Asia Pacific Investment Bank (APIB) suggests the Malaysian government to further reduce corporate tax to help SMEs survive the ongoing pandemic.
Chris Wang, CEO of APIB, says the Covid-19 pandemic is taking a toll on the 900,000 SMEs across the nation, especially those that operate in the tourism, manufacturing, catering and retail sectors.
Businesses in Selangor, Kuala Lumpur, Putrajaya and Sabah are especially hard-hit following the announcement of the Conditional Movement Control Order by the government recently to contain the third wave of the Covid-19 outbreak, he adds.
“Malaysia faces a sharp slowdown in economic activity and SMEs are the most affected,” says Wang.
Citing a survey done by the SME Association of Malaysia, Wang says 51.2% of Malaysia’s SMEs have suffered losses of more than RM500,000 in business from March to September.
Another survey conducted by the Associated Chinese Chambers of Commerce and Industry of Malaysia shows that 25% of the local SMEs could face bankruptcy if the second round of Movement Control Order is implemented.
APIB has been keeping a close eye on the situations and needs of the SMEs, says Wang.
“The Covid-19 pandemic is causing a sudden drop in business. And SMEs are facing significant financial challenges, including a shortage in working capital and cash flow crunch,” he says.
Wang suggests the Malaysian government to reduce corporate tax to help SMEs survive amid such a challenging time.
“The Malaysia corporate tax rate is 24%, which is way higher than some of its ASEAN neighbours including Singapore (17%), Thailand (20%) and Vietnam (20%).
“Reduction in corporate tax will not only lighten the financial burden of the SMEs, it will also attract foreign investments and stimulate the country’s economic growth,” he says.
Wang also suggests to Bank Negara Malaysia (BNM) to extend the six-month loan moratorium period that ended on September 30. Such an initiative will significantly improve the cash flow of the SMEs and give them space to survive the pandemic.
“The six-month loan moratorium programme implemented in March was beneficial to the SMEs as it had lightened their burden. An extension of the period of the programme is one of the best ways to further support businesses,” he says.
However, SMEs must also think of ways to transform their businesses, says Wang.
“SMEs should digitalised their business processes as we are now living in a world of rapid technological advancement.
“Digitalisation is the only way forward. They can layout a business plan to explore new opportunities and gradually transform their business model,” he adds.