Malaysian SMEs on the 'brink of collapse' says MEDAC

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Malaysia’s MSME (micro, small and medium enterprise) sector, accounting for close to 40% of the country’s GDP, is said to be on the “brink of collapsing” should the current nationwide lockdown continue indefinitely.

According to a press release statement on the Ministry of Entrepreneur Development and Cooperatives (MEDAC)’s website, a survey showed that an estimated 580,000 businesses, representing approximately 49% of the sector, are at risk of failing by October if they are not allowed to open up their operations by then.

The closure of these businesses, which are mostly in the first to close last to open (FCLO) category, will see an expected estimate of more than seven million Malaysians unemployed. Assuming that each worker has an average of two dependents, it will mean that another 14 million people will be affected by this situation.

MEDAC minister Wan Junaidi Tuanku Jaafar said this is the “hard truth that needs to be voiced out, in order for people to realise the dire situation faced by the local MSMEs and the urgent need to come up with the right remedial actions to address this issue”.

He said failure to resolve the matter would have a devastating impact on the country’s socio-economic landscape, which will subsequently affect the overall wellbeing and happiness of the rakyat.

“If we don’t do something to help them now, I am worried that many of these MSME will fail and will not be around to help rebuild the economy once businesses are allowed to open. I am also worried that failure of these MSME businesses due to the prolonged lockdown will create a domino effect, hitting the societies hard at the core, leading to a more serious social and economic impact,” he said.

On June 15 to June 28, MEDAC conducted a survey to gauge the impact of the MCO 3.0 on the entrepreneurship landscape in Malaysia. More than 6,600 respondents from across the nation took part in this survey.

The survey revealed that many businesses are now suffering “business fatigue syndrome” and declining confidence as a result of lockdown. About one third of the respondents said that they did not receive the various assistance schemes introduced by the government.

Minister Wan Junaidi also said mental issues were among the areas of concern, as the survey reported that nearly 60% of entrepreneurs suffer from at least one form of mental health condition during the lockdown.

The top three factors affecting mental health conditions of the entrepreneurs included decline and loss of income, debt and financing issues, as well as risk of business closure.

He said many of these entrepreneurs were worried about their future, thus contributing to higher stress levels and affecting their mental and emotional wellbeing. More than 90% of these entrepreneurs have no insurance and 70% have no safety nets to fall back on should they lose their jobs.

The minister also said that the impact of the lockdown is not only affecting the economic aspect but also the social aspect as well. He was concerned that the longer businesses are not allowed to operate, the longer it will take to recover.

“People are becoming increasingly unhappy. They are unhappy because of financial issues as well as not being able to socialise. It is time we look at other holistic measures on how to deal with this other than a lockdown,” he added.

The statement release follows the growing #benderaputih movement. Brands have also stood out to show their support, offering food assistance to fellow Malaysians. According to an SCMP report, the campaign is “the clearest sign yet of the economic despair that hundreds of thousands of Malaysia’s lower-income families have experienced amid the haphazard approach of Prime Minister Muhyiddin Yassin’s government to the public health crisis”.

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