SME Stimulus Package in Malaysia, a Knee-Jerk Reaction?


Malaysia’s Prime Minister Tan Sri Muhyiddin Yassin recently announced an enhanced SME Stimulus Package of RM 10 billion for small and medium enterprises (SMEs) to weather the storm caused by the Coronavirus Pandemic.

RM260Bil Stimulus Package Breakdown

Pie chart to illustrate Malaysia's Stimulus Package

Breakdown of Malaysia’s 260 billion SME Stimulus Package

Source: Prime Minister Text Speech, NST & CIMB

An overview on the latest SME Stimulus Package :

  1. Larger provision for wage subsidies. 

  1. Micro Business Grant of RM 2.1 billion to be awarded to over 700,000 businesses. 

  1. To reduce existing 2% interest rate to 0% under the Micro Credit Scheme provided by Bank Simpanan Nasional (BSN) and also extend to TEKUN national with a maximum loan limit of RM 10,000. All applicants is limited to one selection only. 

  1. Leases & Tenancies under Government-Linked Companies (GLCs), are eligible to apply for waiver or discounts. 

  1. A reduction in foreign worker levy by 25% for work permits due to expire by 1st of April to 31st December 2020. 

Is my business entitled for wage subsidy?

Under the latest wage subsidy program it is now totalled RM13.8 billion instead of RM5.9 billion that was announced over 27th march. This applies to all companies with local employees earning a monthly salary of RM4,000 and below. 

For business under the below mentioned categories, the entitlement cover over a span of 3 months : 

SMEs scale Micro Mid-Size Large
Definition < 75 Employees < 76-200 employees 201 employees and above
Entitlement  RM1,200 per employee RM800 per employee RM600 per employee

But in order to be entitled for the above programme;

  1. Your business must be registered before 1st of January 2020;
  2. Business owners must contribute PERKESO for each employee entitled for wage subsidies programme; 
  3. All business must experience a 50% decline in sales except for micro SME;
  4. Mandatory to be registered with Companies Commissions of Malaysia (SSM) before 1st January 2020;
  5. Applies to local employees with RM4,000 salaries and below only.
  6. Entity enrolled in the programme are not allow to retrench employees within the next 6 months.

Registration is open for application on from 9th April 2020.

Giving recognition to the SME Stimulus where it is due 

To begin with, loan moratorium is perhaps the game-changer for many small to medium enterprise (SMEs). Through an extension of loan maturity date, this allows relevant stakeholders to recoup their cash flow and prepare ahead.

Additionally, with the package many small to medium enterprises (SMEs) will enjoy immediate savings in payroll deductions, with some form of right-sizing, businesses may have a higher rate of survival as a whole.

Needless to say Micro-SME seems to be the largest beneficiary from the package. Businesses who are entitled will be eligible for a grant of RM3,000 and credit scheme of RM10,000 at no interest. For Micro-SME this is an appropriate measure to stimulate aggregate demand. 

Even though national reserve is running low, is a blanket consideration for all businesses that experience a decline in sales over 50%, fair to all small to medium enterprises (SMEs)?

Is this the end? Or what is next?

From my point of view, this SME Stimulus Package is unlikely to help small to medium enterprises (SMEs) to weather through the Post-Pandemic storm. Being mindful that the majority of the global economy is brought to a halt, there is just no place for short-sighted moves to shine.

  1. Back in The Great Depression, it began in 1929 and lasted until 1939. 
  2. Meanwhile, The Great Recession in the US started in December 2007 and lasted until June 2009. 

Although, the sheer size of the above mentioned statistic GDP dwarf the kind Malaysia holds. But policy of such scale should be long-term and not limited to during and post MCO period. 

Also back in 2009, our fiscal deficit stood at 6.7% of our Gross Domestic Product (GDP). However in an interview with Bernama, our finance minister Tengku Datuk Seri Zhafarul Tengku Abdul Aziz is assuming a stretch of only 4%.

Being optimistic should be a layman’s duty.

The Final Say

Frankly, Malaysia government is trying to create the best multiplier effect through this fiscal policy (optimism inserted here). However just like all other taxpayers in Malaysia, we cannot help but wonder if the government has tried hard enough to maintain peoples confidence while undertaking such a large scale spending in the economy. 

Also, at times like this effective automatic stabilisers in the economy such as Employee Insurance System (EIS) should be prioritised as it will serve as an effective measure in future. 

Even though tax cuts and rebates has not been a widely supported measure in this fiscal policy. Studies have shown that if targeted at the lower income household it will be more likely to reflect on aggregate demand especially true for M40 & B40 group. Tax cut can also come in form of property related taxes such as Quit Rent & Assessment Rates. 

Lastly, to those who are not entitled for the SME Stimulus Package. Brace yourself. Unfortunately you are on your own on this one and you should look into leaner approach to operate your business.

Perhaps when push comes to shove, for the survivability of our people we will thrive. 

I keep my fingers crossed, i hope you do too. is a lifestyle and property blog to get the latest news and coverage about the property scene in Malaysia.

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