MANUFACTURING, retail and tourism are the worst-hit sectors among small and medium enterprises amid the Covid-19 pandemic, said industry groups.

Adding to SMEs in the manufacturing sector’s woes is the 10% sales tax, Associated Chinese Chambers of Commerce and Industry Malaysia (ACCCIM) national committee member Koong Lin Loong told The Malaysian Insight.

“Most players in the Malaysian manufacturing sector are SMEs. If you produce or process, you have to charge 10%. So, I think a lot of manufacturers will be affected.

“We call on the government to defer SST (sales and service tax) for this period,” said Koong, who is also chairman of the SME committee.

SME Association of Malaysia president Michael Kang told The Malaysian Insight the retail and tourism sectors will also be badly hit.

Tourism is “totally dead” because of the absence of foreign visitors, while retail is affected by the drop in spending due to the movement-control order (MCO).

Asean Chamber of Commerce president Moehamad Izat Emir said most small businesses will suffer,  including hawkers and taxi drivers.

“When you are not allowed to go out, you are as good as dead,” he said.

Izat lauded the government’s moves to mitigate the economic effects of the pandemic with a RM250 billion economic stimulus package, known as the Prihatin package, unveiled on March 27.

Cash-flow problems

A recent online survey by the SME Association of Malaysia found that about 33% of respondents have just enough cash flow to survive in March, while 37.8% can only sustain until April.

The survey was conducted jointly with Bizsphere and garnered 15,627 SME responses.

Koong and Kang said high rental cost and wages account for a bulk of cash-flow problems.

“All need to pay rental and high salary,” Kang said, while Koong added that the two components are part of fixed expenses.

“Rental and wages comprise 50% of expenses,” Koong said.

An appeal for rental rebates is among proposals ACCCIM submitted to the Finance Ministry recently.

Other appeals involve adjustments to the Prihatin package to increase wage subsidies to RM1,200, instead of RM600, and allow deferment of tax payments.

The government should also consider subsidising landlords of private business premises through a double tax deduction so that they can provide their tenants with rental rebates, said Koong.

“Many SMEs will be pushed to the brink of bankruptcy if the measures are not implemented.”

Koong also said Putrajaya should consider subsidising Malaysian employees until year-end through the wage-subsidy programme, as businesses will still struggle for the next six months even after the MCO is lifted.

Post-MCO, Koong said, SMEs should move towards adopting e-commerce.

This is to adjust to new habits that consumers may adopt, such as social distancing given that the pandemic’s effects will still be felt until a vaccine is developed and approved.

E-commerce platforms have become more efficient and people will not have to shop physically.

Entrepreneurs in need of funds to adopt e-commerce could tap into the RM7.5 billion economic sector fund and automation fund, Koong said.

The MCO is extended until April 14 to break the chain of Covid-19 infections, which have so far killed 53 and infected 3,333 others.

Under the MCO, Malaysians can only leave their homes to buy groceries, food and for emergency medical reasons. – April 5, 2020.