Struggle of Malaysian SMEs During the COVID-19 Pandemic

Published on 14 May 2020

May 2020 Policy Brief 

The COVID-19 pandemic is an unforeseen global phenomenon which has thrown the economy into chaos and effectively put commerce at a standstill. It has affected most businesses, including the small medium enterprises (SMEs) and micro SMEs which make up a significant 98.5 percent of Malaysian businesses.

The Malaysian government responded to the coronavirus threat by introducing PRIHATIN or the Prihatin Raykat Stimulus Package, the purpose of which was to ease financial burdens of the people and businesses coping with the pandemic, especially with the enforcement of a movement control order (MCO) issued by the federal government. However, SME representatives have argued that the allocations in the stimulus were insufficient to help the SMEs (Fong, 2020). This led to the introduction of additions to PRIHATIN by the federal government specifically for SMEs. This relief was lauded by some SMEs while others have commented that the stimulus only allowed SMEs to last an additional two months during the MCO.

This underscore concerns from the SMEs and the millions working for them. Solutions need to be devised to enable SMEs to survive and thrive in an environment where unemployment is on the rise as the situation has become financially unsustainable for some businesses, giving many no option but to go out of business. In the United States, unemployment figures have already reached 26.5 million people (as at 23 April 2020). The Department of Statistics Malaysia has also reported rising levels of unemployment in Malaysia. This presents an urgent need for a means to halt and reverse these trends as high levels of unemployment can eventually give way to social woes such as higher rates of crime.

Engagement with SMEs and relevant government agencies is necessary to ensure constant review of the effectiveness and sufficiency of government policies in dealing with the effects and after-effects of the MCO and coronavirus to facilitate dynamic and appropriate responses. This policy brief is a result of one such engagement, which raised concerns from the SMEs and generated valuable feedback which the necessary stakeholders can examine and apply in terms of appropriate public policy.

One of such engagements was organised by KSI on 30th April 2020 with representatives from the SMEs. These are the findings and recommendations from the said webinar.

Identified Issues 

• SMEs of different sizes have different challenges
• Delay and rejection by banks in obtaining loans
• Wage Subsidy Programme limits options for some businesses
• Exclusion of unregistered SMEs
• E-commerce had varying effects on different types of SMEs
• Delays due to bureaucratic processes
• Policy gaps affecting e-commerce processes
• Receivables management

Recommendations for SMEs

• SMEs need to review business models
• Adoption of new technologies to enhance operational efficiency
• Improve risk management
• Implement cashless payments
• Formalise the informal sector
• Implement high occupational health and safety standards
• Be kept informed on government announcements

Recommendations for government

• Involve SMEs in procurement process
• Introduce the COVID-19 Act
• Reduce bureaucratic processes
• Transparency and oversight on cash transfers
• Review internal procedures and regulations to facilitate digital adoption
• Referral system for loans as alternative to KYC
• Provide more electricity discounts
• Ministry of Human Resources Mediation
• Resume Employment Retention Programme (ERP)
• Facilitate business registration
• Increase Special Relief Facility (SRF) by another MYR5 billion which will help SMEs to last an additional 3 months.
• Take the lead in organising digital EXPOs for trade promotion.
• Loosen regulations to speed up the entry of new businesses by making it simpler for them to obtain business licenses.
• Suspend all statutory notices for at least 6 months.
• SSM late submission fees are deterring businesses from registering. Such cost of doing business must be reduced.
• Combat corruption to allow businesses to thrive.
• Coordinate tourism packages to generate business
• Allow businesses to keep the government in check to ensure policies are not politically-driven but serves a pragmatic purpose.
• The government needs to cultivate an ecosystem that allows SMEs and businesses to thrive, which are conditions necessary after the lifting of the movement control order (MCO).