Malaysian SMEs running out of cash due to COVID-19

Kuala Lumpur’s illuminated skyline (Photo: www.imf.org)

Kuala Lumpur (VNA) – The taps are running dry for small- and medium-sized enterprises (SMEs) as Malaysia moves into its fourth phase of the movement control order (MCO) to curb the spread of COVID-19, reported The Star newspaper.

Quite a lot of SMEs had been squeezed to the maximum and were forced to fold because there is just no more liquidity in the company to go on.

On May 12 when the MCO is expected to end, it will mark 56 days of non-operation for the majority of businesses where cash is being burnt everyday without any inflow.

There is also the possibility of another round of extension, depending on the situation of the COVID-19 pandemic.
The SME Association of Malaysia is estimating that about 200,000 to 300,000 SMEs may collapse over the next one year.

A recent survey by the association found that 70 percent of SMEs only have sufficient cash up to the end of April. This could result in some 2 million people becoming jobless as wages constitute quite a substantial amount of a company’s expenses.

There are around 1.08 million SMEs, including micro companies, with an employment size of about 9.8 million people.

The Employees Provident Fund (EPF) Chief Executive Officer Alizakri Alias said that if 1 percent of the Malaysian SMEs go bankrupt, more than 60,000 jobs will be lost, which would also impact 0.6 percent of the country’s GDP.

The Malaysian government has announced a wage subsidy programme worth 13.8 billion ringgit (3.2 billion USD) for the SMEs.

However, about 500,000 SMEs were registered with the Social Security Organisation which is handling the subsidy applications and only 228,797 employers applied as of April 26.

Some economic experts called on the government to raise the wage subsidy for the smaller companies to 1,500 ringgit from 1,200 ringgit. Small firms with employment sizes of less than 50 are believed to be the most vulnerable to cashflow problems./.