APR 07, 2020

[PRESS STATEMENT] Government Response Encouraging, But Bolder Measures Warranted

We welcome the announcement of PRIHATIN plus that allocated an additional RM10billion to aid Small and Medium Enterprises (SMEs). 

In particular, the increase of the allocation for the wage subsidy program from RM5.9billion to RM13.8billion is a step to the right direction, as it eases the cashflow of SMEs and enable them to retain their workers. The commitment for them to continue to be employed for next three months is also important to ensure that the workers are treated fairly. This is in line with REFSA’s earlier suggestion that we must make sure that there will not be a moral hazard where profit is privatised but losses socialised. 

However, we are concerned that the tiered system of RM600 for firms with 200 pax above, RM800 for firms between 76-200pax, and RM1,200 for firms under 75 pax might still come up short in solving the dilemma of SMEs in retaining workers. In comparison, Singapore subsidised up to 75% of salary of each employees in highly impacted sectors, while the UK support 80% of the monthly salary of each furloughed employee. While the 3-month timeline is good, it may not be sufficient to cover the amount of time required for businesses to recover e.g. Singapore’s wage subsidy package is for 9 months until December. 

There’s also room for improvement in the mechanism. The capping at 200 employees might mean that it is harder for larger firms to retain their headcount. Meanwhile, there’s no distinction on the type of micro enterprises in the handout of one off RM3,000 – a T20 yoga instructor at home and a B40 pisang goreng seller are both micro-enterprises if they register their company, but certainly have different needs depending on how badly their businesses are affected. 

Most glaringly, owned account workers and gig workers are not included in this package. This means that our hawkers, handyman, school bus drivers, artists, property agents won’t be covered. These are some of the most affected groups during the MCO period. In this regard, we echo the views made by other think-tanks including KRI and IDEAS, that these group of people should be included in the Employment Retention Programme run by SOCSO.

The levy discount for foreign labour might be a short term relief for SMEs, but it will perpetuate our reliance on foreign workers. Instead, government should have seize the opportunity to encourage enterprises to hire of locals and adopt more technology, which is good in the long run for our economy.

In short, we think that the recent announcement is encouraging and will be able to lend some support to the ailing SME sectors. However, there are still many who fall through the crack. We will need a blanket wage subsidy programme so that companies – micro, small and medium, as well as own-account and gig workers can all benefit from it. 

As the country continues to fight the pandemic and our economy hangs in the balance, government must be agile and quick to respond to this dual crisis that is certain to be a game-changer to our country and the world. Bold and out-of-the-box thinking is warranted, so that our companies and workers can weather this storm and our economy can emerge from this crisis without irreversible damages.

Published in: The Star, SME Magazine