MCO 3.0: 50,000 of SMEs May Shut Down

 

At least 50,000 more small and medium enterprises (SMEs) may be out of business should the Movement Control Order (MCO 3.0) extend another six weeks.

The Malaysian Reserve

According to SME Association of Malaysia national VP Chin Chee Seong, about 100,000 companies have ceased operations since the first MCO. The affected SMEs, especially in retail and food and beverages (F&B), are just hanging on at the edge of a cliff. About 40% have indicated that they will shut down their businesses should the lockdown continue for the next four weeks. This may cause two million jobs lost.

Only 8.6% of the SMEs said business is as usual, but the remaining 91.4% indicated that they will suffer losses from 25% to 100%, based on their recent survey.

Another survey done early in May by the SME Association shows that 65% of survey respondents stated that a blanket automatic loan moratorium is necessary while 88.5% agreed that business performance will be significantly affected if the National Covid-19 Immunisation Programme (NIP) is delayed. About 50.4% stated that they would like a private immunisation programme and are even willing to bear the cost themselves.

Many SMEs survived 2020 because they were either in the right industry or they dipped into their own savings to pay salaries and suppliers. But many are no longer able to do so. The MCO 3.0 is going to be even tougher. SMEs are now put in a position where they must choose whether to pay their loans first or their suppliers first. Almost one-third of SMEs are down to their last month of reserves!

Malaysian Entrepreneurs Foundation (MEF) chairman Nitesh Malani said the impact on SMEs amid MCO 3.0 is one of low confidence, overstretched credit and looming bankruptcies. “Firms engaged in services are the worst affected, with those engaged in accommodation and food services bearing the brunt, followed by non-food manufacturing, retail and wholesale, as well as travel and transport.”

According to Nitesh, 12% of SMEs have shut down during the 2020-2021 period. Another 35% are on temporary closure, while 9% of SMEs have reduced their workforce by 45% in the past 12 months.

What else can the country do?

Overview of Policy Responses as at July 2020 (https://smecorp.gov.my/)

The Prime Minister had announced a RM1.5 billion allocation for the one-month Wage Subsidy Programme under Socso for all affected economic sectors. This may be helpful, but a one-month subsidy will not be enough. The programme should be at least over three to six months following the loan moratorium. A comprehensive, all-inclusive Covid-19 care pack and recovery aids from the government are needed. And this should be tailored based on individual industry needs!

 

Reference:

1.     Nur Hanani Azman, 50,000 SMEs face closure under MCO 3.0, 8 June 2021, The Malaysian Reserve

2.     Sulhi Khalid, 40% of SMEs will shut down if Govt imposes full lockdown, says association, 19 May 2021, The Edge