MANY small and medium enterprises (SME) owners said they will have to lay off workers to stem losses after movement curbs to curtail the spread of Covid-19 were extended again.

With SMEs accounting for about 98% of Malaysia’s enterprises, this means an impending wave of unemployment, said SME Association of Malaysia president Michael Kang.

“There will definitely be lay-offs, there are already 10% to 20% in retrenchments. During this MCO period, SMEs definitely will suffer and will have to restructure their operations, maybe up to 20% will even close down. 

“We estimate that about 20% in the sector will lose their jobs, with many already retrenched since March and this will continue in April,” Kang told The Malaysian Insight.

His comments come even after Putrajaya unveiled a slew of incentives for SMEs, including an improved wage-subsidy plan to compensate some 4.8 million SME workers.

The Malaysian Institute of Economic Research estimated that about 2.4 million workers could be retrenched because of the pandemic.

However, Malaysian Employers’ Federation (MEF) executive director Shamsuddin Bardan told The Malaysian Insight that he does not believe 20% of SME jobs will be lost, as mentioned by Kang.

Shamsuddin said up till March, only about 15,000 people have lost their jobs.

Retrenchments started even before the pandemic started because of a slowing domestic economy, he said.

“I don’t think unemployment in the sector will reach 20%. According to the World Bank, economic activity in Malaysia has reduced by 33% and this is expected to continue until next year.

“If 33% of businesses have no income, then unemployment will increase accordingly, because employers have no reason to keep 100% of its employees.”

He warned that unemployment was definite unless the economic stimulus package is extended and not confined to the three months like now.

“The government’s subsidy for private employers was initially just 7%, then it was increased to 16%, but if you look at other countries it’s up to 70% to 80%,” Shamsuddin said.

Employers want to avoid lay-offs as it is counterproductive in the long run, he said.

This is because new workers need more training and time to familiarise themselves with a business. 

Prime Minister Muhyiddin Yassin on Friday extended the MCO a second time until April 28, but also announced that some sectors of the economy would be allowed to resume.

Shamsuddin said MEF suggested to the Finance Ministry and International Trade and Industry Ministry to resume export operations to re-establish Malaysia’s international supply chain.

Exports, such as home appliances and electronics, should continue so their international supply chains will not be broken, without losing customers and businesses.

Shamsuddin also said because of the travel restrictions around the globe, many export orders have been cancelled and their deposits need to be refunded.

Some exporters also have to turn to other countries to receive goods already exported, resulting in double losses.

Employers are now facing great challenges after the MCO’s extension and can no longer sit at home to wait and see, he said.

“We urge the government to gradually resume operations in the services and retail sectors, as well as the exports sector.”

EEF has 6,000 member companies and covers 25 sectors, including finance, insurance, and agriculture. – April 13, 2020.