Unprecedented measures needed by industries and businesses at this time

By Jason Loh Head of Social, Law & Human Rights at EMIR Research.

In the wake of the imposition of another movement control order (MCO 2.0), manufacturing players, mid-tier companies (MTCs) and small-and-medium-sized enterprises (SMEs) have been galvanised to rally under Industries Unite as a broad coalition representing the interests of industries and businesses. In what’s a parallel “movement” on the public health front – where experts and medical professionals have been calling for a recalibration and fine-tuning of the Covid-19 containment strategy – similarly, Industries Unite want the government to consult and come up with an emergency and structured recovery plan.

In other words, what industries and businesses need at this time are unprecedented measures that’s proportionate and relative to the situation that’s imposed on them.

Industries Unite have urged the government to ensure the survival and continuity of businesses by implementing “a 6 to 12-month stabilisation plan, followed by a three-year recovery plan”.

In addition, Industries Unite voiced their opposition to more MCO 2.0 extension, describing the move as, “… a death knell for more businesses and warned of soaring unemployment” (Malay Mail, Feb 3, 2021).

Despite a looser MCO this time around, business mood and sentiment remain pessimistic due to the debilitating impact on consumer foot traffic.

Industries Unite are pleading to the government to also allow the so-called “non-essential” businesses to reopen. Otherwise, this creates a bottleneck situation where book orders can’t be fulfilled resulting in further cashflow problems with the effect on employment, not to mention rental plus overhead issues and inventory costs. And the entire supply chain (including logistics) is also affected. Domestic exporters aren’t exempted with critical ramifications on the viability of our external market share.

In this light, the Federation of Malaysian Manufacturers (FMM) President Soh Thian Lai, Malaysian Employers Federation (MEF) Executive Director Shamsuddin Bardan, and SME Association of Malaysia (SMEAM) President Michael Kang have all called for closer cooperation and collaboration between the government and private sector – so that the former can better understand the issues on the ground, and the problems and challenges faced by the latter.

To quote Malaysian Footwear Manufacturers Association President Rachel Foo, “shoemakers cannot work from home and further extension of the MCO is counter- productive. Some 90 percent of shoe factories in Malaysia have workers fewer than 20 to 30 people, who are positioned one-metre social distancing apart, and that means they are within the requirement of the MCO’s SOPs. Most reported workplace clusters are in factories that have more than 1,000 workers and shoe manufacturers in Malaysia are not in that category” (The Malaysian Reserve, Feb 4, 2021).

The government must also adopt “a whole of society” approach in managing Covid- 19 on the economic front by co-opting industries and businesses through their respective representatives to carry the nation through into the next phase of the overall recovery plan (i.e., the 6 Rs of “Resolve”, “Resilience”, “Restart”, “Recovery”, “Revitalise”, and “Reform” that’s been derailed by the huge spike in infection figures and the consequent imposition of MCO 2.0. EMIR Research’ latest poll findings (4Q 2020) have revealed that now “the majority of Malaysians appear to continue living in a state of uncertainty about the viability of …the country’s economy. Nearly five out of every 10 respondents indicate they are unsure whether the country’s direction is on the right track (48percent) … [and whether the] economy is on a strong footing (at 45 percent).

After all, we’re in situation analogous to war. So, the government’s strategy must comprehensively mobilise all resources towards the goal of Covid-19 containment that in turn comprises both the public health and economic fronts.

Although the Malaysian Economic and Rakyat’s Protection Assistance Package (Permai) does include financial help to support business continuity, the focus has either been fragmented or long-term.

In other words, to reiterate, since we’re in a war-like situation – an Emergency – the help provided should be aligned to and be reflective of that.

For example, the RM300 million for the SME e-Commerce Campaign (that had been allocated under Budget 2021) to help SMEs get on board the digital bandwagon doesn’t take into consideration that not all SMEs are – at least in the short- to medium-term – in a position to do so.

As Pikom (the National Tech Association of Malaysia) Chairman Danny Lee has stated, “… the issue was not e-commerce [as such], but rather the emphasis to help local SMEs sell online”. On its part, Pikom has been organising the MYCYBERSALE in collaboration with the Malaysia Digital Economy Corporation Mdec for sik successful years. #MYCYBERSALE contributed RM 392 million in gross merchandise value (GMV) during a 7- day sales in 2019. The number of participating SMEs has grown from 283 to 1,510 over the six-year period. But many more are still being left out for now, that is.

Furthermore, according to Malaysia Digital Chamber of Commerce President Chris Daniel Wong, “”This second MCO finds online shoppers tightening their belts and online per basket size buying has reduced” (The Star, Jan’ 30, 2021). There needs to be, therefore, some fine-tuning and tweaking of policies to ensure help that industries and businesses need at this critical juncture is given.

1. In addition to the policy recommendations of Industries Unite, FMM and SMEAM, etc. (that have been reported in the media), the government might also want to consider the following:On the basis of the government as the buyer-of-last-resort and stockpiler-of-last- resort, there’s a need for the Vendor Development Programme (VDP) to be accelerated and expanded during this period so that SME participation can increase to 50 percent and more. The VDP involves government procurement which relates to the supply chain across all sectors of the economy.

The procurement would include critical assets such as sanitisers, gloves, surgical masks, other types of personal protective equipment (PPEs), and even ventilators as part of the “war-effort” against Covid-19 – which can be provided free of charge to the private hospitals.

Other types of procurement would include school-related items (e.g., uniforms, shoes, textbooks), digital items, hardware and household goods, etc. All of these could be bulk sold at a discount to cooperatives, and even a cooperative outfit set up under the management of the Ministry of Entrepreneur Development & Cooperatives (Medac). The government would also be functioning as “middle- person” between supplier (manufacturer and retailer) and buyer (i.e., institutional and retailer).

This approach not only enables income to flow directly from the government to the SMEs thereby mitigating the lower sales volume. But public—private partnerships (PPPs) that directly include SMEs enables the government to directly engage with these stakeholders and thereby assess the extent of cashflow needs. In turn, the appropriate book orders can be negotiated under
terms that are favourable and specific to the needs and conditions of the participating SMEs.

2. To complement and supplement the above, the government could instruct SME Bank to issue (electronic or digital) “notes”/“bills” for direct circulation within the industrial and business community. These notes/bills would serve as “alternative currency”, albeit artificial, and is, therefore, an effective medium of exchange and barter-like transactions. Participating SMEs have the option to either pledge their assets to SME Bank in exchange for the notes/bills as a form of collateralised loan (which under company law can either be “fixed charges” such as land or “floating charges” such as machinery) or otherwise as an unsecured debenture.
Notes/bills received by one SME as seller from the other as buyer can then be redeemed from the SME Bank (in RM). For this particular approach, it doesn’t in anyway involve the physical printing of money as well as increasing the deficit since no new nett financial assets are created – the loans that creates the deposits equals to zero. It’s based on the experience of the Swiss model (from the 1930s until the present-day) of the Wirtschaftsring/WIR (“economic circle).

The purpose of the notes/bills is to ease the cashflow of SMEs whilst ensuring business and supply chain continuity (by easing any bottlenecks) – as a stop-gap (i.e., temporary) measure.

There are other ways by which the government could do to help industries and businesses at this time. But the strategic focus and framework might have to be recalibrated to truly reflect the Emergency we’re in.

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