COVID-19 lockdowns and manpower shortages have shrunk local small and medium enterprises’ (SMEs) sales by 30%, and the weak Malaysian ringgit is adding to costs, an industry group said.

It said current sales figures are even lower than pre-pandemic levels. 

SMEs contributed 38.2% or RM512.8 billion to the national economy last year, making them the backbone of the Malaysian economy. But that figure was down 7.3% from 2020.

SME Association of Malaysia president Ding Hong Sing said the movement control orders (MCOs) from March 2020 to last year were the main factors for the decline in business.

While business was back to normal on April 1, SMEs are still suffering the effects of MCOs.

“SMEs have never been in such a bad state. While the economy has reopened, the lack of manpower and the government’s attitude means we are operating at a loss,” Ding told The Malaysian Insight.

The devaluation of the ringgit has also seen business volume decrease by 20% to 30% compared with pre-pandemic days due to higher operating costs, Ding said. 

“We can hardly make RM10,000 a month due to inflation, transportation costs and the minimum wage.” 

Micro-enterprises, unable to cope with rising inflation, have had to shutter, Ding said.

Those who were unable to repay their loans at the end of the moratorium period have also folded, he said.

“The only way to service their loans is to sell their assets.”

Given the current situation, he urged the government to provide low-interest loans to help SMEs cope before Putrajaya addresses issues such as automation to reduce dependence on labourers.

Koong Lin Loong, chairman of the Associated Chinese Chambers of Commerce and Industry of Malaysia, said banks and government agencies have been giving out low-interest loans to SMEs.

“However, the lack of documentation has made it difficult for companies to apply for loans.”

Koong said in the post-pandemic era, SMEs need to form annual budgets, change the way they work, re-examine their products, and conduct productivity analyses.

Now that Covid-19 cases are on the rise, Koong said it is pertinent for SMEs to have reserves and be prudent with their spending.

“Before the pandemic, SMEs faced the China-United States trade war. Now we are facing the Russia-Ukraine war.

“We are also faced with the depreciating ringgit and rising interest and inflation rates, not to mention a labour shortage of two million (workers) that cannot be filled in the near future.” 

Since the start of the pandemic 37,415 SMEs have closed down, Entrepreneur Development and Cooperatives Minister Noh Omar said.

Of these, 26,007 are micro, small and medium enterprises (MSMEs) while 2,738 are SMEs.

As of June this year, 23,660 new companies were incorporated, with 1,453,057 local companies registered so far, according to the Companies Commission of Malaysia. – July 20, 2022.