Pikom: Second Prihatin Economic Stimulus Package Not Good Enough
By Digital News Asia March 30, 2020
- Does not go far enough to help SMEs & business owners survive currently
- 6 suggestions, including making IT a necessary enabling service for businesses
Representing over 1,000 tech companies in Malaysia, PIKOM, the National Tech Association of Malaysia, is expressing some concerns, especially for SMEs, relating to the current pandemic and the government’s response through the second Stimulus Package announced last Fri.
While welcoming the measures taken by the government, which include cash aid for singles, households, civil servants, security forces, discounts on electricity usage and free internet, yet Pikom Chairman Danny Lee noted, “The second PRIHATIN Rakyat Stimulus Package may only help certain industries and individuals to see through the lockdown period and the month after. But, this is merely temporary.” Pikom feels that it does not go far enough to help SMEs and business owners to survive the current trying times.
“It would take a minimum of six months before things return to a semblance of normalcy. Even then, Pikom foresees many SMEs will continue to struggle to get back on their feet. If businesses start to fail, the economy will further stall and unemployment will go up,” warns Lee.
He also highlighted Malaysia is highly vulnerable to the global economic slowdown with several major trading partners already severely affected by Covid-19. “We must start thinking about the next coming months during the recovery period,” he urges.
Pikom highlights four key concerns and offers five ideas for the government to adopt in order to keep the technology sector on an even keel in choppy and stormy weather.
1. As an industry that employs over a million people, the technology sector is concerned that not enough is being done to ensure that employers and employees alike are assisted during this trying period.
2. The RM600 subsidy for those earning RM4,000 or less and deferment of loans by financial institutions will help some no doubt but a major proportion of employees in the technology industry would not be able to enjoy that coverage. In the tech industry, human resource costs can make up between 70% to 80% of overall expenses of a company with many in the M40 category.
3. The government should use more in its arsenal to prevent an economic meltdown. A direct cash aid to companies that require it the most is needed to prevent a collapse and ensure the business can remain sustainable.
4. The exemption on HRDF contributions while welcomed would not be sufficient. Restructuring EPF contributions would help but the government should have allowed for an automatic suspension of EPF contribution by both employer and employee for at least 6 months. This will free up at least another 24% for those earning below RM5,000 and 23% for those earning above RM5,000 into the economy during this vital time.
With the above concerns as the background, Pikom is making six suggestions that the government can immediately take to assist employers and employees alike to ride through the Covid-19 triggered storm:
- Corporation tax for income earned should be looked into. In a tough operating environment, businesses are struggling to survive and cash flow is tight. Reducing tax would help free up additional capital to businesses to invest and hire additional employees. The tax reduction should be for years of assessment 2019 and 2020.
- For professionals who are mostly paying income tax, a reduction in the contribution to the monthly PCB will free up some cash flow. In addition, some additional rebate and relief should be introduced for the taxpayer. This can be in the form of reduction in overall tax rate or increase in personal relief.
- There is a need to address the issue of unpaid leave during the MCO period and beyond as business activity would continue to be depressed. Rather than to lay off staff, providing the staff the opportunity to return to work when the situation improves will be a better option. There can be a cap on the maximum amount of days rather than indefinitely placing an employee on unpaid leave.
- Another major cost that impacts business is rent and utilities over and above the earlier announcement. While the government may not be involved in the provision of such services, it may play a role in helping alleviate the situation by encouraging deferment of rental through a tax incentive.
- The waiver of sales and service tax will also be able to provide an additional boost to the companies and reduce overall cost of doing business. This will have a catalytic effect and encourage more consumption.
- Pikom also recommends that the government consider IT as a necessary enabling service for businesses, whether it is for essential or non-essential services during the MCO. This is where IT infrastructure has to be robust, systems need to be up and running and IT support services are required. We urge the government to allow IT services to continue operating should the company deem it necessary.
"These are some recommendations that PIKOM feels are required immediately to support all industries at this critical phase," says Lee. Providing support to businesses will help ensure that the business continues to operate and the employees continue to be gainfully employed.