Two-thirds of SMEs see no hope business will recover this year

 

Two out of three small and medium enterprises (SMEs) believe that their businesses are unlikely to recover this year, according to a survey conducted by the Small and Medium Enterprises Association (Samenta).

Samenta central chairperson William Ng said the survey also showed 16 percent of respondents think that their business will only recover in 2023.

"From June 19 to 23, Samenta conducted our mid-term survey, and the result is far from heartening. Two out of three SMEs do not see any hope for a recovery in 2021, with 16 percent expecting their businesses to only recover in 2023. 

"The full movement control order (MCO) in force is particularly devastating to a majority of our SMEs.

"During MCO 1.0, many SMEs still had cash buffers to keep their businesses afloat. However, after over a year of disrupted business, SMEs are no longer in a position to survive on their own," he said in a statement yesterday. 

Ng said there may be as many as 90,000 businesses forced to shut down since MCO 1.0.

"Indeed, 30 percent of SMEs would have run out of cash during this full MCO, and if it is extended, many of them would simply close down.

"In November last year, the Companies Commission of Malaysia (CCM) stated that 30,000 businesses closed down since the start of the Covid-19 pandemic. This data would most likely be three times more by now, given the MCO 2.0 and 3.0, and including businesses that have ceased business without reporting to CCM," he added. 

In the initial MCO phase, a large number of businesses in sectors deemed as non-essential were ordered to close, while those that remained open could only do so under strict standard operating procedures.

Under the ongoing total lockdown which kicked off on June 1, the government only allowed 17 essential services to operate with manpower capacity limited to 60 percent.

It was reported on June 3, a total of 128,150 companies involving 1.57 million workers had obtained approval to operate during the lockdown.

Meanwhile, Ng said the latest World Bank Malaysia Economic Monitor affirmed that SMEs have less cash flow compared to regional peers.

Citing its Business Pulse Survey that analysed the pandemic’s impact on businesses, the World Bank said 60 percent of firms polled admitted they faced cash flow issues where some risk falling into arrears within the next six months.

A median Malaysian company only has two months of cash flow left.

SMEs, which comprise 98.5 percent of all businesses, contribute to around half of all employment in the manufacturing sector but only account for 31 percent of output.

"The National Recovery Plan has largely been silent about our plans as a country to mitigate economic losses from the pandemic. More conspicuously, it is silent on our plans for a 'recovery' and how Malaysia can get back on the track that we have been derailed from since the beginning of the pandemic.

"At the top of our concern is the low technology adoption among Malaysian SMEs. Our Digital Adoption Index stood at 69 percent versus Singapore’s and Korea’s 87 and 86 percent respectively.

"Even more worrying, our business sub-index for digital adoption stood at 55 percent, lower than our regional neighbours such as Singapore (86 percent), Brunei (66 percent), Vietnam (59 percent), Philippines (57 percent) and Thailand (57 percent)," Ng added.  - Mkini