Small motor businesses suffer much from stop-start EMCOs

 

A huge sigh of relief greeted the government’s lifting of the EMCO in most areas of the peninsular central region.

For the automotive sector, three associations representing all the major car companies and component makers had over the past week appealed for the restart of their operations.

They wrote to the prime minister and the domestic trade and consumer affairs minister while the Malaysian Automotive Association (MAA) issued a statement.

There was no association to represent automotive micro-SMEs which was a pity because there are 45,000 such entities and together, they account for about 200,000 workers based on a conservative estimate of four employees per company.

It would have also been apparent that the economy in the central region – Selangor, Kuala Lumpur, Negeri Sembilan and Perak – would have triggered a hollowing out of the automotive sector if a lockdown had gone on for much longer.

The 17 months of economic disruption was about the most that many micro-SMEs in the automotive sector could have withstood before they started to retrench the last of the skilled staff they retained on partial salaries. Once these skilled staff are gone, it would be much more difficult to restart what was once thriving, if not self-sustaining businesses.

The definition of an automotive micro-SME is a bit hazy: the SME Corporation of Malaysia defines a micro-SME in the services sector as having less than five employees or making less than RM300,000 a year; the Malaysia Automotive, Robotics and IoT Institute (MARii) has a more accurate assessment of an automotive micro-SME as a company employing less than 20 people.

By this definition, MARii has a database of 45,000 micro-SMEs in the automotive sector.

This community is under-represented in the halls of government because the members are mainly entrepreneurs who have grown their businesses organically using loans from friends and family. They pay income tax and make the necessary contributions to Socso and the Employees Provident Fund for their workers.

While the government declared that no one would be left behind in the pandemic, the perspective is that what the government gives is barely a fraction of what people in productive employment can earn for themselves.

One micro-SME employer reported that during this entire pandemic period all that he received was three months of salary subsidies worth RM1,200 per employee per month for his two workers last year. Another owner said that he received a one-off payment of RM1,500 last year compared with his monthly fixed cost of about RM30,000.

The lifting of the EMCO is really what the micro-SMEs want. “We want to work and our workers ask when they can come back to work,” said Suresh Anthoney of Espada Motors. “They’ll be very happy to come back to work, I guarantee,” he said.

On July 11, the Malaysian-German Chamber of Commerce and Industry (MGCC) said the ever-changing SOPs in line with the change of movement restrictions led to confusion in implementation but also enforcement, including from the police and the international trade and industry ministry (Miti) itself.

MGCC also represents the Audi, BMW, Mercedes-Benz and Volkswagen automotive brands.

Following MGCC’s call to the government, MAA which represents most of the car companies including associate members Proton and Perodua, on July 13 issued a statement calling on the government to allow workshops and distribution centres for passenger and commercial vehicles and spare parts in the Klang Valley to operate with immediate effect under strict restrictions.

MAA also pointed out production and distribution of automotive products (i.e motor vehicles, components & parts), and sales of vehicles had halted since June due to the EMCO. Selangor and Kuala Lumpur account for close to 50% of Malaysia’s total industry volume per annum.

On July 12, the Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) appealed for car dealers to be allowed to reopen their businesses as soon as possible.

It said that since the road transport department (JPJ) and vehicle inspection centre Puspakom had already opened in non-EMCO areas, the government might as well allow the opening of used and new car dealers.

In the letter to Alexander Nanta Linggi, the domestic trade and consumer affairs minister, FMCCAM said that its 4,500 members registered zero income last month.

It also protested about double standards in that approval had been given to a giant online car trading platform while the association’s members are not allowed to operate.

FMCCAM president Tony Khor was referring to a subsidiary of Southeast Asia’s largest integrated car e-commerce platform which worked around the EMCO stoppage of inspection centres by doing home inspections of cars offered for sale.

It would be timely to heed the call of two economists who proposed a third and best approach to the Covid-19 pandemic.

Paolo Casadio and Geoffrey Williams, both based in KL, said that the international experience of multiple strategies including prophylaxis and therapeutics provides a feasible alternative option to the current policy approach which can save thousands of lives and avoid prolonged economic costs tipping Malaysia into a depression.

In a letter to FMT, they stated that the only scenario that provides any hope of a feasible solution is the recovery scenario. “Decoupling the management of the health crisis from the management of the economy is not a matter of saying which is more important, lives or the economy? It is about understanding the most effective method of dealing with the virus by evaluating the consequences of multiple strategies on both lives and the economy,” they said.

Stop-and-start EMCOs in the central region are like using hammers to hit flies. Malaysia has a lot of catching up to do to reverse its slide in the Asean automotive competitiveness league. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.