The Covid-19 pandemic wreaked havoc on the country’s small and medium-sized businesses (SMEs). Data compiled by the SME Association of Malaysia was astounding!
- About 57% of the 4,280 SMEs that participated in a survey reported zero income during the MCO.
- 40% reported revenues dropping by half.
- 36% said they had enough cash to last till May end, 21% till June, and 17% till July.
- 23% of SMEs would downsize businesses after the MCO.
- 28% would restructure, with only 19% of SMEs believing they can continue normal operations.
Bank Negara Malaysia (BNM) has projected that unemployment figures could reach 1.8 million from the current half million and this could escalate until measures are quickly put in place to alleviate the situation.
For a start, BNM has allocated RM5billion under the Special Relief Facility to address the short-term cash flow problems. This is a temporary measure to alleviate the situation.
Ultimately, the country’s economic performance will be based at the speed of its recovery and business reforms that are put in place in the wake of the pandemic. Businesses must realign strategies and determine new ways to expand, whilst optimising resources.
Being resilient to market forces is key. There is no playbook for this and it will be a new normal for most economic sectors.
This article briefly highlights some key considerations for sustained economic growth.
Apart from financial relief for SMEs, micro-entrepreneurs, and start-ups, banks should accommodate the restructuring of existing facilities under favourable terms. Equitable repayment strategies must be in place to ensure businesses remain viable.
BNM has lowered interest rates by 50 basis points to 2%. Correspondingly, Maybank and CIMB have reduced their base rates. Apart from the reduced cost of borrowings, affected businesses must seek favourable moratoriums on repayments, restructuring of loans, etc. from banks.
Government red tape should be eliminated to facilitate business growth, without compromising on necessary controls. This also includes expediting the approval processes and so forth.
There is every reason for the government to fast-track the National Fiberisation and Connectivity Plan (NFCP) to promote digital economy at the national level – more so now that the Malaysian economy has regressed by a couple of years. The NFCP is the cornerstone for future economic growth.
Government Industry Partners Think Tanks
The Economic Action Council (EAC) must establish think tanks with the relevant sectors of industry to ensure planned and strategic growth. The EAC should co-opt captains of industry to lead consultative groups for relevant economic sectors as part of the process to share experience, provide resolutions, and develop growth strategies amid challenges ahead.
As part of change management, existing processes must be optimised, including:
- Implementing structural change; revisiting business models to improve cash flow.
- Installing new technologies, digitalising work functions, facilitate remote operations.
- Incorporate risk assessment and management profiles.
- Analyse supply chain cycles; digitalise procurement and supply chains.
- Enhance stakeholder communications to expedite informed decisions to be made.
Export Market-oriented Businesses
However, it would be tricky for SMEs involved in the export market as foreign (importing) companies too would have been affected by the pandemic and restrictions.
Working closely with the Malaysia External Trade Development Corporation (Matrade) would facilitate business continuity. Using Matrade’s e-trade programme, SMEs can benefit through export promotions, exporter development, market intelligence, etc.
SMEs and micro-enterprises are facing critical times. The government and the relevant government-linked companies, multinationals, public-listed companies, and financial institutions must work expeditiously to assist SMEs if businesses are to capitalise on Malaysia’s economic rebound in 2021.