SMEs in dire need of assistance

ON the eve of Malaysia Day, I was delighted to share a few drinks and cigars with my two elderly sifus, Peter Khoo and TK Teo. Khoo, an accounting and tax practitioner and Teo, an experienced banker and corporate personality, have such great stories to tell with much wisdom imparted from their past experiences.

But our discussion turned sombre when I asked them how bad has this pandemic-driven recession affected Malaysian SMEs, as compared with other recessions since 1987.

Both say that the SMEs are facing the toughest challenges ever seen before.

Khoo reckons some 30% of Malaysian SMEs have closed down in the last 18 months. Teo feels that more SMEs will close down come January 2022 when the bank moratorium ends.

My hairstylist who used to have a saloon in Kota Damansara told me that more than half of the 40 over hair salons in his area have closed down in the last 18 months. Many shopping malls across the country have seen retail and F&B stores close. Not forgetting the closures of so many hotels and all tourism businesses. The list is endless. The damage is extensive.

The many lockdowns and strict SOPs have ruined many businesses. As the losses mounted, cash flow depleted super fast, defaults on bank loans reprieved by two moratoriums, savings are all used up and there is no light at the end of the tunnel for any recovery in business. Until now.

Luckily for Malaysia, our vaccination programme has been accelerated and in three weeks, 90% of our adult population would be fully vaccinated. The adult population is the working population. This has enabled the government to open up the economy gradually and come October, hopefully all sectors will be reopened and we hope that it includes allowing interstate travelling.

How can the government help the SMEs? I had asked Teo this question before we left for home.

The following day, Teo asked if I remembered about the Export Credit Refinancing (ECR) scheme which was introduced by the government after the 1987 major recession.

Of course I remembered. In the late 1980s, I was managing a rubber glove factory and had used the ECR facilities to the maximum. Upon receiving a purchase order (PO) from my customers, I could utilise up to 80% of the PO value to issue letters of credit to my latex supplier, order packaging materials and pay for the gas bills.

Upon completion of the order, the money received is first paid to the bank and the balance money is used to pay salaries. Manufacturers could borrow upfront based on a firm order so that production could proceed.

Financing cost was at 4% compared to the standard 8%-10% commercial rate of borrowing. It was a Bank Negara initiative, all ECR loans and facilities extended by commercial banks were guaranteed by Credit Guarantee Corporation (CGC), owned by Bank Negara and Malaysian banks.

Teo explains more: “As we know, SMEs are the worst hit sector during this pandemic. Most of them have no more working capital even if there is new demand for their products or services.

“Most of their existing loans have now turned into non-performing loans (NPL). So they have little chance of getting banks to extend additional facilities to them. Therefore, Bank Negara can introduce a similar funding scheme that can cater to SMEs that have contracts or orders in hand, but need fresh working capital.

“These funds can be guaranteed by CGC and also with the condition that part of the new business proceeds must be used to settle the existing NPL.”

Teo’s idea is practical and offers an amicable solution to all parties.

SMEs will get fresh loans and cash flow to proceed with their operations to fulfil orders. Banks are able to reduce the NPL impact without taking on more risks.

The government controls a quantitative easing measure that is directed at productive activities that contributes towards faster growth of our gross domestic product.

I would like to expand on Teo’s idea and suggest the following:

  • Set up a RM100bil SME revival fund. Allocate an amount to the banks based on their respective loan size to the SME sector. CGC can guarantee up to 80% of the new loans extended by the banks to existing SME customers.
  • Set the interest charged for these loans to not more than 3%. With overnight policy rate at 1.75%, there are sufficient margins for the banks to implement this scheme profitably.
  • For export business, reintroduce the ECR scheme. For domestic business with orders or contracts in hand, a similar domestic credit refinancing (DCR) scheme can be implemented. The total amount of financing should be about two to three months of rolling future sales. Assuming it makes RM500,000 monthly sales, based on 80% financing, a RM1.2mil DCR facility would be sufficient.
  • For businesses that depend on future orders like F&B and services, a one-off revival loan can be implemented. Assuming the F&B outlet can generate RM100,000 monthly sales, then an upfront RM100,000 loan repayable over three years can be implemented. This RM100,000 loan will be sufficient to kick-start the business.

