2020: The Year in Review

2020 was most definitely the year of tectonic shifts for business worldwide and in Malaysia, it was an eye-opener for most, if not all. In order to brace these challenging times, business owners and the government were left with no choice but to embrace the new age that was ushered in by the Coronavirus pandemic.  

Consumer behaviours while have been known to change with time, the trends this year have definitely taken a turn that required businesses to keep up faster than ever. According to a study by Bain & Company and Facebook, Digital Consumers of Tomorrow, Here Today, digital consumers will make up 69 percent of Southeast Asia’s population by end of 2020.  

The growth was originally forecasted for 2025 in the study, indicating a five-year acceleration within this year alone.  According to Bain & Company, the new normal that was ushered in by the outbreak gave birth to new purchasing habits and expectations. 

“Malaysian consumers are not just spending more online as forecasted in 2019, they’re also buying into more categories online,” says Gwendolyn Lim, a Partner at Bain & Company. 

Nicole Tan, Country Managing Director of Facebook Malaysia highlighted that in Malaysia alone, they are expecting approximately four million new digital consumers this year. 

“The power of digital consumer spend is exceeding expectations with online spend set to triple by 2025,” says Gwendolyn. Furthermore, across SEA, preference to buy from online channels has seen a leap, and with e-commerce becoming a platform for search or intentional buying.” 

The study also showed that Malaysian consumers are open to try different online stores, with unique products and good deals driving interest in new different stores. 40 percent of Malaysian consumers say they only shop from new stores only when there are good deals and promotions, with reliability and value said to be factors for switching in regular stores. 

“The change in consumer behaviours can also be seen in the increasing preference for e-wallets as bank transfers are noted to have reduced, indicating that Malaysians are embracing the contactless way of life,” she highlights. 

In June, the Mastercard Impact Studies had observed an increase in online shopping among Malaysians during the Covid-19 outbreak in March.  Malaysians had spent more time online with top activities comprising surfing the net for news and entertainment (75 percent), followed by online video streaming (57 percent), social networking (55 percent) and home delivery of food or groceries (50 percent). 

40 percent of consumers reported they were using mobile or digital wallets more, followed by contactless debit cards (26 percent) and contactless credit cards (22 percent). 

Uncertainty dominates  

While the outbreak has accelerated the adoption of digitalisation, it has also contributed to an increasing rate of unemployment in the country. This brings about the question if consumption pattern, which the government very much relies on, will be able to pick up and remain consistent. 

In Malaysia, the unemployment rate which rose to 5.3 percent caused by the current economic conditions is considered to be the highest in 30 years. While the rate has declined month-on-month to 4.9 percent from the record high rate, this begs the question if a more positive consumption trend can be registered in months to come? 

“The trend of rising unemployment will continue as firms and businesses shift into survival mode for the rest of the year, with a few exceptions,” Fellow in the Economics, Trade and Regional Integration (ETRI) Division of ISIS Malaysia, Juita Mohamad tells Business Today

Juita adds that the consumption patterns will be different for various income groups and for different types of products. “For those in the middle-income group and the B40 group, job security is a very big concern. Depending on how secure their jobs are at the moment, this will impact how they spend their income,” she says. 

In Malaysia, different sectors have already seen the impacts arising from the outbreak. With the Movement Control Order (MCO) in place, the country’s entire economy has been put to test and this includes the property sector. 

According to IDEAS senior fellow, Carmelo Ferlito, the property market will be under stress from different perspectives. He points out that projects under construction cannot go ahead under the MCO and with a dominant climate of uncertainty, investments are on hold both for commercial and residential properties. 

In recent weeks, tenants of both commercial and residential units have been affected in their capabilities to pay rents. Ferlito points out that this is particularly true for activities within the malls and for individuals who are losing the job and in return will affect landlords as well. 

“Such difficulties add on to the structural difficulties experienced by the industry in the past few years, where both the residential and the commercial sector have faced a slowdown,” says Ferlito. 

Putrajaya had recently announced three stimulus packages in order to better aid Malaysians as well as businesses in the country, in particular SMEs. Ferlito points out that the stimulus package recently announced is more oriented toward the generality of the public and presents further measures for SMEs. 

He further points out that the property market, together with all other industries can enjoy some of the credit facilitations or loan payment deferral which are introduced however, nothing specific is foreseen for the property market 

“It has to be said that, according to some studies, the construction sector is the one that has cash enough to stand longer than other sectors,” Ferlito says. 

He also cautioned that if the MCO were to last longer than expected, property segment will remain stand still with some projects abandoned for good and some firms will face bankruptcy however the extent of the impact will still very much depend on the MCO duration. 

Foo Gee Jen, group managing director of CBRE, who shares a similar sentiment with Ferlito stressed that the property market will not be exempted from a pandemic of this magnitude. 

“The property market is known to be lagging behind economic changes, thus there may not be significant changes in the first-half of 2020 while economies around the world are still contemplating and domestic consumption and investment behaviours are unlikely to change immediately either once the MCO is lifted,” Foo says. 

He added that the effects would be more evident in the second half and challenging times are to be expected ahead. 

Biggest Budget in History  

A total of RM322.5 billion or 20.6 percent of the GDP was allocated in the Budget 2021. 

RM236.5 billion (73.3 percent) of the allocated Budget was dedicated for operating expenditure, RM69 billion (21.4 percent) for development expenditure (DE) and RM17 billion (5.3 percent) for the Covid-19 fund. 

