EXTENDING the Wage Subsidy Programme (WSP) by another three months for companies that still face cash flow problems is a better option than extending the six-month loan moratorium because the former is proven to be a better safeguard in ensuring jobs are saved. 

Going by the fact that a bigger portion of the deferred loan repayments under the moratorium was utilised more by individuals to the tune of RM38.4 billion, as compared to RM19.3 billion by businesses, we can safely assume the main reason why there are calls for the moratorium to be extended is the fear of the rakyat on losing jobs, facing pay cuts or being put on unpaid leave.

In a live address to the nation on Monday, Prime Minister Muhyiddin Yassin said about 65% of households have benefited from the moratorium on loan repayments, totalling RM38.4 billion.

He also said more than 2.5 million jobs have been saved through the implementation of the WSP as well as the employee retention programme under the Prihatin and Penjana stimulus packages.

“Additionally, more than 313,000 businesses, including micro-businesses and SMEs have benefited from the packages,” he added.

The fear of an impending bad time probably have resulted in many individuals who could opt-out of the moratorium to opt-in so that they can still save for these rainy days, as 90% of borrowers have taken advantage of the moratorium, according to a poll by the Credit Counselling and Debt Management Agency (AKPK).

This saving for rainy days is further reinforced when only 21% of those who took up the moratorium spent the money on daily necessities compared to 48% who used it to build an emergency fund.

But at this stage in the development of the economy, what is needed is not savings to build emergency funds; rather it is spending in order to drive consumption, which is one of the main drivers of growth in the economy during time of recession which the Covid-19 pandemic is expected to generate. 

And people will spend accordingly if their worries over losing their job, receiving a pay cut or getting a no-pay leave are assuaged through measures like extending the WSP.

The beauty about the implementation of the WSP is that unlike the moratorium which is automatic, an employer needs to apply for it at any time from April 1 to September 30, with the wage subsidies being paid from the month the application was submitted. 

This means applications that are made in September before the deadline of 30 September will, on approval, receive a six-month wage subsidy from September to February 2021.

It also means the WSP will not be bunched up because those who can withstand the cash flow problem arising from the movement control order (MCO) will not apply in April and would apply later, say in June, which in turn means the WSP will be paid to them from June to November.

WSP is a financial aid paid to local employers of employees who earn RM4,000 monthly and below. Initially, the subsidy was for a period of three months, but this was extended to six months in total.

Beginning June 15, the employment retention programme (ERP) was incorporated under the WPS, thus including employees who have been instructed to take unpaid leave, provided that they work in the tourism or other sectors that are still prohibited to operate during the recovery MCO. 

At the end of the day, the issue here is of saving jobs which benefits many people via the WSP, as opposed to moratorium which is just a form of postponing obligation to another day which benefits only those who are having difficulty meeting their obligation to pay their loans during this trying time of Covid-19 pandemic.

Finance Minister Tengku Zafrul Abdul Aziz said deferred loan repayments under the moratorium are estimated to have reached RM55.2 billion as at July 13.

Extending the moratorium to a further six months will only balloon the amount and burden the banking industry which had already done their part by agreeing in the first place to forgo compounded interest on the six-month moratorium.

It will also burden those who opt-in for the moratorium extension with a 12-month future obligation to pay their loan especially when they can afford to opt-out of the moratorium extension.

It is with this in mind that Zafrul had suggested if ever an extension is given, it should be done on a case-by-case basis, targeted at those who are really in difficulty to meet their obligation to pay their extended loan. And the extension doesn’t have to be for another six months as it could be a shorter period depending on the situation of the borrowers in difficulty. 

And hopefully the banking industry can again play their part in continuing to forgo compounded interest on these people in difficulty during this trying time with this targeted extension. After all, the banks can afford to be generous with the smaller number involved. – July 22, 2020.

* Jamari Mohtar and Amir Jalal read The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.