Bank Negara should consult the various trade associations and banks to ascertain their needs before designing the SOP’s for the SME revival fund.

The ECR and DCR schemes can be implemented quickly and should be implemented before the moratorium expires by the end of this year.

With the economy opening up, let us hope that our government will not resort to further lockdowns because the country will plunge into an economic abyss and never recover. We also need the government to ensure proper public health policies go hand in hand with economic activities.

The Health Minister has started the vaccination of children from the ages of 12-17 years, but the speed of vaccination will depend on the supply of Pfizer vaccines, which is again delayed.

Some countries like Singapore have started booster shots of vaccines for the elderly and for cancer patients so I am sure our Health Minister will look into this urgent matter, again subject to the delivery of vaccines.

Our Senior Minister for Security has announced that the 181 SOPs will be reduced to just 10 ‘simple to understand’ SOPs.

The whole nation will rejoice when the new SOPs are announced. It should be based on vaccination status, public health considerations of wearing masks, sanitisation, social distancing and crowd control.

Further considerations will be on self testing, home quarantines and contact tracing. Generalise the instructions for businesses and citizens to follow and make SOPs simple so that it will not be misinterpreted by local enforcement officers.

Businesses should not be subjected to International Trade and Industry Ministry approvals anymore.

We should not burden the police with applications for interstate travels. The civil service must revert back to pre-Covid efficiency levels. It is unproductive to have to make a booking online for an appointment to submit a document and frustrating to see all slots have been fully booked for the next two weeks.

What used to be a simple task of going to a public service department, collect a waiting number and conducting a simple transaction on the same day, must resume immediately.

I have never seen any government departments refusing to collect taxes or stamp duties before until this pandemic.

The land office is closed, the public have not been able to get road tax since March and the Inland Revenue Department is refusing to collect cheque payments at their counters. Funnily enough, our Finance Minister was lamenting about the low collection of tax revenue.

Lastly, the plantation and the manufacturing sectors are screaming for foreign workers to be allowed entry.

Since the pandemic started, we have had net outflow of foreign workers returning home upon completion of their contracts as no inflows are allowed. Working mothers are also in search of domestic helpers since their previous helpers have left for home.

With the economy opening up quickly, we need to allow entry of new foreign workers and domestic helpers. It is a major revenue for the Home Ministry as workers levy and fees run into hundreds of million a year.

Managing this recovery will require all ministries and our civil service to work together, coordinate better and communicate with one voice. And do listen carefully to the voice of desperate SMEs and to the voice of frustrated citizens as GE15 is only two years away.


*The views expressed are those of the author. If you have any questions about the content, copyright or other issues of the work, please contact Newswav.

Malaysia must reopen soon

Pic: Malay Mail

I have been in London since Aug 4. The purpose of my trip? Medical procedures that are not available in Malaysia. Since Malaysia is categorised as an ‘amber” country, I had to self isolate and quarantine in my own apartment for 10 days.

I had to undergo compulsory swab PCR tests on day two and eight and I had the option to do an ‘early release’ swab test on the day five. Please note that arrival date is considered day zero.

To date, I have had swab tests on Aug 1 (pre-departure), Aug 6, Aug 7 (pre-admission to hospital), Aug 9 and 12. Five swab tests and so far so good, as long as I am being labelled as negative.

I have to do further swab tests today (second pre-admission) and one more pre-departure swab test in London. After landing in KLIA, I understand I will have to do an antigen test. As I am fully vaccinated, I am now allowed to quarantine in my own home for 14 days.

I do feel alienated when I walk on the streets or go into restaurants. I am so used to wearing a mask but almost everyone here in the UK do not wear masks! The exceptions are some old folks and the Chinese staff in Royal China restaurants. I understand that you have to wear masks when you take the underground trains. That’s all.

The UK economy is fully open and running at full steam. What can we learn from the UK experiment on managing a pandemic crisis? Follow the facts and data:

> Vaccination to date – first dose 90% of adult population. second dose 76%. In three weeks time, 90% of the adult population will be fully vaccinated. UK has also started vaccinating 16 and 17-year-olds.

> Positive cases Aug 12 – 33,074 cases a day.

> Admission into hospital 737 cases a day

> Patients on ventilation – 871 people

> Deaths – average of 90 deaths a day for the last one week.

