Loh: Without any income during the MCO period, how many months do you think we can sustain our business?
Chan: It is important to take care of the people, but if the SMEs shut down, many people will be jobless in the end
Nonee: We hope the government will come up with a third stimulus package that is targeted at solving the challenges faced by SMEs
Chew: The RM600 relief doesn’t help much as the amount is so low and it only applies to staff with salaries below RM4,000
Farm: The EPF contribution is another issue. Hopefully, employers are allowed to temporarily stop the mandatory contribution.
Lim: I think the government is doing the right thing with the MCO but it needs to be kind to us
The Perikatan Nasional government may have won the hearts of many with its RM250 billion Prihatin economic stimulus package, which assured that “no one will be left behind”, but small and medium enterprises (SMEs) are far from happy. Most feel that the segment, although a crucial cog in the wheel of the economy, has been overlooked, neglected even.
Hit by the Covid-19 pandemic and the government’s Movement Control Order (MCO), many businesses are unable to operate during the period, although fixed expenses, including employee salaries, rental fees and utility bills, have to be paid.
Although the government has announced plans to introduce a wage subsidy programme and other measures to assist employers during this extremely difficult period, the SMEs and business owners whom The Edge spoke to are calling for more action from all sides to address the real economic challenges created by Covid-19.
Datuk Melvin Loh Kok Man, managing director of construction company LKM Group, warns that if SMEs struggle to survive the crisis, many people will lose their jobs.
“Our group employs more than 100 people and we pay about RM500,000 a month in salary. Without any income during the MCO period, how many months do you think we can sustain our business? Bear in mind that there are many other companies with a bigger workforce than us. Can you imagine if all of us fail? That would be disastrous for the country,” he points out.
Loh acknowledges that the wage subsidy programme, where the government provides a salary of RM600 per month to each employee for three months, is quite helpful in his case, as half of his employees earn less than RM4,000 a month (the threshold to qualify).
“But even then, it is very tough because we have zero income and we need to find ways to pay the balance of our workers’ salaries. Time is money. The government should come out with more solutions to help the SMEs as soon as possible,” he stresses
Short-term gain, long-term pain
Businessmen are also taking aim at Bantuan Prihatin Nasional — the one-off cash assistance to households and individuals — announced by the government.
Under the initiative, Putrajaya has allocated RM10 billion for direct cash handouts, far more than the RM5.9 billion allocation for the wage subsidy programme.
CP Printery Sdn Bhd CEO Chan Gim Kooi opines that giving cash handouts to the needy is welcome but it will not address the real economic problems.
“SMEs are facing many problems today. Profit margins have been going down. Rents are not subsidised by the government. We have the bank loan to service, machinery instalments to pay. Of course, it is important to take care of the people, but if the SMEs shut down, many people will be jobless in the end. Also, we won’t be able to contribute to the government in terms of income tax eventually,” he says.
Moreover, Chan adds, the people most affected by the MCO are the bosses and business owners. “I know this may not be a popular opinion but, frankly, some employees are not affected by the MCO at all. For instance, our company will comply with the government by giving them full salary while they also get cash handouts from the government.”
Established in 1992, CP Printery specialises in the printing of manuals, books, brochures and financial reports. The company employs 40 people and its monthly fixed cost is about RM200,000, mainly for staff wages, rent and machinery instalments.
“So far, we have not seen a serious cashflow problem because our company has been saving for the rainy day and has some cash reserves. Hopefully, we can sustain our business for a few more months,” says Chan.
Nestcon Development Sdn Bhd executive director Kwong Jee Kong also feels that the government should allocate more money for the SMEs rather than the households and individuals.
He says although the government insists that employers ensure there is no retrenchment or wage cuts, at the same time, certain individuals are entitled to cash handouts as well. Essentially, this means that some employees will be getting more money than they usually do — without going to work.
“From the employers’ viewpoint, we don’t understand the logic. If you don’t allow companies to cut workers’ salaries, that means the employees won’t be affected. Therefore, in my opinion, the cash handouts should be given as a reimbursement, only if their salaries are cut,” Kwong suggests. Nestcon Development is the property arm of Nestcon Group.
As far as the property sector is concerned, Kwong urges the government to not only ease the housing cooling measures but also stimulate the market.
“The property sector has multiplier effects for many other industries. If the property market does well, other sectors thrive, and the [positive] sentiment will come back,” he says.
Global Turbine Asia Sdn Bhd chairman and founder Datuk Nonee Ashirin Mohd Radzi acknowledges that Covid-19 is an unprecedented pandemic that has caused global economic uncertainty and where businesses were totally unprepared for the contagion.
