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FMM: Economic Stimulus Package “Commendable” but …

FMM In the News: SME MAGAZINE (Saturday, 28 March 2020) - The Federation of Malaysian Manufacturers (FMM) has described the RM250 billion Economic Stiumulus Package announced by Prime Minister Tan Sri Muhyiddin Yassin to mitigate the impact of the COVID-19 and the Movement Control Order (MCO) as “commendable”.

FMM President Tan Sri Dato’ Soh Thian Lai said in a statement that the package, which is equivalent to about 17% of the 2019 GDP, is comparatively higher than the allocation by other countries that have already announced their Stimulus Packages. “We view this Economic Stimulus Package as a primary care package mainly for the M40 and B40 groups which are most vulnerable to the impact of the COVID-19 and the subsequent public health measures taken by the Government.”

He said FMM also welcome other initiatives would help ease the immediate cash flow and financial constraints of businesses in particular the SMEs. These include the
• RM50 billion Danajamin guarantee scheme with up to 80% guarantee for working capital needs with a minimum RM20 million loan size per company. FMM however hopes that banks will fully assist affected companies with reasonable interest charges.
• The automatic six month moratorium announced by Bank Negara Malaysia on repayment/payment of loans/financing for small and medium-sized enterprises (SMEs) and individuals. FMM is of the view that banks should not be compounding interest and reduce interest further or even better would be to waive interest to help the companies affected;
• The increase in the Special Relief Facility for SMEs from RM3 billion to RM5 billion. FMM however is of the view that the interest should be set at 2%;
i. The exemption from payment of the Human Resources Development Fund levy for all sector for a six-month period;
ii. Enhancing access to financing for SMEs by increasing guarantee facilities through Syarikat Jaminan Pembiayaan Perniagaan (SJPP) amounting to RM5 billion with an increase in the guarantee rate from 70% to 80%; and an increase in the Micro Credit Scheme to RM700 million at a 2% interest rate with no collateral requirement.

Tan Sri Soh however, note that the Stimulus Package has not sufficiently addressed the impact of COVID-19 and in particular the MCO which has disrupted production and trade. He said Industries are facing a catastrophic situation on an unexpected scale that would risk business viability and continuity. “Recovery from this situation is easily going to take industries between 6 months to a year at the very least.”

FMM said the industry needs more immediate measures to keep businesses afloat and proposed the following measures:

i. In view of the prolonged MCO, many businesses are already grounded to a halt. In addition employers are not allowed to cut wages or request employees to utilise annual leave during this period. While FMM appreciates the Government’s initiative to introduce the wage subsidy measure amounting to RM5.9 billion to mitigate business cost, we are of the view that the RM600 wage subsidy introduced should have been extended to all employees regardless of wage level and be an automatic subsidy without the need for companies to prove reduction in earnings by 50%. In fact, FMM had proposed for a 30% wage subsidy by the Government on a tripartite shared basis with employers and employees.
ii. FMM had hoped for a complete exemption from contribution to the Employees Provident Fund until end of December 2020 instead of the current announced deferment/restructuring/ rescheduling option of payment which would still tie employers down financially.
iii. The increase in electricity discounts appear to only benefit domestic and low voltage users which would not cover the major industrial and large users who would be impacted most by the interruptions to operations.

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