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SURVIVAL OF MALAYSIAN SMALL & MEDIUM ENTERPRISES (SMEs) AMIDST PANDEMIC COVID-19



The Corona Virus Disease (COVID-19) pandemic has rapidly spread worldwide within the last few months. In Malaysia alone, we are witnessing an alarming number of deaths and high number of COVID-19 cases daily. In order to curb the spread of COVID-19, the Malaysian government had officially announced the execution of Movement Control Order (MCO) on 18 March 2020. This order is estimated to last until 28 April 2020 and only specific essential services such water and electrical supply, food supply, medical providers and few others are allowed to operate at the moment. This also means the halting of various non-essential industries and businesses operation across Malaysia.
With majority of our human capital working from home, this brings the discussion on the fate of our small and medium sized enterprise (SMEs) to the limelight. The ongoing MCO and various SMEs businesses are forced to stop operations, therefore what are the challenges that SMEs are facing amidst this COVID-19 situation?

1) Project cancellations worth up to millions of ringgit
According to thestar.com, local manufacturer especially those who are small and medium-sized businesses are currently facing cancellation of projects worth up to millions of ringgit due to the disruption in production caused by the outbreak of COVID-19. In addition to that, SMEs in tourism industry are also seeing a 30% profit decline in their profit while SMEs in other industries are facing a delay in execution of their projects and business activities.
Interesting statistic from survey conducted by Recommend.my:


2) Zero cash inflow due to MCO
Majority of small and medium enterprises in Malaysia expected that there will be no cash inflow for a minimum 3 months resulting from the still ongoing MCO. According to the edgemarkets.com, one of the main concerns brought up by the national president of SMEs Malaysia, Datuk Michael Kang, was on the estimated period of sustainability for SMEs. The data shared from a survey conducted by SME Malaysia showed that companies are estimating that their cash flow can only sustain up until April.



3) Bankruptcy possibilities
Given that most SMEs companies are still obligated to continue making a full payment of salary, rental and others while not having a sufficient cash flow in due to halting business operation, there is a rising concern with regard to the sustainability of businesses for as long as MCO is still ongoing. This situation right here may lead to a very high chance of bankruptcy for SMEs who did not have sufficient profit and cash for the next few months. According to Datuk Michael Kang, he stated that the economic uncertainty for the next six months will burden the repayment capability and that businesses shall be at risk to go under bankruptcy. He further shared a statistic where 4% out of 22.5% businesses that applied for loan has been rejected by the banks. 

This is a very concerning situation for SMEs across Malaysia as we are looking at possibility that various businesses, regardless of the sector or industries, might actually go bankrupt if there is not effective planning as to how to sustain their business throughout MCO and COVID-19 pandemic situation.

4) Suggested solutions for SMEs to overcome the challenges from COVID-19 pandemic
The sustainability of SMEs across Malaysia is still debatable up until recent date. However, we applaud the effort taken by both the government and SMEs in doing their best to maneuver through this highly disadvantages situation. At the same time, we also believe it is crucial for all SMEs to keep an eye on any updated stimulus package announced by the Malaysia government from time to time as these packages could be a useful aid to further assist SMEs in overcoming difficulties caused by COVID-19 and MCO situation.

For example, the recent announcement by the Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin on 6 April 2020 which highlighted the additional measure called SME Economic Stimulus Package (PRIHATIN) which was aim at easing the financial burden of SMEs and to help ensure 2/3 of Malaysian workforce remain employed. This PRIHATIN package expanded the allocation for wage subsidy from RM5.9 billion to RM13.8 billion.

Some other features worth noting for this PRIHATIN stimulus package include:

We sincerely hope that all SMEs are holding up well during this MCO period despite the numerous challenges to face with regards to the halting operation which lead to both financial and economy constraint.



REFERENCE
https://www.thestar.com.my/news/nation/2020/03/09/smes-badly-hit-by-outbreak
https://www.theedgemarkets.com/article/covid19-malaysia-smes-see-zero-cash-inflow-least-three-months-due-mco
https://www.malaymail.com/news/malaysia/2020/03/27/covid-19-after-mco-survey-finds-nearly-70pc-smes-lost-half-income/1850688
https://www.pmo.gov.my/2020/04/langkah-tambahan-bagi-pakej-rangsangan-ekonomi-prihatin-rakyat-prihatin/



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Location: Malaysia

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