Stimulus Will Cushion Some of the Covid-19 Impact on the SMEs

Prime Minister Tan Sri Muhyiddin Yassin announced an additional stimulus of RM10bn to the existing RM250bn Prihatin Rakyat Economic Stimulus Package, bringing the total stimulus packages to RM260bn or 17.3% of GDP. The latest additional measures are targeted to support the small and medium enterprises (SMEs) as well as to ensure that two-thirds of the Malaysian workforce continue to retain their jobs. The additional RM10bn is mainly allocated to the wage subsidy scheme amounting to RM7.9bn, while the remaining RM2.1bn will be allocated to the Prihatin Special Grant for all SMEs that qualify.

Wage Subsidy Programme Raised by RM7.9bn to RM13.8bn in Total

The wage subsidy programme, which was previously announced in the Prihatin stimulus package, with an allocation of RM5.9bn previously, now has been raised to RM13.8bn, whereby all workers that earn RM4,000 and below will receive a wage subsidy for three months. The amount of subsidy will depend on the number of employees the SME has employed; for instance, SMEs with more than 200 employees will receive a subsidy of RM600 per worker and is limited to 200 workers (limited to 100 workers previously), and so forth.

This programme is expected to benefit 4.8m workers. With this subsidy, employers must retain their staff for at least six months. Previously, in the Prihatin stimulus package, only companies whose businesses have experienced a 50% drop in earnings since January 2020 were able to qualify for the wage subsidy scheme.

Creation of RM2.1bn Prihatin Special Grant

Besides the wage subsidy programme, the Prime Minister also announced the creation of RM2.1bn Prihatin Special Grant for all SMEs that qualify. The Government will provide a Special Grant of RM3,000 to all micro SMEs, which is expected to benefit close to 700,000 micro SMEs. In addition, the Government will also abolish the 2% interest rate to 0% for the micro credit scheme worth RM500mn under Bank Simpanan Nasional. Meanwhile the micro loan scheme for micro businesses will be extended to TEKUN Nasional with a maximum loan limit of RM10,000 per company at 0% interest. The Government has allocated RM200m for this purpose.

Besides that, the Government will provide a temporary rental waiver or rental discount for SME retailers, which are premised in locations owned by government-linked companies. Private premises owners are encouraged to provide the same facilities by reducing their rental rates at least during the MCO period and 3 months after the MCO ends. Moreover, an additional tax deduction equal to the amount of the rent reduction for April 2020 to June 2020 (at least 30% of the original rate for the period).

Importance of SMEs in Malaysia

The SMEs are an integral part of the economy in terms of production, employment generation, contribution to domestic and external demand, as well as promote economic development.

Source: Affin Hwang Research - 7 Apr 2020