Light at the End of the Tunnel for Micro SMEs and Employment

After two years of facing the global Covid-19 crisis, which has hammered economies worldwide, Malaysia will be on the road to recovery in 2022.

 

Budget 2022

The government has listed numerous essential steps in the RM322.1 billion allocation that aims to revitalise enterprises, the labour market, and the general economic outlook, with the largest budget in the country's history slated for next year.

Budget 2022 addresses the needs of the bottom 40% income group (B40) and assistance for the medium 40% income earners (M40), which makes up a significant portion of business owners.

The government ensures that the efforts outlined in Budget 2022 provide job opportunities to people from all walks of life after the pandemic wreaked havoc on the labour market.

Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz remarked during the budget presentation in October that the budget embodies the spirit of the Malaysian family as it was formed following discussions with focus groups and reviews of over 1,100 memorandums.

Through the Budget 2022 portal, the government received approximately 50,000 suggestions. Cooperation with political groups was also a part of the process to guarantee that the government had adequate information about the needs on the ground.

 

Businesses to be revitalised by Semarak Niaga

Due to movement restrictions that limited business activities, nearly 37,000 small and medium companies (SMEs) have gone bankrupt. Since the pandemic outbreak, the government has taken several steps, including stimulus packages, to help entrepreneurs maintain business continuity and mitigate the effects of Covid-19.

The government unveiled an RM40 billion financing package under Program Semarak Niaga Keluarga Malaysia (Semarak Niaga) to help SMEs get back on their feet and consolidate their market presence.

Direct loans, financing guarantees, and equity injection are all part of the scheme, which aims to help entrepreneurs ranging from micro firms to publicly traded companies. The aid is structured around four primary pillars that will help micro-SMEs re-calibrate their operations during the economic recovery.

The government is anticipating a recovery for the business sectors.

Micro-credit schemes

The first initiative is a micro-credit scheme through which businesses will be able to obtain nearly RM1.8 billion in microcredit from a variety of agencies, including Agrobank, Bank Simpanan Nasional (BSN), Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat), Tekun Nasional (Tekun), and Bank Negara Malaysia (BNM).

Under Tekun, informal and micro-financing schemes would be provided with loans up to RM10,000 with no interest and a 12-month moratorium. Microfinance up to RM75,000 will be offered by BSN and Agrobank, with a 0% interest rate for the first six months and a six-month moratorium.

The government also intends to extend the I-Tekad social financial programme, which integrates social finance instruments such as zakat, sadaqah, and waqf to give micro-financing and skills training to micro-entrepreneurs.

 

Equity or alternative funding

Semarak Niaga's second pillar focuses on equity or alternative funding. Tengku Zafrul had previously claimed in his budget announcement that since the pandemic began, there has been a massive surge in equity crowdfunding and peer-to-peer finance, with more than RM1.3 billion in funds raised.

As a result, the government continues to support this approach by granting RM80 million in matching grants to the Malaysia Co-investment Fund. In collaboration with the Bumiputera Agenda Steering Unit and BSN, SME Bank would make RM600 million available to all Malaysians, particularly Bumiputeras.

In addition, Bank Pembangunan Malaysia Bhd (BPMB) would contribute RM500 million in Rehabilitation and Support Through Equity programmes, while the central bank will fund an RM1 billion Business Recapitalisation Fund.

Semarak Niaga also improved the Syarikat Jaminan Pembiayaan Perniagaan (SJPP) scheme, which helps SMEs get funding in these tough times. The initiative had offered over 44,000 businesses with business loan guarantees totalling over RM46 billion as of October. BNM, Agrobank, BPMB, SME Bank, Permodalan Nasional Bhd, and MIDF Amanah Investment Bank Bhd are among the participating agencies in the programme.

The government also plans to extend the tax breaks on refurbishment costs of premises up to RM300,000 until December 31, 2022, for businesses that change their facilities to satisfy the requirements stipulated in the standard operating procedures.

For enterprises registered under Safe@Work, the government will also extend additional tax discounts until RM50,000 on employees' rented accommodation for another year.

 

Enhancing the labour market

Malaysia's jobless rate hit an all-time high of 5.3% in May of last year. The unemployment rate has been progressively dropping as the economy recovers. However, it has not yet returned to pre-pandemic levels.

As of September this year, the unemployment rate was 4.5%, with 729,600 people unemployed as employment continued to rise.

The government will create 600,000 job opportunities with an allocation of RM4.8 billion under the Jamin Kerja Keluarga Malaysia (Jamin Kerja) initiative to address the country's unemployment problems.

Through the Social Security Organisation, the government will continue to encourage businesses to hire by providing RM2.5 billion in wage subsidy incentives, targeting 300,000 employees.

With an RM1.8 billion budget, the government would also continue to offer the Malaysia Short-Term Employment Programme, which will provide 50,000 vacancies in the public sector and 30,000 positions in government-linked firms starting in January 2022.

Budget 2022 also plans to offer reskilling and upskilling programmes to 220,000 people to improve their marketability. The place-and-train programme, which is projected to cost the government RM1 billion, is one of the ideas that will be executed.

 

The government anticipates the unemployment rate to decline to 4% due to the Jamin Kerja project and other economic recovery initiatives, as well as a predicted increase in economic activity.

According to the government's 2022 Economic Outlook, Budget 2022's allocation will be 20.3% of the total GDP where RM233.5 billion or 70.3% will be directed to Operating Expenditure, RM75.6 billion (22.8%) for Development Expenditure (DE) and the balance of RM23 billion for the Covid-19 Fund.

 

Source: The Malaysian Reserve