How The Government’s 2022 Budget Can Help You Rebuild or Drive Your Business Forward

MRCA Event

How The Government’s 2022 Budget Can Help You Rebuild or Drive Your Business Forward

Naz Rahman moderator of the session, speaks to a panel of experts on the dynamics of Budget 2022 and how it impacts micro-SMEs and SMEs.

PANEL SESSION 1

The first panel session featured 3 distinguished speakers namely, Datuk Dr A. T. Kumararajah, Secretary-General of the Malaysian Associated Indian Chambers of Commerce & Industry (MAICCI), Jenny Hoh, Vice President of SME Advisory and Marketing, Credit Guarantee Corporate Malaysia Berhad (CGC), and Yip How Nang, Head of SME Banking, RHB Banking Group.

The panellists shared their thoughts and insights on SME financing, the government’s stimulus packages available to SMEs, and the efforts to rebuild the SME landscape with Budget 2022.

DATUK DR A. T.KUMARARAJAH, MAICCI

Talking about the incentives provided by the government in Budget 2022, Datuk Kumararajah says most SMEs are happy and relieved; however, certain areas need more focus with clearer narratives to move from a pandemic to an endemic stage, and to actually anchor the growth story. Despite the government’s efforts, it is uncertain whether SMEs can recover as fast as it is organically needed.

Datuk Kumararajah points out that the disruptions that have happened in the last 20 months have either accelerated SMEs’ problems to an unmanageable level, or have pivoted them into new business models or digitalisation which has enabled them to survive. However, the primary issues of access to credit and cashflow have especially plagued the micro-SMEs. From the RM530billion stimulus packages provided by the government, only 38,000 micro-SMEs and SMEs have benefitted from around RM12.5billion in the last 20 months. Datuk Kumararajah explains that this is because conventional financial and development financial institutions (DFI) are not having any different approach to the credit risk of customers. They are still taking into consideration cash flow and the ability to pay back. He pointed out that another issue that’s not taken into consideration in the new budget is that 30% of the SMEs have shut

down, while a large number are still struggling to navigate the market despite the government’s efforts.

Datuk Kumararajah said that the government’s targeted wage subsidy programme and the PENJANA Tourism fund are good efforts. However, these efforts have not reverberated well in the market as the take up rate has been low with only 11% disbursement of financing. He adds that this is due to credit evaluations being done using pre-pandemic approaches. Datuk Kumararajah stresses that this should be considered as a ‘war-time’ effort, and should be placed under a single institution guaranteed by the government in line with its commitment to protect businesses under the SJPP scheme with funds allocated for capitalisation or recapitalisation. He suggests that the government step in to establish that risk mitigation can be done for certain industries under a single institution. “We did it in Danaharta and Danajamin, why don’t we extrapolate that experience and expertise that is still within the market,” he stresses.

He advises SMEs to explore the Ministry of Finance’s (MOF) portal which lists several initiatives for access to financing and grants as well as digitalisation.

JENNY HOH, CGC

Having dealt with many SMEs in the past, Jenny is optimistic about the new budget and expects it to spur the economy. With SMEs employing 70% of the country’s workforce, one of the key elements in the budget is the focus on getting people employed. The GDP is expected to grow around 5.5%, however what is important now is to address social issues. As for SMEs, they have to plan for their own resources and capacity. When it comes to Budget 2022, it is about how to capitalise on the government’s provision and treat it as an added advantage.

Even before the pandemic, CGC realised that SMEs were not getting sufficient access to financing, so CGC decided to customise its products differently. It set up our advisory team and matched SMEs with alternative financiers. CGC also has programmes for customers to gain market access such as e-commerce and digital marketing workshops, among others. Jenny explained that micro-SMEs especially are fearful of going digital but CGC managed to broaden their mindset to embrace digitalisation. She added that to-date, enquiries for assistance coming into CGC’s call centre has increased by 13 times compared to 18 months ago.

Over the last 50 years, CGC has built a strong name in guaranteeing, however, it has also embarked on direct-financing. Jenny points out that CGC is not a competitor among its banking partners, instead it complements them by bridging any gaps with innovative ideas to help entrepreneurs and business owners.

As the market moves towards sustainability, Jenny explains that it is best to consider this early and to raise awareness among SMEs to curb long-term business losses.

YIP HOW NANG, RHB BANK BERHAD

Yip says that it has been tough in 2021, however, RHB’s in-house economists point to a very sharp rebound in 2022. GDP is expected to be at 4% which is a stark contrast to last year. He adds that there will be a lot of opportunities to harness not just next year but even after that. He predicts that OPR is expected to remain unchanged for the rest of the year with interest rates being largely accommodative.

