Guan Eng urges loan moratorium for all except for T20 segment, warns SMEs need urgent financial assistance

A food vendor is seen waiting for customers during the movement control order in Jalan Alor in Kuala Lumpur June 23, 2021. — Picture by Firdaus Latif
A food vendor is seen waiting for customers during the movement control order in Jalan Alor in Kuala Lumpur June 23, 2021. — Picture by Firdaus Latif

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KUALA LUMPUR, June 25 — Former finance minister Lim Guan Eng today urged the Perikatan Nasional (PN) administration to provide urgent financial help via an auto bank loan moratorium until the end of the year for all Malaysians except for the T20 category. 

He said Putrajaya should also provide RM35 billion in rental, wage and utility subsidies, hiring and wage incentives to create new jobs, and grants as well to help the public cope during the latest movement control order. 

“The moratorium should be borne by a banking industry that recorded after-tax profits of more than RM23 billion in 2020 and RM32.3 billion in 2019, and continues to earn healthy profits in the first quarter of 2021,” Lim said in a statement.

The Bagan MP said the targeted bank loan moratorium pursued by PN has clearly failed as not all loan applications were approved.

“Even the loans to small-and-medium enterprises (SME) have not been taken up due to their lack of capability to borrow.

“Finance Minister Tengku Zafrul Abdul Aziz revealed that on tourism financing, the government had an allocation of RM600 million for SMEs and micro SMEs that were still affected by Covid-19,” he said.

Lim cited the finance minister’s remarks that as of June 11, there have been 669 applications, of which 331 applications were approved with total funding of RM65.9 million, meaning the approved applications are only slightly more than 10 per cent.

“Pakatan Harapan had proposed an automatic loan moratorium until the end of the year, except for the T20, and an injection of RM45 billion in financial aid as soon as possible to save jobs, economic livelihood, and businesses.

“Out of this RM45 billion, at least RM35 billion must be reserved to help struggling businesses, particularly SMEs. Some 98.5 per cent of business establishments in Malaysia are SMEs and the nearly one million SMEs contribute to 39 per cent of our country’s GDP in 2019,” he said.

The DAP secretary-general added the current economic recession brought by the Covid-19 pandemic has hit the critical SME sector particularly hard.

“The World Bank has not only revised downwards the growth projection from the PN government’s six to 7.5 per cent for 2021 to 4.5 per cent, but also highlighted the crisis for survival faced by many Malaysian companies.

“It stated that Malaysian firms are less equipped to withstand shocks compared to their regional peers, with less cash in hand to face a crisis like Covid-19,” he said.

According to the bank’s report ‘Malaysia Economic Monitor: Weathering the Surge’, liquidity is a pressing problem as the median Malaysian firm has only two months of cash flow available, while the average Malaysian firm has 4.9 months cash flow available which is lower than Indonesia 9.5 months and Vietnam’s 5.9 months cash flow available.

Some 60 per cent of firms are either in arrears or at risk of falling into arrears within the next six months and firms appear to be less willing to borrow due to fear of repayment risks, with sellers also appearing less willing to provide credit.

Lim said the report is borne out from a survey by the Entrepreneur Development and Cooperatives Ministry published on June 4, which said more than 90 per cent of micro SMEs risked closure, with 54 per cent saying they could only survive three to six months, and 72 per cent expecting to suffer losses.

“The SME Association of Malaysia disclosed that 100,000 SMEs closed last year and 50,000 more are expected to suffer the same fate.

“With only 10 per cent of loan amount given out for the crippled tourism sector that lost RM100 billion last year, Malaysian companies, especially smaller and micro-enterprises, are in deep trouble,” he said.

As the RM77.6 billion direct fiscal injections so far have been grossly inadequate to deal with hundreds of billions of ringgit in economic losses, Lim asked if the PN government will offer an automatic bank loan moratorium and RM45 billion fund injection as required, or will it continue to disappoint until the growth prospects for this year dwindle and disappear.

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