A. Welcoming Measures

• SMEs and micro-businesses make up two-thirds of the workforce and contribute 40% of the GDP. Unlike the 2008 global financial crisis (GFC) where shops and restaurants could still rely on social interaction and foot traffic for business, Covid- 19 has stripped that advantage away. This crisis demands a set of policy support measures that are both broader and longer term than those pursued in 2009. Otherwise, small businesses are certain to face a calamity.

• Thus, the latest additional stimulus measures worth RM10 billion to soften the impact of the movement control order (MCO) on SMEs and micro businesses are welcoming. Many are experiencing a tight cash flow due to zero or minimal sales revenue. But the tight cash flow Is not just because of the MCO. Businesses are also affected by the slow and inconsistent implementation of policies and measures as well as trade wars and other domestic challenges in the past.

• Without these additional measures, even if the MCO is lifted, demand is expected to be weak for some time due to travel aversion and social distancing. Not every small business is equipped to survive this downturn. The drop in consumer and corporate spending will intensify the adverse chain reaction that will fuel the collapse of micro businesses, especially the younger and smaller businesses due to their highly vulnerable situation. Generally, the older and larger small businesses are more likely to withstand an economic crisis. Exports will stay weak from lockdowns. Commodity prices will be soft.

• And because small businesses contribute disproportionately to job loss during recessions, policy responses are necessary. Many SME businesses have been forced to close their doors, and some may not reopen. Apart from revenue loss, they will be impacted by poor credit standings.

• With the additional measures plus the increasing focus on micro businesses which make up a big share of the SMEs, the support will more likely help reduce bankruptcies and bad loans. There could be some relief on job losses which remain a major concern although these are expected to vary considerably according to the age and size of the small businesses.

B. Key Highlights

1. Allocation for the wage subsidy programme (3 months) will be raised to RM13.8 billion from RM5.9 billion. All SMEs (registered under the Companies Commission of Malaysia [SSM] or local authorities and Socso) with local employees paid under RM4,000 will receive:

• RM600 of wage subsidy per eligible employee (maximum number of eligible employees is 200) for businesses with more than 200 employees;
• RM800 of wage subsidy per employee for businesses with 76–200 employees;
• RM1,200 of wage subsidy per employee for businesses with less than 75 employees.

2. RM2.1 billion of special grant for qualified micro enterprises, and a RM3,000 special grant for each micro enterprise which will benefit 700,000 micro SMEs registered with the Inland Revenue Board (LHDN);

3. Licensed money lenders are urged to provide a 6-month moratorium to SMEs, beginning April 2020;

4. Abolishment of 2% interest rate for BSN’s Micro Credit Scheme, amounting to RM500 million;

5. RM200 million will be provided in the micro loan scheme for micro businesses (also extended to Tekun Nasional) with a maximum loan limit of RM10,000 per company at no interest;

6. SMEs whose premises are in GLC buildings to be exempted from rental or given discount on rental. Private property owners will receive additional tax exemption if they give discount (at least 30%) to SME premises in their buildings for the April–June 2020 period;

7. Foreign worker levy cut by 25% for those with permits ending 31 December 2020. However, this is not applicable for domestic helpers;

8. 30-day automatic moratorium from the last day of of MCO for enterprises to submit statutory documents to the SSM.

Source: AmInvest Research - 7 Apr 2020