The industry calls for a further extension of the automatic moratorium on the repayment/payment of loans/financing which will end in September 2020. Given the contraction in economic activities amidst the recovery from the Covid-19 pandemic, the Federation of Malaysian Manufacturers (FMM) proposes that the extension be for a further six months which would be particularly welcomed by the small and medium enterprises (SMEs) and individuals as it would provide a much- needed breathing space and further ease the tight cash flow that they are currently experiencing.
The extended moratorium can provide the financial relief to those who are currently economically disadvantaged, especially companies that are struggling to sustain their businesses and workers who have been retrenched and have lost their source of income. At the same time, to ensure that the economy can quickly recover, the extended moratorium would allow SMEs including entrepreneurs to tap and benefit from the various initiatives that have been introduced under the PENJANA Short-Term Economic Recovery Plan to assist with business recovery without further burdening businesses with the cost of servicing their loans/financing and indirectly reduce their cost of business survival.
As a result of the Covid-19 and the Movement Control Orders (MCOs), businesses haveseen a big drop in revenue, suffered financial losses and faced s evere trade challenges which have impacted business sustainability, employment and productivity. While the essential sectors were allowed to operate in stages during the MCO period, they were still impacted by disruptions to their supply chains and ability to meet their trade obligations especially export orders given that they were only operating at half their capacity.
Many businesses, especially those in the non-essential products and services, only commenced operations after the Recovery Movement Order Control Order on June 10, 2020. Manufacturing companies supporting the construction and hospitality industries were further impacted as these sectors have only just started to resume operations given the additional conditions and precautionary measures and Standard Operating Procedures (SOPs) to be implemented before business could resume. These sectors and the supporting businesses would be most impacted and would need a longer period to tide over the Covid-19 disruptions and impact on their businesses. For some, the Covid-19 and the MCO had significantly impacted both domestic and export trade, ranging from complete cessation to significant reduction in business activity. This has resulted in severe challenges on capital and cash flow for these companies and employment for workers.
The Wage Subsidy Programme (WSP) as at July 6, 2020 has benefitted 310,622
employers covering 2.48 million workers. These figures are an indicator that companies are unable to sustain their businesses and have had to resort to obtain aid from the Government to sustain their employment cost and ensure that their employees continue to keep their jobs. The majority of these companies would have applied for assistance from April while trying to manage their employment cost. Companies are not allowed to terminate the services of these employees covered by under the WSP for a further three month after the end of the WSP payment period. The WSP which has been extended for a further six months, would likely end in September. This would coincide with the end of the current loan moratorium period and would be a double cost whammy on businesses which could severely impact their sustainability and initiatives to revive their businesses.
FMM therefore appeals for the consideration of the Government to extend the moratorium for a further six months to March 2021.
In addition, FMM has appealed to the Government for further assistance in the following areas which has a significant cost impact on businesses and would provide reprieve to many who are facing tight cash flow issues:
• Six-month moratorium from date of disbursement on all of the PENJANA financing schemes as currently only the RM500 million Bumiputera Relief Financing has provided this relief;
• Stamp duty exemptions are now granted only for instruments of transfer (partial exemption) and loan agreements (full exemption) for sale and purchase agreements signed between June 1, 2020 and May 31, 2021. We appeal to the Government to extend this stamp duty exemption to all loan and financing instruments for a one year period from July 1, 2020 until June 30, 2021.
• Stamp duty exemption for SMEs has now been extended on any instrument executed for Mergers & Acquisitions (M&A) between July 1, 2020 and June 30, 2021. FMM would like to further propose that the stamp duty exemption be extended to M&As and partnership agreements agreed or signed prior to the outbreak of the Covid-19 pandemic and were disrupted due to the Covid-19 pandemic and MCO. Some of the documents were signed prior to these events and are only now proceeding but will take a longer time to be implemented given the changes that have taken place over the past few months. As it stands now, these projects will not be able to enjoy the duty exemption.
