Kuala Lumpur, August 25, 2020 – The manufacturing sector has been severely hit with production and supply chains of most companies being on a near standstill due to the Covid-19 pandemic and the subsequent Movement Control Orders (MCOs). Given that Malaysian manufacturers in general were only allowed to resume operations at full capacity in early May 2020, this has resulted in many manufacturers being unable to fulfil their contractual obligations. As a result, businesses are exposed to the consequences of failing to comply such as damages claims, forfeiture of deposits, termination of leases and insolvency proceedings. As such, the passing of the Temporary Measures for Government Financing (Coronavirus Disease 2019 (Covid-19)) Bill 2020 on August 24, 2020 which provides a moratorium or relief from court proceedings, arbitration and bankruptcy actions is welcomed in this particular time in Malaysia. The Federation of Malaysian Manufacturers (FMM) believes that the legislation provides temporary reprieve to allow businesses to avoid legal disputes and protects them from resulting legal suits, as they try to resuscitate their businesses and recover from the pandemic.

FMM had on May 31, 2020 submitted its feedback on the proposed COVID-19 Bill to the Government. We requested to the Government for relief measures in the form of a holistic and multi-sector Covid-19 Act. Among others, we have recommended that the scope of scheduled contracts that may be applicable in Malaysia be broadened compared to the scope under Singapore’s COVID19 (Temporary Measures) Act 2020. Given the contraction in manufacturing activities due to the harsh impact of Covid-19 pandemic on business sustainability, employment and productivity, we had proposed for the Act to provide provision for relief for manufacturing and its related supplies as well as expanded to cover other services such as trading or distributorship and logistics related services such as warehousing, transportation and shipping. Malaysia’s Bill as it stands now is not all-encompassing as the temporary relief measures only applies to seven categories of contract carried out for the period from March 18, 2020 until the end of the year. With the exception of supply of construction material and equipment, the Bill does not cover other manufacturing related sectors and its supply chain.

FMM had maintained that business recovery may take anything between 4 months to 2 years depending on the sectors and impact that Covid-19 has had on the business. Any measures however temporary including the Covid-19 Bill will assist businesses to recover at a faster pace and continue to improve their revenue and sustain their workforce. However, it is noted that measures in the Bill for manufacturing sector and businesses at large falls short of the requests made by FMM. For example, there is no provision in the legislation for a valid issuance and lodgement of notification for relief to be served due to delay or breach attributable to a COVID-19 event and therefore it is unclear how businesses can initiate the proceedings to claim temporary relief under the legislation.

Furthermore, there are no clear provisions in this law to address the inevitable disagreements that will arise between the contracting parties. Although the Bill has a mediation provision, mediation however is not compulsory and if mediation fails, there is no further recourse for the two parties. Singapore’s Ministry of Law however had established a panel of specialised assessors made up of industry experts to determine whether the non-performance is due to COVID-19 and grants the necessary relief appropriate in the relevant circumstances to ensure a joint and equitable outcome.

FMM is of the view that this legislative safety net provided it covers multi-sectors and implemented with effective enforcement mechanisms will not only save jobs but will also give a much-needed boost to the Small and Medium-sized businesses that need that lifeline to survive this difficult period.