Subsidies for SMEs okay but think long-term too, govt told

A woman working at her stall at the Kota Kinabalu General Market during the MCO.

KOTA KINABALU: A think tank today suggested that the government offer subsidies to small and medium-sized enterprises (SMEs) to encourage firms to counter the effect of a longer movement control order (MCO).

Institute for Democracy and Economic Affairs research director Laurence Todd said additional subsidies should also come with measures to encourage businesses to adapt to the developing situation.

He welcomed reports that the government is set to announce fresh financial assistance for SME workers affected by the MCO but advised it to plan for the long term as well.

“Ultimately, subsidies can only help for so long. The disruption might continue for some time,” he said.

Todd said any support should also come with efforts to adapt.

“Firms should be encouraged to adopt digital technologies and employees to undergo retraining.

“There are many government programmes to provide this which could be made conditions of more generous financial support. That way, we can protect firms for the short term and help them adapt for the medium and long term,” he told FMT.

Prime Minister Muhyiddin Yassin is expected to announce fresh financial assistance later today that will help workers in SMEs affected by the closure of businesses under the MCO.

A worker shutting down a store near the Gaya Island jetty behind the Kota Kinabalu General Market during the MCO.

This is in addition to the RM250 billion Covid-19 rescue plan, dubbed the Prihatin Rakyat Economic Stimulus Package, announced last month.

SMEs account for about 98.5% of businesses with some six million workers, contributing a little over one-third of the gross domestic product.

Todd said the special relief facility should be enhanced, giving the example of the interest rate which he said should be reduced to 2%.

He also spoke of an interest moratorium for the duration of the MCO.

“The employee retention programme (ERP) should also be enhanced, up to RM1,200 from RM600 now.

“I also think there should be a mechanism for employees on unpaid leave to undertake training in digital skills so they can adapt to longer term disruption.”