IT will take at least six months to a year before retailers and small- and medium-sized enterprises (SMEs) see any kind of economic recovery from the Covid-19 lockdowns to curb the spread of the coronavirus, industry leaders said.

Despite most states having moved on to phases 3 and 4 of the National Recovery Plan, where a large number of economic activities have been allowed to resume, industry experts said it will take time to recoup the losses incurred during the last 18 months.

They said while there is increased footfall in malls and eateries, it has not gone back to pre-epidemic levels as people are still hesitant to go out.

This, coupled with social distancing measures, also mean that these places have to limit the number of people at any given time, further cutting into their losses.

Ameer Ali Mydin, president of the Bumiputera Retailers Association (BRO) is cautiously optimistic that business has improved but concedes that there is still a long road ahead in terms of recovery.

“Retailers are feeling positive because over the weekend there was higher footfall not only in malls but also in F&B outlets now that interstate travel is allowed,” he told The Malaysian Insight.

“The number of people in malls and hypermarkets has increased by 70% compared to during the lockdown. Retailers, however, shouldn’t be too optimistic as it will take at least another six months before we get back to pre-epidemic levels.”

Ameer, who is also the managing director of the Mydin hypermarket chain, said the industry will find it difficult to completely recover as long as people continue to work from home and social distancing measures are in place.

“If you don’t go back to work, you won’t stop by the mall, eat out or pour petrol. The multiplier effect extends to at least 40% of the population.

“Even though restaurants are open for dine-in, there is a one-metre social distancing rule. We have to reach an endemic stage where these restrictions are lifted.

“There is also no way we can go back to normal business until we open for tourists,” he said, adding that while domestic tourism is contributing to the economy, Malaysia relies heavily on international tourism in its GDP.

Ameer said the other problem that is driving down economic recovery is the fact that consumers do not have cash in hand to spend.

“The weekend crowd is mostly of people going out to get fresh air. But the reality is people have no money, because of low employment. They have loans in default and all this becomes a priority, not shopping.”

Non-essential retail sectors were closed for the better part of 18 months in the government’s effort to bring down the number of Covid-19 infections in the country.

During the first lockdown in March last year, the government projected that the country was making a loss of at least RM2 billion a day as only essential sectors were allowed to open.

The retail sector makes up for 35% of the GDP, and so the total losses industry-wide in the last 18 months are also in the billions, Ameer added.

Currently, only Selangor, Kuala Lumpur, Putrajaya, Pahang, Negeri Sembilan, Malacca and Labuan are in phase four of the national recovery plan.

Perlis, Perak, Kelantan, Terengganu, Penang, Kedah, Johor, Sabah and Sarawak are in phase three.

SMEs need international tourists

SME association of Malaysia national vice-president Chin Chee Seong said until the borders are open to international tourists, businesses won’t be able to recoup their losses.

“SMEs have all restarted their businesses, but we don’t foresee economic recovery so soon.

“There have been a lot of people coming out to dine and in shopping malls but the numbers are not that high.

“The number of infections in the country is still high and uncertainty surrounding Budget 2020 may also affect SMEs if it is not in favour of us,” he said.

Chin said recovery is also contingent on the government no longer enforcing any form of lockdown in the near future and the infection rate remaining low.

Revenge spending

Raymond Teo, deputy president of the Malaysia Retail Chain Association (MRCA) said that since most people were sequestered in their homes for long periods of time during the epidemic, they are spending more now, since they can go out and malls are open.

“People are buying more now. When they come out, they have the intention to buy, not just window shop. We can see that there is revenge buying.”

But while people may be spending more when they are out, Too said, this does not translate to economic recovery.

“The majority of retailers will still be facing losses (even though they have been allowed to open), because they were closed for so long. But there is light at the end of the tunnel with cases coming down.”

Retail fund to write off debts

With Budget 2022 expected to be tabled in parliament on October 29, industry players are hoping that the government will provide better relief packages for the sector.

Ameer, who owns 64 Mydin outlets, said that businesses, especially malls are haemorrhaging money from rental payments.

“Many tenants have not been able to make rental payments due to the lockdowns, leading to millions in debts.

“What we have requested is that the government come with a retail fund, like the Danaharta Act, where they buy over the debt of the banks. There is an overhang of debts in the retail industry that they don’t see. 

“There is a lot of rent that has not been collected and the tenants have no money to pay. This will have to be written off as owners can’t kick out all the tenants either.

“These big businesses also owe banks and other landlords. If the government buys back these debts, it will help save the retailers,” he said.

This, he said, is needed to allow business owners to have an infusion of capital to buy stock, employ people, put up new deposits and such, as they have run out of capital.

The Pengurusan Danaharta Nasional Berhad Act 1998 was introduced by the government to re-energise the Malaysian financial sector by buying non-performing loans (NPLs) from financial institutions and maximising their recovery value.

While the government has given various forms of relief through six economic stimulus packages worth RM520 billion, Ameer said this is still not enough.

“The government is giving an umbrella with a lot of holes; they are helping but we are still getting wet.”

According to data from Retail Group Malaysia, in the second quarter of 2021, the real industry recorded a growth rate of 3.4% compared to a -30.9% growth in the same period last year.

However, the retail growth for the first six months of the year contracted by 4.4%.

Sub-sectors that made the biggest improvement were department stores, which saw a positive growth of 18.2% compared to -24.3% in the first quarter, followed by fashion and fashion accessories, which saw a 17.6% growth versus -23.4% in the first quarter and pharmacy, and personal care stores, which recorded a 10% growth compared to -6.2% in the first quarter.

Though dine-ins are now allowed, cafes and restaurants are expected to record a -30.2% growth, further declining from -10.9% in the second quarter and -6.2% in the first quarter of 2021. – October 22, 2021.