THE road ahead remains difficult for companies as movement restrictions persist.
With many still not licensed to operate – and those in critical industries only operating at limited capacity – SMEs are exploring various options to help them weather the storm.
According to the second quarter 2021 RAM Business Confidence Index (BCI) survey conducted by credit research and advisory services firm RAM Holdings Bhd, small businesses that have been hit hard primarily see cost-cutting measures as their main survival strategy.
The survey, which surveyed some 180 companies, found that more than half of respondents have resorted to some reduction in operating costs in the past year. In addition, around 43% believe they may need to institute cost reductions in the near future to remain viable.
“This is especially true for small businesses that already have limited cash flow. If no further aid is extended, they could face an inevitable shutdown in the coming months, â€says RAM.
Other initiatives employed by companies to remain viable include relying on e-commerce sales channels and redesigning their product lines. Many also intend to invest more to enable remote and flexible working arrangements to maintain their workforce.
These measures will be crucial in helping businesses to survive until the economy fully reopens and consumer confidence is restored.
SMEs are rightly negative about the short-term outlook given the current restrictions and limitations.
RAM notes that the business climate for SMEs fell in the second quarter of this year following the reimposition of the movement control ordinance. The second quarter BCI RAM, concluded in early June, plunged to a record low of 33.2, from 38.7 in the previous quarter. An index of 50 and below indicates pessimism in the business outlook over the next six months.
“The survey results indicate that companies were the most pessimistic about sales, with over 60% (up from 47% previously) citing poor prospects over the next three months. As a result, the sales sub-index hit a new low of 24.9 after two consecutive quarters of improvement, â€adds RAM.
Their main concern is the weak economy and rising costs against a backdrop of declining sales.
Notably, the high-touch retail and business services sectors have been hit the hardest by the foreclosure and are therefore the most concerned about weak sales and profits over the next quarter.
Conversely, according to RAM, nearly 90% of manufacturing companies surveyed cite rising business costs as their main challenge. This is consistent with the recent surge in the cost of major raw materials following a cycle of rising commodity prices, as well as soaring global shipping costs amid bottlenecks.
Regulatory issues were also cited as a challenge for businesses.
In a recent statement, the Small and Medium Enterprises Association (Samenta) Malaysia pointed out that, based on its survey of essential list people who have sought approval from the Ministry of International Trade and Industry ( Miti) under CIMS 3.0 approximately 11% are still pending.
The Federation of Malaysian Manufacturers (FMM) also notes that factories face multiple raids from different enforcement agencies who have different interpretations of standard operating procedures and Miti approvals.
Given the difficult operating environment, it is not surprising that some 73% of those surveyed in RAM’s survey expressed the need for additional short-term support.
Topping the list are the maintenance of wage subsidies (36%) and extended loan moratoriums (17%) – both available under Pemerkasa Plus – as well as access to new loans (15%).
“It is also encouraging to point out that nearly 30% of the companies surveyed are able to fend for themselves, alluding to their strong instinct for survival which bodes well for entrepreneurship,†adds RAM.
According to Samenta, 23% of respondents to her survey plan to lay off employees this time around, compared to just 7% when she conducted a survey in January 2021. The wage subsidy had then helped reduce job losses and many called for an extension of the wage subsidy program, especially for SMEs that are not allowed to operate until December.
However, he adds that only 18% had requested the moratorium on loans under Pemerkasa Plus. For those who requested the moratorium on loans, 36% were still pending while 18% were rejected.
Samenta urges financial institutions to simplify the verification process to help SMEs overcome the cash flow crisis.
Despite the difficult challenges of the past two years, RAM says 84% ​​of companies surveyed hope the economy and their businesses will recover within a year, although the majority expect their businesses to stay below pre-market levels. pandemic.
“Optimism helps overcome adversity and the emerging economic recovery will certainly benefit from such sentiment.
“While we applaud the various stimulus packages for businesses and SMEs, we urge policymakers to continue to provide immediate assistance to the most vulnerable entities in the service and retail sectors. As the backbone of the nation, the survival of SMEs is crucial for Malaysia’s long-term economic development, â€he said.