KUALA LUMPUR June 9 :- Adopting a policy enforcing local procurement within the Government and GLCs should be the way forward, urged the Malaysian Consortium of Mid-Tier Companies (MCMTC) today.
The group representing the Mid-Tier Companies (MTCs) in Malaysia lauded the Government’s launch of the Shop Malaysia Online initiative in the Short-Term Economic Recovery Plan (PENJANA) but said that the Government should set the example in supporting local companies through policy frameworks.
“Many local manufacturers export products which are internationally certified, recognized and accepted in the overseas market. If other governments can use Malaysian-made products, I believe our Government should support local companies,” said MCMTC President, Callum Chen, in a press statement.
However, Chen said that if a product is unavailable locally, then opening the contract to international companies is rational but the procurement department should reach out to local companies first.
On the various tax incentives to attract foreign direct investments (FDIs) to Malaysia, Chen said that though this is a good move, the focus should be introducing financial schemes and incentives to grow local companies.
“Waiting for FDIs or Malaysians to relocate their overseas businesses to Malaysia will take time, whereas the low-hanging fruit is to extend the validity period and value of the reinvestment allowance, and at the same time introduce financing schemes to MTCs,” he said.
According to PENJANA, the reinvestment allowance is valid from 2020 to 2021. The reinvestment allowance value has yet to be announced by the Government.
Chen recommended that the validity period of the reinvestment allowance should be extended to five years and value pegged at 80 percent of the investment value.
To stimulate growth among local companies, Chen added that MTCs should also be considered for special financing schemes as was the case for small and medium enterprises (SMEs).
“Businesses across the board are affected in this economic downturn and besides having incentives to grow a business, companies need financing capacities,” said Chen referring to the six-month automatic moratorium for bank repayment exclusively for SMEs and which he recommended should also be extended to MTCs.
Chen also proposed introducing a five-year loan at 3.5 percent interest rate amounting from RM5 mil to RM15 mil which could help MTCs have more working capital to do reinvestment.
He emphasized that assisting MTCs will lead to a multiplier effect in the economy’s recovery because SMEs, MTCs and multinational companies (MNCs) are co-dependent on each other’s supply.
In addition, MCMTC agrees with the Malaysian Association of Hotels’ proposal for a 50% wage subsidy for employees with monthly pay of up to RM4,000 and 30% for those earning between RM4,000 to RM8,000. The group urged the Government to remove the limit of RM600 payout to only the first 200 employees earning less than RM4,000 in the company.
Chen said this move would raise dissatisfaction among employees and employers, especially among MTCs who employ around 500 employees and not receiving support for the balance of the 300 staff is unsustainable and likely lead to job losses.
“SMEs have less than 200 employees and are fully supported but if you are an MTC who has 500 employees, how would you feel? The very same reasons for supporting the first 200 employees are equally valid for the remaining 300 employees of a Mid-Tier Company. If due to an MCO enforced closure and consequent depressed economic conditions where cash flow is not sufficient to maintain full employment, the problems facing the business is the same whether it is a company of 200 or 500 employees”.
“Moreover, this scheme’s purpose is to assist companies in retaining employment, it could also be argued that companies see more need to retain higher paid skilled employees,” said Chen.
On the RM100 mil smart automation matching grant, Chen said this move is important to reduce the dependency on foreign labour, but the amount of this grant will need to be increased if the Government wants to see an immediate impact on the economy.
“Digitalisation and connectivity are the first steps to achieving Industry 4.0 and to see significant changes to the industries in Malaysia, it requires a lot more capital,” said Chen who also welcomed the increase of accelerated capital allowance for machinery and equipment including ICT equipment from 20 to 40 percent and the extension of its validity period to December 2021.
MCMTC strongly supported the significant enhancement in the wage subsidy program which now allowed companies to implement reduced four day work week with a corresponding 20% reduction in salary “This flexibility is a welcome move to enable the thousands of companies and hundreds of thousands of employees to adjust to the new normal brought about by Covid-19. It is also a growing realisation by both employers and employees and Trade Unions and Government that very rigid work arrangements especially in this period will lead to either the complete closure of companies or widespread retrenchments. It is far better to have flexible work arrangements to save both jobs and companies” concluded Chen.
About MTCs: MTCs consist of only 1% of companies in Malaysia, contribute to about 30 percent of the country’s GDP and 22% of the workforce. There are approximately 10,000 MTCs in Malaysia and is defined as companies with a RM50 mil to RM500 mil annual turnover for the manufacturing sector and services sector with a minimum annual turnover of RM20 mil to RM500 mil.
Malaysian Consortium of Mid-Tier Companies