As a banker, Yip said it is very important to have alternative ways to evaluate customers and not just base credit evaluations on financials. Generally, banks have been slow in adapting to the new environment, but RHB had figured this out even before the pandemic crisis. Yip explained that today, RHB has the ability to judge and gauge the financial flexibility of a particular borrower even without looking at their financials. RHB relies on data collected from borrowers to make credit decisions, and at times the bank also works together with partners and uses their insights to facilitate their credit decisions.

Responding to a question on educating entrepreneurs, Yip explained that RHB conducts digital workshops on its SME e-Solution on a regular basis to share business knowledge and experience with its customers.

Yip reminisces that when the Special Relief Facility (SRF) was first introduced in 2020, many businessmen assumed that despite the pandemic situation in China, Malaysia would be shielded from the situation. RHB was one of the first to participate in this effort and got the first case approved. That particular customer, who was in the tourism industry, got the disbursement within the same month. Yip added that as a commercial bank, RHB is one of the biggest supporters of government grant schemes, and to-date has disbursed more than RM1.1 billion in SRF, and will continue to do so for all Bank Negara Malaysia-funded schemes.

On the question of sustainable business financing, Yip explains that RHB is poised to grow its ESG (Environmental, Social and Governance) loan books by RM1 billion by the end of 2022. RHB is one of the first banks to put together renewable energy packages for SMEs as early as February 2020, before the pandemic began.

MRCA Event

PANEL SESSION 2

The second panel session featured 3 industry stalwarts namely, and Shirley Tay, President, MRCA, Kevin Lee, Head of SME, Maxis Business, and Pang Kong Chek, Chief Financial Officer, PKT Logistics Group Sdn Bhd. The panellist shared their thoughts on problems on the ground, digitalisation, pivoting business and Budget 2022.

SHIRLEY TAY, MRCA

Sharing her thoughts on Budget 2022, Shirley said that she appreciated the continuing incentives and financial assistance provided to SMEs. She highlighted that one major incentive that is encouraging is the targeted wage subsidy programme whereby RM600 million will be used to benefit 6,000 employers and 300,000 employees. “The government with its umbrella of Jamin Kerja and Keluarga Malaysia will create another 600,000 jobs, which is very important as SMEs are in shortage of workers,” Shirley explained.

“There is also an incentive given to Malaysians to hire jobless people, whereby they stand to receive assistance of 20% of workers’ salary for 6 months, and another 30% for the subsequent 6 months,” she added.

Shirley also mentioned that the MyStep initiative to help people get employed was very encouraging.

Amidst these initiatives, Shirley highlighted that the rental subsidies remain disappointing, which is adversely affecting SMEs because they owe huge outstanding amounts to landlords. Presently, SMEs are protected by the COVID-19 Act, however this is a temporary measure, which comes to an end in December 2022. On that note, she hopes that the government will be able to provide direct subsidies for rental relief.

Shirley expresses her appreciation of the RM1.6 billion stimulus given to the tourism industry by the government, alongside the RM33 million to boost the production and purchase of local goods; and, the RM250 million for shopping online and e-commerce onboarding.

KEVIN LEE, MAXIS

Speaking about the importance of digitalisation for Malaysian SMEs, Kevin explains that the market is now an even playing ground with digitalisation. He adds that Malaysia has been a very conducive business environment for many years, that is why there are many entrepreneurs in Malaysia. “It is easy to start a business and the barrier of entry is low, and to sustain a decent business revenue is actually not too difficult in Malaysia,” Kevin explains.

He shares that Maxis has entered a partnership with the Malaysia Digital Economy Corporation (MDEC) and Ministry of Finance (MOF) to help the government reach out to SMEs in Malaysia to bring them onboard government grants. It is targeted to help up to 100,000 Malaysian businesses, primarily micro-SMEs, to kick-start their digitalisation journey. Todate, through this initiative, Maxis together with MDEC and MOF have helped more than 15,000 Malaysian SMEs to embark on digitalisation, from front-end solutions to other back-end and operational solutions.

Maxis has stepped up its support for SMEs by collaborating with world-class IT companies such as Microsoft, Amazon and Cisco as well as Malaysian digital solutions provider, to deliver end-to-end digital solutions to SMEs embarking on digitalisation, encompassing, digital marketing, point-of-sales, Internet of Things (IoT), logistics, track and trace, and digital remote working solutions, among others.

PANG KONG CHEK, PKT LOGISTICS

Sharing about PKT’s digitalisation journey, Pang explains that the company was already digitally ready pre-pandemic. However, when the pandemic hit the country, it further accelerated PKT’s digitalisation journey alongside its transformation programme. PKT was impacted because their customers were unable to operate during the pandemic. In mitigating business disruptions, the company diversified its business in the education and e-commerce sectors. The company is working towards its aspirations to derive its revenue from the online platform by 2025.

Pang highlights that PKT deployed AI and robotics into its customs declaration system whereby it not only reduced the resources required to perform certain activities, but also channelled larger resources to more value-creating business operations. He advises to start small steps and gradually expand digitalisation throughout the business operations of SMEs.