The federal government’s revenue in 2021 is expected to increase by 4.2 percent to RM236.9 billion or 15.1 percent of GDP, on the back of improving economic growth and business prospects. 

As for the Covid-19 Fund, a sum of RM17 billion will be allocated in 2021 to address the impact of the ongoing pandemic on the economy.  

The Ministry has also allocated RM8.9 billion for the education and training sub-sector to provide better education facilities. 

The RM69 billion allocated in 2021, an increase of 38 percent from 2020, is to support economic growth and provide a better quality of life and living environment through the implementation of new and ongoing programmes and projects, mainly in the areas of education, healthcare, housing, transportation and public utilities. 

In terms of allocation by sector, the economic sector remains the largest recipient at 56.4 percent of DE, followed by social (26.7 percent), security 11.2 percent and general administration 5.7 percent. 

The transport sub-sector accounts for the largest share at 21.8 percent or RM15 billions of total DE. 

Expenditure for the social sector, amounting to RM18.4 billion or 26.7 percent of total DE, is the second-largest component in DE, with RM8.9 billion allocated for the education and training sub-sector to provide better education facilities. 

The health sub-sector remains as a priority sub-sector with an allocation of RM4.7 billion or 6.8 percent of total DE, with spending focused on expanding the health sector and providing an effective national healthcare system. 100,000 health frontliners will receive a one-off payment of RM500. 

The Budget was received rather well by most industry players with telco players such as Celcom applauding Putrajaya’s decision on the implementation of the Jalinan Digital Negara (JENDELA) initiative that focuses on the expansion of broadband services, ensuring connectivity provision for Malaysian schools throughout the nation.  

“We also welcome the B40 initiative under the Jaringan Prihatin Program and have been in discussions with the Ministry of Finance on an industry coordinated response to support this effort. We will continue to collaborate and work closely with all relevant parties in finalising a range of products and services, which will benefit our B40 customers,” said Idham Nawawi, Chief Executive Officer of Celcom Axiata Berhad. 

On the other end, the Malaysian Association of Tour and Travel Agents (MATTA) has expressed their disappointment that the much-anticipated Budget 2021.  

The Association said the Budget has failed to provide solid relief programmes to protect jobs and tourism businesses and will not do much to help the tourism sector on its road to recovery. 

MATTA President Tan Kok Liang says, “Given the vulnerable and fragile situation of the tourism industry, Budget 2021 does not take into consideration the welfare of 3.6 million workers in the field and SME tourism companies. Travel demands will continue to diminish with the ongoing travel restrictions until a vaccine is widely made available.” 

Focus on SMEs 

Small and medium enterprises, or SMEs, make up over 98 percent of business establishments in Malaysia, contributing more than 38 percent to the country’s overall gross domestic product (GDP). 

Corporate leaders along Putrajaya had reaffirmed their commitment towards supporting the SME and startup community amid the pandemic. From banks such as CIMB to tech players like Huawei, initiatives after initiatives were rolled out to support the ecosystem.  

Back in early October, Facebook Malaysia launched the Small Business Grant, offering financial aid of up to RM3.2 million in grants to local businesses. Highlighting the importance of small businesses as the heart of communities as well as the backbone of our economy, Country Director, Nicole Tan was aware of the importance of supporting them.   

The support for the SME segment did not just end there. At the recent Facebook Summit Malaysia 2020, Tan reaffirmed Facebook’s commitment towards fast forwarding Malaysia’s digital progress through Small Medium Enterprises (SMEs).   

“We know the pandemic has hit the smallest businesses the hardest. However, with Facebook tools, they have also managed to leverage on opportunities throughout these unprecedented times,” she said.  

As such the platform will be continuing their partnership with MDEC on the eUsahawan programme and will also be launching a new train-the-trainer programme to certify 100 digital marketing trainers by this year through their flagship digital marketing certification, the Facebook Blueprint Programme.  

The Malaysia External Trade Development Corporation (MATRADE) and CIMB Group Holdings Berhad (CIMB Group or CIMB) have accelerated their efforts to assist the Small and Medium Enterprise (SME) to become agile and resilient to unprecedented risks during the pandemic. 

The objectives include helping SMEs with a business case for adopting sustainability principles and ways to start by conducting due diligence on their value chain. MATRADE-CIMB’s exclusive delivery partner, IMPACTO Sdn Bhd (IMPACTO) offered SMEs advisory on adoption and implementation of sustainability strategies. 

Under the SMEs Sustainable Exporters Programme, SMEs from six subsectors comprised of food & beverage (F&B); machinery parts and components; medical equipment; furniture; fashion (garments and cosmetics) were trained. 

Realising the important role SMEs play in the Malaysian economy, and the urgency for these enterprises to go digital in order for them to continue to thrive in the future, Huawei Technologies (Malaysia) Sdn Bhd (“Huawei”) has kick-started a series of SME programmes, in collaboration with the SME Association of Malaysia (“SME Association”), SME Corporation Malaysia (SME Corp. Malaysia), and the Malaysia Digital Economy Corporation (MDEC), to drive digital transformation among SMEs and create a sustainable ecosystem for SME growth. 

The programmes leverage Huawei’s deep knowledge and expertise in digital infrastructure such as connectivity, Cloud, Artificial Intelligence (AI) and the Internet of Things (IoT) to spur technological innovation for SMEs. 

Through the programmes, SMEs will be able to enjoy facilitation for innovative solutions, funding, as well as advisory and capacity building services. 

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