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KUALA LUMPUR (June 27): Two out of three small to medium enterprises (SMEs) do not foresee their businesses recovering this year, according to the Small & Medium Enterprises Association (Samenta).
In a statement today, the association's chairman Datuk William Ng said it had carried out its mid-term survey from June 19-23, where 16% of respondents also said their businesses will only recover in 2023.
"The FMCO [full movement control order] currently in force is particularly devastating to a majority of our SMEs. During MCO 1.0, many SMEs still have cash buffers to keep their businesses afloat.
Post-pandemic recovery amid rising inflation
Higher inflation in the US and globally, fear of quantitative easing, a resurgence of the Covid-19 virus and the slow pace of vaccination are key factors that will cause higher volatility in the equity market. They are likely to dampen market sentiment, especially concerns surrounding the US inflation rate.
"However, after over a year of disrupted business, SMEs are no longer in a position to survive on their own. Indeed, 30% of SMEs would have run out of cash during this FMCO, and if the FMCO is extended, many of these would simply close down," he added.
Ng estimated that around 90,000 businesses would have shuttered by now, after weathering the movement control orders. This would be three times the 30,000 reported by the Companies Commission of Malaysia, and takes into account that some businesses would have closed down without reporting it to the commission.
"The World Bank, in its latest Malaysia Economic Monitor, has also affirmed the fact that our SMEs have less cash flow compared to regional peers.
"The National Recovery Plan has largely been silent about our plans as a country to mitigate economic losses from the pandemic. More conspicuously, it is silent on our plans for a ‘recovery’ and how Malaysia can get back on the track we have been derailed from since the beginning of the pandemic.
"The government needs to be leading at this crucial period by providing a clear, realistic roadmap for our economy, and by extension, (for) our SMEs to recover from the pandemic and tap into opportunities in the new normal," he said.
Besides the immediate challenges from the pandemic, Ng also said it is important for Malaysian SMEs to be weaned off relatively “cheap” labour, speed up automation and reliance on physical manpower, while also improving the education levels of the next generation of entrepreneurs.
He noted that the better integrated the country’s SMEs are to the global market, the quicker the drive will be for such businesses to digitalise.
“At the same time, don’t set the bar so high that our SMEs are discouraged from investing in technology. Stop talking about IR 4.0 and when most of our SMEs are still keeping their records in manual ring files,” said Ng.
The Samenta chairman also underscored the need to build indigenous brands and local heroes, instead of training Malaysians to become mere middlemen and resellers of foreign, low value-added products.
This is occuring as the country is allowing low-cost products with questionable qualities to flood our market, amid the country’s fervour to globalise, to the detriment of Malaysian SMEs, Ng opined.
“We must be firmer in ensuring the large de-facto monopolistic marketplaces prioritises local SMEs,” he added.
Ng also expressed hope that the government will continue to place more emphasis on capability and capacity building for Malaysian SMEs, as it has been doing through SME Corp, rather than short-term handouts, which although crucial during this pandemic, should be ceased once the pandemic has ended.
“A recent SME Employee Experience study conducted by SME Magazine and Willis Towers Watson has shown that contrary to popular notion, Malaysian SMEs are ahead of regional peers in employee engagement. This means that our SMEs are by and large ‘good employers’. Unfortunately, this has not translated into SMEs becoming preferred employers,” Ng added.
He concluded by saying that the country should also look beyond the reopening of the economy to help its SMEs regain "lost ground and sprint ahead of our regional peers".
"As the saying goes, never waste a good crisis," he added.
Source: https://www.theedgemarkets.com/article/twothirds-smes-see-no-hope-recovery-year-says-samenta