There is a correlation between vaccination ratios and seriously ill and death ratios in this UK experiment.

Vaccination ratios are up while admissions into hospital and deaths down. Positive cases will always be detected as the virus is still around and all positive cases are advised to self-isolate at home for 10 days.

What then can Malaysia learn from the British experience?

Based on our latest data:

> Vaccination of adults – 70% have taken a first dose and 40% have taken two doses. In three weeks time, it will be 80% having taken their first dose, while 70% would have taken their second dose. So technically speaking, if we follow the British experience, we can open up our economy in early Sept. Perhaps on a precautionary step by step approach.

> For states that have had 70% of their adult population fully vaccinated, a full opening of economic activities with a vaccination passport being the criteria for dine-ins, attending functions, religious activities and back to work, can be recommended.

> For states that have had below 70% of their adult population vaccinated, they should remain in phase one and kept isolated from the rest of the country. A vaccination passport must be in place for economic and social activities and for inter-state travel.

> Wearing masks and hand sanitizers must still be a compulsory part of our daily lifes. Keep it simple, there is no need to micro manage standard operating procedures (SOPs).

It has been proven that all these SOPs have been ineffective in managing the pandemic.

The key solution to this pandemic has all along been the speed of vaccination of the population. And I must give credit to our National Covid-19 Immunisation Pro-gramme coordinating minister Khairy Jamaluddin who has done a remarkable job in sourcing, planning and implementation of the vaccination campaign.

Other than Singapore and China, Malaysia has done very well if compared to the other non-western countries.

We need to re-open our economy as soon as we healthily can. Not only is our general population in deep financial difficulties, the mental health of our citizens is in great peril. We need to regain some normalcy in our lives.

Restarting economic activities with our closest neighbour Singapore must be our priority as we have lost too much in employment opportunities. Citizens of both countries who are fully vaccinated must be allowed non-quarantine travel.

As our working mothers go back to work, fully vaccinated maids must be allowed to enter the country. They should still serve the two-week quarantine rules.

Travel restrictions for business purposes must be lifted for those who are fully vaccinated. For tourism to start, travel bubble arrangements between like minded countries can be considered.

We will need to adjust as we learn, making decisions based on latest key data. Nobody can predict the future and making decisions on hindsight is one step too slow.

We still have three weeks to observe the British experiment, crucial insights that can help us plan and make better decisions.

With our present political crisis, there is a possibility that a general election might be called soon.

Can Malaysia handle a general election with national campaigns over the next 90 days? I am confident that our Yang di-Pertuan Agong will make a wise decision to solve this dilemma.

In the meantime, please encourage everyone you know to get vaccinated. The sooner the better for all of us.


*The views expressed are those of the author. If you have any questions about the content, copyright or other issues of the work, please contact Newswav.

Avoid being sentimental in business

Malaysiakini - US banks deem Malaysia a 'high-risk money laundering'  destination
Pic: Malaysiakini

During the last 12 months, I have met many SMEs facing severe cashflow problems due to losses and reduced revenue. My first advice is always to regularise cashflow sufficiently to cover monthly operating expenses and bank payments.

Unlike any other recession, the current pandemic-induced recession has caused the most pain across many industries and livelihoods of individuals all over the world.

Like all recessions, businesses have to reset their priorities and strategies going forward.

During the last 12 months, I have met many SMEs facing severe cashflow problems due to losses and reduced revenue.

My first advice is always to regularise cashflow sufficiently to cover monthly operating expenses and bank payments.

Most times, for older companies, they have property assets – land or factory warehouse buildings charged against banking facilities.

For the smaller businesses, sometimes they have the house that they stay in being charged to the bank for bank facilities used by the company.

In the old days, every SME’s priority was to own a property when they started making money just because they knew the property would definitely have capital appreciation and they could secure additional banking facilities based on higher revaluation of the property later on.

Our local “kiasu” banking system will insist on collateral with every loan application besides tying up your arms and legs in additional protection via personal guarantees.

Looks like nothing has changed unless the loans are 80% guaranteed by Credit Guarantee Corp. Different banks have different risk appetite for SME loans.

As an SME operator, when do you decide whether you should buy a property?

That will depend on your spare positive cashflow and your intention or purpose of the investment.

If it is for own business use it is ok.

