Businesses are generally positive about the additional stimulus package announced on April 6, especially the wage subsidies and soft loans to help extend cash flow, and want to know what the government plans to do to stimulate the market once the Movement Control Order (MCO) has been lifted and companies can go back to business as usual.
Ken Neoh, founder of Infinite Loop Media Sdn Bhd, is happy with the RM10 billion stimulus package for small and medium enterprises (SMEs). “The previous stimulus package focused more on the people, especially those from the B40 group – which is very important – and SMEs were not the focus. But the additional stimulus package for SMEs did pump money directly into the companies’ pockets,” he says.
The salary subsidy for SMEs has the most direct impact on Neoh’s company, a creative content production house. “It will help us pass through the current period. Fortunately, our company is still able to pay our staff their full salaries, including claims. But some of our clients may be suffering. Such a subsidy will allow us to lower our profit margin and offer some of our clients a lower price. And it helps us to maintain our business,” he says.
Neoh believes that the abolition of the 2% interest rate for the RM500 million Micro Credit Scheme under Bank Simpanan Nasional and microloan scheme for micro-businesses extended by Tekun Nasional will help ease the burden of SMEs. Tekun is an agency under the Ministry of Entrepreneur and Cooperative Development that provides quick and straightforward financing facilities to bumiputera businessmen to kick-start their businesses.
Ong Zhong-Ken, co-founder of Footballhub Sdn Bhd, a start-up that allows football enthusiasts to book fields and participate in matches, says the stimulus package for SMEs is mainly designed with traditional businesses in mind. Start-ups that utilise technology to cut down on labour do not benefit as much.
“The announcement does not prove much of an aid to start-ups. We have been adopting technology to reduce costs and maintain efficiency. We have cut the number of mundane labourers, who are paid less, and hire more workers with specific knowledge by paying them a higher salary,” says Ong.
“As such, a subsidy that helps companies pay the salaries of employees who earn less than RM4,000 per month will not benefit start-ups as much.”
While the government announced grants and loans with low interest rates for SMEs, Ong isn’t sure that he wants to apply for them. “I don’t know if we should be taking more loans when there are very few business opportunities,” he says.
However, the additional RM10 billion stimulus package is still a positive to the country’s economy as many local companies are traditional businesses, says Ong. He adds that start-up founders should rely on themselves to weather the crisis instead of relying on financial assistance.
“Waiting for financial assistance is the final resort. Being start-up founders, we should be able to manage the crisis and explore other possibilities to reduce the burn rate,” he says.
“Instead of looking at stimulus packages, I would rather focus on what the government is doing to curb the further spread of the Covid-19 virus. This, in turn, should lead to a projection of when companies may resume business as usual and we can plan accordingly. I would also like to be advised on the steps our government intends to take to help the market recover after the MCO.”
Automated test equipment designer and manufacturer Aemulus Corp Sdn Bhd CEO Ng Sang Beng says there was not much in the updated stimulus package to interest his company. “The deferment of loans in the previous announcement was a good thing for us as it eases our cash flow.
“We did take loans to buy our land and buildings and we had to service those loans each month. Not having to pay that for the period of the moratorium will really help.”
Ng says that in the first round of Prihatin, the prime minister also announced that SMEs would be able to get RM1 million in soft loans, to be disbursed by the banks. “This is another possible benefit for us, but the coverage should be extended to a broader definition of SMEs.”
What about the newly announced wage subsidies? “It does not do much for us because the ratio of subsidy to average salary is not high. But to be fair, under the manufacturing environment, a lot of the operators are overseas labourers earning between RM1,500 and RM2,000. So, the subsidy represents 40% of their salary. But the RM800 does not mean that much to us,” he says.
Ng says the most important thing for SMEs now is to extend their cash flow. “If I can get a loan, I can extend my cash flow. And it needs to be a subsidised loan, which means the interest is super low, say 1% or 2%, and the payment deferred. The extension of cash flow is actually a way for the government to pump a lot of money into the market.”
This is important, especially for when the MCO is over and everybody emerges from their places of confinement to survey the wreckage. “When the MCO is over, we will need an engine to restart the economy. This is usually provided by the SMEs and manufacturing sector. As long as they continue to run, continue to pay money, we are okay,” says Ng.
“If you help the workers without helping the SMEs, when all this is over, they will not have jobs to go back to.”
So, lifelines are important. For the period of the MCO, it is important to ensure that the SMEs continue to survive. “They are the backbone of the economy and should be our No 1 priority.”
Ivan Hoh, co-founder and CEO of Codon Genomics Sdn Bhd, a bio-informatics company, welcomed the additional stimulus measures but felt that certain things should have been made clearer. “Companies need a clearer way to apply for the benefits under the stimulus package and access should be made easier,” he says.
He suggested certain refinements to the programme such as allowing businesses to defer their Employee Provident Fund contribution for the duration and providing special assistance to technology companies for things like cloud access, outsourcing, data centres and technology tools.