HomeNewsBillions in lockdown aid is breadcrumbs to Malaysia’s small businesses

Billions in lockdown aid is breadcrumbs to Malaysia’s small businesses

Small and medium enterprises (SMEs) are the backbone of the Malaysian economy, according to the government.

Just like every other facet of society, they have been hit hard by the global coronavirus crisis.

As the nationwide lockdown chomps down hard on daily life, Prime Minister Muhyiddin Yassin has moved to reassure the country’s 900,000 SMEs that they will not be forgotten or, indeed, left to founder by themselves.

On March 27, he announced that, in addition to the MYR 250 billion (US $57.4 billion) earmarked for the national economic stimulus package, MYR 10 billion was set aside to help small businesses pay wages, specifically wages for lower paid workers, drawing a salary of MYR 4,000 a month or less.

Two months down the road and the government will have you believe that, national crisis notwithstanding, everything is ticking along nicely.

According to its data, 90 percent of that MYR 260 billion is already in play, having been approved for disbursal.

Note that word ‘approved’. In Malaysia, that is essentially the government’s sign-off on a job well done, pat on the back, crisis averted and a cue to put its feet up until the next brouhaha.

- Newsletter -

However, the reality in a nation that has spent almost all of its 63 years under the thumb of an authoritarian government mired in corruption and cronyism is far from rosy.

In a recent interview with a local business paper, former finance minister Daim Zainuddin attacked the government’s approach, saying the wage subsidy only reached 30 percent of intended target companies, while adding delivery was slow and coverage weak.

The Department of Statistics reports 68 percent of SMEs showing zero revenue since the lockdown was introduced on March 18, while there has been a 17.1 percent spike in unemployment, compared to the same time last year.

This translates to a jump in the national unemployment rate from 3.3 to 3.9 percent, with more than 50,000 graduates also expected to hit the job market in the coming months.

A family wearing face masks amid concern over the spread of the COVID-19 coronavirus, sit outside a shop after shopping ahead of Eid al-Fitr which marks the end of the Muslim holy month of Ramadan, as businesses have been allowed to reopen in Kuala Lumpur on May 21, 2020. (Photo by Mohd RASFAN / AFP)

Chief statistician Mohd Uzir Mahidin said in a news conference earlier this month that this figure could rise to as much as 5.5 percent as the long-term effects of the lockdown begin to bite.

In the context of Malaysia’s backbone, 92.1 percent of the MYR 6.3 billion in soft loans for SMEs approved as part of the stimulus package were gobbled up by just 14,000 companies, leaving the other 886,000 or 98.44 percent out in the cold.

Cronyism? Perhaps. In the past, there have been numerous instances of civil servants divvying up the juiciest cuts of budget infusions to their friends.

Yet, while some business owners grumble, there is scant evidence to back the cronyism argument up.

More likely the loans were given out on a first-come, first-served basis with little thought to budgeting for potentially 900,000 applicants. Then again, dividing it equally among all companies would come to a mere MYR 7,000 each.

This would be a nice little boost for a sundry shop owner with a handful of employees, but peanuts to larger companies with 500 people on the payroll.

As it is, that 1.56 percent of SMEs have a lifeline, the rest have nothing. This seems to be a general problem in providing much needed funds to companies that are running on empty. While the money is there, with the best will in the world it does not seem to be getting anywhere fast.

Therein lies a national problem, for in Malaysia there is no plan. Here, we jump straight from initial concept to execution, because getting bogged down in details of mundane things like a structured approach is just too boring.

The result, again for all the best intentions in the world, is utter bedlam.

Two coronavirus-related cases in point: Shortly before the lockdown, the police announced that people had to apply for an interstate travel permit at their local police station by midnight that night.

No one in the police had bothered to check how many people commuted interstate on a daily basis or indeed the extra workload for the officers manning the desks that day.

However, the bright sparks in the police hierarchy had a general idea when tens of thousands of frustrated commuters showed up at stations across the country, making desk sergeants wish they had been out directing traffic.

Security personnel check the temperatures of people entering a market, while enforcing social distancing, in Penang on May 29, 2020 as Malaysia eases its partial lockdown due to the COVID-19 novel coronavirus. (Photo by GOH Chai Hin / AFP)

Meanwhile, in mid-April the government announced that it was adding expanding the number of industries that could operate during the lockdown.

The Ministry of International Trade and Industry said companies could register for operating permits through its all-singing, all-dancing portal, which promptly crashed when 176,000 business owners all tried to access it at the same time — and continued to crash for the next few days.

On top of which, registration meant manually entering in the personal details of every single employee, which was a 20-minute task for a small company of a few people, but not for GMs of major factories with thousands on the payroll.

Yet, despite all the kerfuffle, there is some hope. Roughly 89 percent of the country’s SMEs are in the service industry, which means providing someone with something.

Traditionally, this means some face-to-face contact, particularly for market traders or small shops selling goods. Malaysia is a traditional country and this tactile contact forms a significant part of every transaction, so to lose this medium of exchange is difficult for many business owners to process.

So, with a lockdown all but killing off this sales channel, the more adaptable have taken their produce online.

Using delivery companies like Grab, small traders have by themselves found that lifeline the government promised them. So far, it has been a hit-and-miss affair as they adjust to the whims of the digital marketplace.

Some traders complain the platform doesn’t take into account the daily price fluctuations of their produce, meaning they sometimes sell at a loss. Meanwhile, others have found a whole new market and business is good.

What the lockdown has proven for many businesses is the need to adapt. In evolutionary terms, this could be the trigger that forces a response.

We do not know how long the lockdown will last or even the effect on social behavior when people are given more freedom, so it is encouraging that some enterprises are embracing change.

People walk inside a shopping mall in Kuala Lumpur on May 28, 2020, as sectors of the economy are being reopened following restrictions to halt the spread of the COVID-19 coronavirus. (Photo by Mohd RASFAN / AFP)

Yet, the significant majority of businesses cannot make that change, or even will not.

In a nanny state where the government provides — or is expected to provide — society has grown accustomed to holding up its rice bowl and having it filled on demand.

If indeed SMEs are the backbone of an economy at breaking point, the government could apply some radical new therapy and try to push this sector forward.

However, with its track record of liberally applying subsidies to gain favor, it will more likely resort to placating owners who just want to be rewarded for business as usual.

Gareth Corsi is a freelance journalist based in Malaysia. The views expressed in this article are the opinions of the author and do not necessarily reflect the editorial stance of LiCAS.news.

© Copyright LiCAS.news. All rights reserved. Republication of this article without express permission from LiCAS.news is strictly prohibited. For republication rights, please contact us at: [email protected]

Support LiCAS.news

We work tirelessly each day to tell the stories of those living on the fringe of society in Asia and how the Church in all its forms - be it lay, religious or priests - carries out its mission to support those in need, the neglected and the voiceless.
We need your help to continue our work each day. Make a difference and donate today.