If you are a trading company and you buy houses and apartments for investment using company funds, then the stretch on your cashflow will come back to bite you later when your business is not doing well.

In such cases, it is better to dividend out the profits to shareholders and let the shareholders invest in their personal capacity.

SMEs must be disciplined in their financial management of the company.

If you cannot afford it, have a smaller office. No harm in staying humble.

Capex should only be on necessary investments that contribute towards revenue and the bottom line.

In that way, the core business will enjoy sustainable growth. Investment in non-core assets that do not contribute positively to revenue growth of the core business should be avoided.

All these problems will surface when SMEs face a recession.

So, what do you do in a very weak property market when your assets have to be sold at a much lower valuation? Sometimes the final selling price is not sufficient to cover all the multiple loans that you have charged to the banks.

Troubled SMEs have a few options available depending on individual company state of affairs.

Reach out to external equity. If your business is still viable but extremely short on cashflow, look for external investors. Be prepared to give up part of your shareholding. General rule of thumb – the major shareholder looks after financing of working capital. If the external investor takes a majority position, then let him finance the business and you can discharge your property from the bank.

If your business is still viable and the sale of property will provide you with additional cashflow and reduce the payment of bank interest, then do it. I am assuming you want to keep the company to yourself.

If your business is not viable and you are not able to get an external investor, sell your property, clear all bank loans and suppliers debt and close the company. No point using good money to chase after bad money. You will dig a bigger hole than what it is now.

During a crisis, it is critical to think with less emotion and stop being sentimental. Pay attention to the numbers and the cashflow required. Don’t forget this year is going to be another tough year. The pandemic will not go away this year or the next.

It is difficult to see your business which you built over the last twenty years face a difficult crossroads at this moment. But if your business has been facing difficulties pre-pandemic, then you have ignored the earlier stress signals. No excuse and no way you can blame the pandemic for the difficult situation that you are in now. The pandemic merely accelerated the declining performance of your company.

What I notice to be quite common among matured SME owners is the sentimental attachment they have for the business that they have grown accustomed to. While the external conditions and the industry have changed, they continue to operate in the same manner that they have been doing for the past twenty years. With disruptions coming in thick and fast, they simply do not stand a chance in this current market dynamics at play. What they don’t understand they ignore.

For the young entrepreneurs, you will travel the same journey as what the old entrepreneurs have gone through. You will experience rapid growth in the early years and have some good profitable years. Then you start feeling confident to purchase your own property. The you start having bigger dreams of investing into more properties, thinking that you can make more money from such investments.

Do be careful with your cashflow planning especially when paying more for interest on higher debt. Just remember the monthly principal instalments will reduce your cashflow needed for your core business. Rental revenue is never steady nor sufficient in an over supplied property market. Only invest when you have spare cash not needed by your core business.

It is not foolish to run your business on an asset light strategy until you have accumulated sufficient profit reserves. Focus on the core business and do it well. Never count the chickens before they are hatched. You might be disappointed if your dreams remain just a dream.

Learn from the mistakes made by old entrepreneurs like me. And trust me, we old geezers have made many many mistakes not because we are not wise. We are just sentimental, that’s all.

*Views expressed here are the writer’s own.

[EXCLUSIVE] What Communities Need To Do To Survive

Rekindle Spirit of Merdeka
Pic: NST

In the last twelve months, international traveling for Malaysians came to a standstill. Airlines were not allowed to fly, borders were closed and Malaysians were asked to stay at home. Businesses were asked to close, open, close and now opened again. Every instruction were given as SOP’s and citizens have to follow diligently or we will be penalized with a summon or fine. There is absolutely nothing we can do except to obey and assist our government to fight the pandemic.

In the meantime China is practically COVID free but fighting a different battle. Battered in a trade war by past President Trump of USA, China now faces additional sanctions by current President Biden who now ropes in its allies like United Kingdom, Canada and Australia to put pressure on China on the issues of ‘human rights’ in China and democracy in Hong Kong and Taiwan.

China went on the offensive against the western media and the American government by asking for prove or evidence of human rights abuses happening in Xinjiang and recently invited many Ambassadors to visit the hot spot to see for themselves. What is really apparent is that the Chinese government has more than 90% popular support from its 1.4 billion citizens who are happy and feeling optimistic of their economic future.

