FMM: Improve Cash Flow for SMEs Businesses

i. Extend the moratorium on loans and financing until year-end or even to March 2021to relieve business cash flow. Although Bank Negara Malaysia has been very aggressive and proactive in reaching out to SMEs to approach their banker early to reschedule and/or restructure their loans / financing, an extended moratorium is still the preferred and more effective assistance, especially since the onset of the third wave of the Covid-19 had again raised market uncertainties and risks.

ii. Recognize that during the current pandemic, sales in many economic sectors are adversely affected. There should be flexibility in the definition of company size based on sales turnover to assist all companies which have suffered significant declines to the extent that they can fall within the ambit of the national SME definition. These companies are among the most badly affected and in dire need of assistance and support and will likely be the mid-tier companies (MTCs), which also have the potential to create a strong multiplier effect. MTCs as defined in MATRADE’s Mid-Tier Companies Development Programme are companies with annual revenues between RM50 million to RM500 million in the manufacturing sector and between RM20 million to RM500 million in other sectors. There are approximately 10,000 MTCs in Malaysia, and despite being just 1% of all Malaysian firms, they collectively contribute ~30% of the country’s GDP and employ over 22% of the workforce. These statistics clearly show that mid-tier companies have the capacity to create wider and stronger multiplier effect up- and downstream of the supply chain. Tax relief and assistance accorded to SMEs should also be accessible to MTCs for at least the next two years to help in their recovery.

iii. A key booster will be the waiver of both corporate and individual income taxes for Year of Assessment 2020 and 2021. Since taxable income is greatly reduced, the loss in tax revenue to the Government may be comparatively minimal. But for businesses, the waiver will allow them to recoup and strengthen their internal finances to rebuild their businesses; while employees as consumers will have higher disposable income for consumption and demand for goods and services. Both corporate and personal income taxes have to be waived for a stronger impact and multiplier effect from consumer to business to workers in the virtuous cycle of supply and demand.

iv. The Wage Subsidy Programme (WSP) has helped SMEs in the past few months however there is growing unease that for the mid-tier and larger companies with more than 200 employees with turnover exceeding RM50million and which contribute significantly to the GDP, the wage subsidy is grossly inadequate and will lead to problems in the coming months if not addressed. Wage subsidies are given to companies to assist them to retain their workers through this difficult environment. For wage subsidies we would expect all employees in a company to be treated equally but unfortunately the current WSP is limited to only the first 200 employees in a company. There are many companies employing more than 200 and they are left unassisted. In addition, the other condition of the salary cap of RM4,000 has made more workers ineligible for the WSP. Propose that the Government consider removing the 200 employees limit and RM4,000 salary cap. Further it can be more targeted to the mid-tier companies by a restriction perhaps not exceeding 800 workers. Extend the WSP to assist companies impacted by the third wave of the Covid-19.

Article Reference : FMM