unresolved dispute between various collection bodies following the dissolution of Music Rights Malaysia Berhad reaches a settlement,” it said.

3. Targeted tax incentive for retail and tourism spending

Acknowledging the government’s RM150 million allocation to support online spending with the Shop Malaysia Online initiative, the groups noted that the government appears to have not given any incentives for physical retail shopping or tourism.

They then urged the government to consider granting tax exemption on individual income tax for tax assessment year 2020-2021, namely exemption on a monthly RM1,000 shopping bill backed by receipts and on a RM5,000 sum to be backed by receipts.

4. Tax relief for safety, hygiene spending

With operating costs going up at least 10 per cent to 20 per cent due to equipment purchase and high frequency of sanitisation in line with the Covid-19 SOP, the groups ask for tax relief on such spending during the Covid-19 pandemic crisis.

5. Giving out Covid-19 SOP compliance certification for retail, restaurant premises

The groups urged for the government to introduce such certification to encourage businesses to fully adopt the SOPs (as the majority strictly adhere while some remain non-compliant) and to build customer confidence and give them the reassurance to return to shop and dine physically.

6. Extending wage subsidy programme (WSP)

Noting the WSP’s success in enabling many businesses to keep their staff, the groups were grateful that this programme would be continued for another three months but said this should be extended as it was “highly unlikely that most businesses will have recovered by March 2021 based on the current economic climate”.

“We wish to appeal to the Government to extend the WSP up to six months for a grant of RM1,000 per employee who earns less than RM 4,000 a month,” the groups said, urging for this to be extended to all businesses and all SMEs as the majority of them would cut costs by reducing their workforce if such assistance is not available.

7. Extend bank loan moratorium to all until June 2021

The four groups urged for the blanket extension of the moratorium or freeze on repayment of bank loans until June 2021, due to cashflow being the lifeline of businesses.

8. Travel bubble to restart tourism industry

With the tourism industry contributing RM84.16 billion to the Malaysian economy in 2019, the groups said the government should make allocations in Budget 2021 towards achieving the goal of starting a “travel bubble” programme to allow visitors from selected neighbouring countries to visit Malaysia to reignite the tourism industry. 

“To minimise the risk of imported Covid-19 transmission, strict criteria including rigorous testing for tourists can be put in place prior their arrival into the country,” the groups said, having noted that prolonged closure of Malaysia’s international borders will be detrimental to the recovery of the tourism industry and related industries that rely on tourism. 

9. Revise the Covid-19 Act (Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020) to give adequate protection to businesses

The groups said this new law gives insufficient protection to businesses due to limitations, such as only protecting tenants from warrant of distress for arrears from March 18 to August 31, 2020, which the groups said meant that landlords can use the same methods to recover rent from the tenants from September 1 onwards even though businesses have been severely affected by CMCO.

“That said, we urge the Minister of Law to revise the Covid-19 Act in tandem with the current dire business conditions so that business owners who are affected by CMCO can actually rely on these provisions to save their business,” it said, having cited a similar law by Singapore that could be made a reference. 

The four groups said it welcomed further engagements and dialogues with the government through relevant ministries to develop a sustainable solution to help businesses weather through the unprecedented crisis, stating: “Together we can save lives and livelihood.”

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