We have a Chinese communist party who runs China like a socialist state in terms of welfare and national development but allows a capitalist economy to flourish. This must be the strangest combination of strategies to run a country but funnily this communist-socialist- capitalist model seems to work well for China. Besides lifting 800 million people out of poverty, China has the most advanced infrastructure/ transportation systemin the world. Besides having the biggest middle class population in the world, it is the only country that still grew its GDP last year.

And the joke is there is nothing USA can do about it except to harp on human rights values and insisting democracy is the only way to run a country when they themselves faced challenging issues at home on human rights, racism and attack on democracy itself by their own citizens. USA has lost much credibility as the self imposed democratic superpower that can decide who, why, and how they want to dictate the world order.

Now that reality is slowly becoming more evident, USA is domestically going on a reset by investing in their infrastructure and re focusing on their technological competitiveness and innovations. Perhaps USA must prepare the right mindset of being the second biggest economy in the world. Numbers don’t lie and truth sometimes hurt the ego.

Perhaps USA should stop interfering with other countries’ internal affairs. Harping on how China treat their minority people especially in the deradicalization of the Uighurs when they have their own domestic terrorism. Harping on how China treat Hong Kong rioters when they themselves can’t handle local rioters back home. It is just like a parent teaching other parents about preventing their children from becoming hooligans when his own son has been arrested for stealing and causing public mischief.

Every country has its own unique characteristics but the elected government (non military junta) is almost always controlled by the majority race of the population. The one person one vote system ensures that the main leader of the majority race almost always become the head of the government but there are exceptions like Barack Obama some twelve years ago.

In Malaysia, our biggest parties are race and religion based since independence so naturally the biggest party UMNO has been ruling a coalition government from independence in 1957 until 2018. It is not surprising then that Malay parties will always rule the country as Malay Muslims consist of 65% of our general population. Except for Sarawak, Sabah and Penang where the population skewed towards indigenous and minority race, we will see a Malay state government for the rest of the country. So politics by race is perpetuated by leaders who aspire to be national leaders.

This is how a democratic country selects its leaders and there is absolutely nothing the minority citizens can do about it. What differs in all countries will be the way the majority government treats the minority citizen in their country. Does every citizen have equal rights and a place in the sun in his home country?

As a Malaysian Chinese born in this country, I feel blessed that I have many friends of all races and I have my place in the sun in this beautiful country. I have never desired to migrate to other countries and I will be buried in this country when it is time for me to depart. But I do worry for my children and my grandchildren going forward as Malaysia is becoming more polarized by race and religion. And there is absolutely nothing I can do about it.

As for the Chinese community in Malaysia, I believe that by functioning as a close knit community, we can overcome many obstacles together. We should continue to provide affordable high quality education to our children from primary to pre university. With the shrinking quota for public university, more scholarships and education loans should be made available for students to further their studies in private universities.

Needless to say our community associations should step up to look after the poor and the needy. Business leaders must also step up to look after micro and SME businesses by giving a helping hand. Intra community economic support will be vital to keep small businesses afloat and provide jobs. Our children must be taught to be resilient, resourceful and to work hard for their families and to support our community.

In these modern times, perhaps a community super app in Mandarin and English should be created to achieve all the above aspirations. A super app that directs scholarships and loans to students, creates job opportunities in local communities, creates business opportunities for micro and SME companies and most important of all to build a close knit community that can withstand economic hardships together.

Can we do something about this? I believe we can and we should if we want our children and grandchildren to have their place in the sun.

*Views expressed here are the writer’s own.

Motivation Behind The Motives

Best 6 Morning Markets in Klang Valley - Malaysia Breakerz
Pic: Malaysia Breakerz

My favorite personal moments in life now seems to be confined within the timeline of 10pm till 3am. Sitting on my balcony chair and having a slow smoking cigar, I have the luxury of time and the quiet of the night to reflect on the happenings of the day and to gather my thoughts on my plans for tomorrow. I write best during these hours, free of interference especially on the need of having a conversation with my wife.

When one has too much free time, the mind wanders freely picking up random issues in life to gripe about, be it daily happenings that affects your life or politics that affects the economy.

The key question in my mind is always about the motives behind the actions and the motivation that drives such actions.