She says the Prihatin economic stimulus package is the right move to ease short-term liquidity woes but further business-friendly measures must be introduced soon to cushion the impact of MCO, now and later. “We hope the government will come up with a third stimulus package that is targeted at solving the challenges faced by SMEs in maintaining their operations and capabilities,” she adds.
Global Turbine Asia is an independent engine and maintenance, repair and overhaul (MRO) service provider of military and civil service engines.
According to Nonee, although one of her company’s clients is the Armed Forces and should, therefore, remain operational for the nation’s defence readiness, it did not receive any approval from the government to operate.
“We had to apply for a permit for our skeleton team to be at our workshop. With the MCO 2 now, we have decided to shut down 100% and be on standby for emergency or ‘Aircraft On Ground’ situations,” she says.
She adds that the MRO and aerospace sectors need direct stimulus injections by the government as the relief funds are not sufficient to assist these SMEs.
“Remember that the airlines are going bankrupt; we are directly supporting them. If they fold, MRO companies will also have cut their overheads and shrink their operations.”
F&B and services
While food and beverage (F&B) companies are relying on food delivery services such as Foodpanda and GrabFood to offset the impact of the MCO — dining in is not allowed — their owners say the income is simply not enough to cover their fixed expenses.
Growthrive Sdn Bhd director Ken Farm says the food delivery companies take a 30% to 35% cut from sales, which have already fallen by more than 60% over the past two weeks.
“Our profit margin is being squeezed and we have no choice but to push up volume. It would be good if the government asked them (food delivery companies) to reduce their commission by 10% to 15%,” he proposes.
Growthrive is the operator of 8haus, a Western and Oriental fusion restaurant in KL that employs 10 people.
Farm says everybody should come together in the current crisis. If the F&B companies put up the shutters, the landlords will lose their tenants. And if the SMEs shut down their businesses, there will be fewer customers for utility companies.
“Everybody needs to compromise, everyone needs to sacrifice, so that the companies can survive, and the employees get to keep their jobs,” he says.
He hopes Putrajaya will ask the landlords of commercial properties to reduce their rent by 50% and the utility firms to lower their rates or even allow the SMEs to defer payment.
“The EPF contribution is another issue. Hopefully, employers are allowed to temporarily stop the mandatory contribution for the next few months. If the government insists [that employers contribute], perhaps they could share the burden with us. As for income tax, it would be very helpful to us if the government reduced it by 50% or even waived it,” he says.
Harry Chew, sales director of BioConnexion Sdn Bhd, a master franchise holder of bubble tea franchise Presotea, concurs.
“Perhaps the government should consider higher discounts for utilities and provide some sort of rental subsidy or compel landlords to defer our rental payments so that the effects of the loan deferments can trickle down to the supply chain,” he says.
He also thinks that the amount provided under the wage subsidy programme ought to be a percentage rather than a flat rate of RM600.
“The RM600 relief doesn’t help much as the amount is so low and it only applies to staff with salaries below RM4,000. Singapore announced that it would help employers with 75% of salaries, which would have a much greater impact on SMEs. To us, even a 50% subsidy would help a lot,” says Chew.
“As for loan deferments, although it helps my landlord with his loan, he still charges me the same rent, which is a hefty chunk of our expenses.”
Silver Cut Hair Studio director Patrick Lim points out that rent is a huge burden for his salon. Thus, he thinks the government should make it mandatory for landlords of commercial properties to reduce rental rates.
“If the government can’t give us the flexibility of cutting employees’ salaries or asking them to take leave, then please ask the commercial landlords to be more considerate to us. If our rent can be reduced, that will be a huge relief,” he says.
He concurs that just as employees need to be taken care of, so do business owners. “Overall, I think the government is doing the right thing with the MCO but it needs to be kind to us. We cannot be paying all these fixed expenses without any income.”
Top 5 things the SMEs are asking for
1 Stronger employment retention and wage subsidy programme
- Employers to be given flexibility to negotiate with employees on unpaid leave and pay adjustment
- Increase the amount of wage subsidy
- Less stringent conditions to qualify for wage subsidy programme
2 Suspend employers’ statutory contribution
- Exemption or cut in EPF contribution
- Suspension of Socso, EIS, HRDF, foreign workers’ levy
3 Lower income tax
- Income tax to be reduced or waived
4 Lower rents
- GLC-owned buildings and commercial landlords to reduce rent for tenants
5 Lower utility bills
- Electricity bill discounts to be extended to more users
- Other utility firms should follow suit