With ‘total lockdown’ extension looming, SME group says two in three members have given up on 2021

With a looming extension to the ongoing third movement control order (MCO 3.0), two out of three small and medium enterprises (SME) in the country have expressed zero hope for any recovery in 2021. — Picture by Shafwan Zaidon
With a looming extension to the ongoing third movement control order (MCO 3.0), two out of three small and medium enterprises (SME) in the country have expressed zero hope for any recovery in 2021. — Picture by Shafwan Zaidon

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KUALA LUMPUR, June 27 — With a looming extension to the ongoing third movement control order (MCO 3.0), two out of three small and medium enterprises (SME) in the country have expressed zero hope for any recovery in 2021, an interest group representing them said today.

This is according to a mid-term survey conducted by the Small & Medium Enterprises Association Malaysia (Samenta) on its members from 19 to 23 June.

Samenta Central chairman Datuk William Ng went as far to say that 16 per cent of those polled expected their businesses to only recover in 2023, citing the devastation caused to the majority of the country’s SMEs due to enforced containment measures nationwide.

“The government needs to be leading at this crucial period by providing a clear, realistic roadmap for our economy and by extension, our SMEs to recover from the pandemic and tap into opportunities in the new normal.

“Our focus should go beyond re-opening of the economy to helping our SMEs gain lost ground and sprint ahead of our regional peers,” he said in a statement in conjunction with World SME Day here.

He cited a November 2020 announcement by the Companies Commission of Malaysia (SSM) that some 30,000 businesses have closed down since the start of the Covid-19 pandemic.

“During MCO 1.0, many SMEs still have cash buffers to keep their businesses afloat. However, after over a year of disrupted business, SMEs are no longer in a position to survive on their own. 

“Indeed, 30 per cent of SMEs would have run out of cash during this FMCO, and if the FMCO is extended, many of these would simply close down.

“This data would most likely be three times more by now, given the MCO 2.0 and MCO 3.0, and including businesses that have ceased business without reporting to SSM,” he said.

On the challenges faced by the association’s members, Ng conceded that continued reliance on government handouts and patronage through Government-Linked Companies was one of the reasons why many SMEs were collapsing amidst the pandemic.

“We can always blame our SMEs for not being ready, but the reality is that our patronage economy has grown an entire generation of businesses that do not feel the need to compete globally,” he said.

Other contributing factors included low technology adoption among Malaysian SMEs as compared to its regional counterparts such as Singapore and Brunei.

At the same time, Ng also called out the government’s attempt to “set the bar high”, which inadvertently discouraged SMEs from investing in technology.

“It is important therefore that we continue to wane Malaysian SMEs off relatively ‘cheap’ labour, speed up automation and reliance on manpower, and improve the educational level of our next generation of entrepreneurs.

“Moving forward, it is important that we allocate the right resources to push our SMEs to adopt technology through more accessible matching grants that cover businesses of all sizes and sectors; and across all stages of digitalisation.”

He also expressed hope that the government will continue to place more emphasis on capability and capacity building for our SMEs (as it has been through SME Corporation Malaysia), rather than short-term handouts.

To circumvent the industry’s inability to access world-class talents, Ng said it was hopeful that the government could provide short-term intervention in the form of fiscal incentive either directly to SME employers or to SME employees.

“This could be in the form of matching contributions for EPF, subsidies on HRDF contribution, and tax cuts for employee benefits and employer branding,” he said.

This latest MCO, or “total lockdown”, was implemented on June 1, after daily new Covid-19 cases soared past the 7,000 cases mark in late May.

It was then extended for another two weeks, from June 15 to June 28.

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