Unpaid SMEs in tight spot

THE Covid-19 pandemic has changed the world but is the world ready to change? No person, rich or poor, and no business, large or small, has not been affected by its invisible and creeping presence.

As governments all over the world scramble to contain the impact of the pandemic for the medium and long term, its short-term impact has been significant and extremely disruptive. Livelihoods lost, businesses shuttered, travel stopped and education stunted everywhere.

It is gratifying to see that in the world over, with some exception, all these impacts are being received graciously, albeit not without complaints, by the people and businesses.

Aside from ordinary people, among the hardest hit in Malaysia are the medium-sized, small and micro businesses. These SMEs contribute about 33% of our country’s GDP, 66% of total employment and around 17% of total exports. The bulk of the SMEs – around 89% – are involved in the services sector.

The failure of SMEs is not an option for Malaysia. They must endure.

As such, many governments, including our own in Malaysia, have put in play various out-of-the-box proactive economic measures to safeguard jobs, subsidise wages, support the self-employed and protect industries. These have been widely reported. I am confident such concerned or “prihatin” measures will be helpful to many who need them.

“Kita jaga kita” is the slogan touted nationwide to ensure no one is left behind. There is an overwhelming “oneness” to fight this war against Covid-19 under the leadership of our prime minister, who is ably aided by “national heroes” on the frontlines, like doctors, nurses, the police, military and many others.

I am delighted to see everyone come together to do good for the country. We see the Malaysia Boleh spirit come to the fore to make things happen. There has been deep and unabashed enthusiasm among many to help SMEs deal with with the fallout of the outbreak.

A simple example is an effort by the community in Mutiara Damansara. They established an online market for SMEs called Souq Mutiara Damansara to sell their goods with cheap home delivery.

As much as we appreciate and celebrate such efforts, we must also be cautious and wary of those in our midst who are insensitive to the plight of the SMEs or worse, takes advantage of them.

It is good that the SMEs have the Special Relief Fund, moratorium on loans, salary subsidy for employees, etc, but it will not help them much if their clients, comprising mid-sized and large organisations, both in the private and public sectors, stop paying them their dues or do not pay them on time despite goods sold or services rendered.

I don’t believe any business owner, board of directors or management would allow their companies to purposely take advantage of their SME vendors. Having said this, I know of an SME involved in consultancy services that has not been paid since January 2020, despite the movement control order (MCO) only starting in mid-March. If not done on purpose, then is it oversight or negligence?

If it happened to this SME, then there may be others that have experienced the same. Many SMEs in the services industry tend to be at the mercy of their clients. Many are in a “live from hand to mouth” (“kais pagi, makan pagi; kais petang, makan petang”) kind of business, as consultancy jobs are few and far in between.

With this in mind, imagine the trouble they got into when the SME that I mentioned was “forced” by their client to “agree” to a reduction of their fees by as much as 35% from March onwards after not being paid from January. It is hard to believe this is an isolated case.

When times are good, consultants are often expected to deliver more than what is contracted. If they don’t, then they just get dumped. Similarly, when challenges arise, the risks and losses seem to be forced down their throats first.

Most big organisations do have the funds to cushion the Covid-19 impact.

Many still have healthy cash flow and credit lines from banks available at any time. Unfortunately some had used the MCO as an excuse to slash contractual sums and hold back payments to their SME vendors. All in the guise of “being prudent”.

I guess it should be alright and understandable if they don’t have the financial means, but if they are financially sustainable, it is just downright irresponsible and very unMalaysian.

When the MCO began, the particular SME I mentioned had no choice but to accept this unfortunate fate, and beg and pray that payment would be processed. Being small with insignificant negotiating power, the only thing they could do was complain to their ex-banker, like me.

We must remember that SMEs need their payments to be able to make good on their own legal and financial obligations. The SMEs still have to come up with their own income for this, as any assistance derived from government measures are not enough and are merely there to complement their income, not replace.

Clients of SMEs must have the common resolve to come out stronger from this pandemic together as a nation. It should not be a dog-eat-dog situation or everyone for themselves.

With this in mind, perhaps it would be a good idea for the responsible mid-sized and large corporate owners and managers, be they from the private sectors or public sectors, to reaffirm their commitment to do good by all their business partners, especially their SME vendors, throughout the Covid-19 pandemic by paying them their dues and paying them on time.

The government may also want to set the tone from the top and set a good example for corporations by also reminding their agencies, which would have a lot of SMEs servicing them as vendors, to do the same. This is to ensure that whatever economic measures arranged and implemented by the government for the SMEs are not frustrated or rendered meaningless.

Let’s do unto others as we would have them do unto us. Remove this dilemma for SMEs. – May 1, 2020.

* Badlisyah Abdul Ghani reads The Malaysian Insight.

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