My gripe today is about plastic bags. Yes it is about the availability of plastic bags to place my purchases when I shop at my favorite supermarket in Bangsar. Earlier this month, this supermarket completely stopped making available plastic bags at the check out counter in their campaign to save the planet.

When the government made a decision some years back to force consumers to pay 20 cents for a plastic bag (which costs a few cents), supermarkets all over the country rejoiced at the prospect of turning cost into profits besides saving the planet as well. My favorite supermarket introduce recyclable bags which was a great campaign as I see many shoppers especially housewives bringing these bags for their shopping trips.

As I am not a househusband, I would normally go straight to the supermarket from my office to pick up some groceries without any recyclable bags. Consumers are now familiar with the question from the check out counter cashier “ Do you want to use plastic bag” to place your products? I would normally be glad to pay for the 5-10 plastic bags which incidentally are recycled at home, used in the many small garbage bin receptacles in my house.

In this instant two weeks ago, I was faced with the dilemma of not having the choice of buying the plastic bags as the supermarket made the decision to force consumers to use recyclable bags if they want to shop in their supermarket. The cashier pointed out to me the availability of 5 different deigns and sizes of recyclable bags besides her checkout counter which costs between RM 3.80 to RM19.90 per bag.

Being a griping old man and a regular customer to boot, I stood my ground and insisted that they provide me with a proper means of carriage for my RM700 worth of vegetables, meat and bottled plastic drinks. They scrambled and found 3 used cartons from their back room as I was holding up the queue. I had to apologize to the mother and son waiting behind me who incidentally is not aware of this new policy and did not bring any recyclable bags too.

This incident begs the question on the real motives behind the management decision to implement a ‘no plastic bag’ policy in a supermarket. If it is to save the planet, then the consumers should be offered a cheaper alternative (like brown paper bags) to the high priced recyclable bags. Instead the consumers are given less choices and at a much higher price too. If their motive is genuine, sell the recyclable bags at a loss or at cost and consider it as a CSR project.

This smacks of profiteering in the name of saving the planet. It looks as if the profit from selling the plastic bags is insufficient to cover their bonuses. I have shopped in Tesco and Sainsbury in London and I had the choice of paying 20 pence for a much sturdier plastic bag. Consumers should not be inconvenienced when they shop at retail stores. Customer service 101. Duh.

It seems that I am not the only one griping about motives. In a press conference a few days ago by Industries Unite, which is a coalition of 110 trade associations with 3.3 million business owners, they were griping about the motives behind the recently announced RM10,000 and RM50,000 fine on violations of the SOP guidelines on wearing masks and social distancing.

With a genuine motive of preventing the spread of COVID 19, the government banned inter state traveling and implemented tight guidelines on social distancing and family gatherings especially during Chinese New Year. Permission was given to celebrate reunion dinners for family members who stay in the same house. I scratched my head on that one. What next? Seek permission to use the toilet in my house? This is taking the ‘big brother’ watching over you a wee bit teeny too far, I must say.

Anyway, Industries Unite demanded some answers from the government. They questioned the motives behind the high fines set by the government which is detrimental to the business owners who are already suffering from poor business for the last 12 months. Poor communication and poor planning has led to haphazard implementation by enforcement agencies.

They question the legality of the fines, the interpretation of the SOP guidelines by various state agencies and PDRM and the flawed design of the SOP’s without consulting the business community. This high handed approach is detrimental to the revival of the economy.

Beside the fines, other government agencies like HRDF have asked for increased contribution from the business community despite the fact that most companies are already in ICU fighting for survival. It is tantamount to extracting blood from a dengue patient with a dangerously low blood count of 4.

There seems to be a disconnect between the government of the day and the civil service with the business community in the current prevailing state of the failing economy. The government and civil servants tend to forget that their operating expenditure comes from income taxes derived from employment of individuals and corporate profits.

Instead of giving a helping hand to the fallen, they are adding additional cuts and wounds besides the occasional punches and kicks to the business men lying on sick beds. Other than ego and sense of power, I failed to understand the real motives behind such flawed decisions.

Now our Ministers are contemplating removing the inter state traveling for the coming Hari Raya festivities. I am just wondering what the new SOP’s will be like. Maybe we will finally understand the real motives behind the great politician minds of our generation.

Get well soon everyone.

*Views expressed here are the writer’s own.

The different meanings of being wealthy

For the wealthy Chinese, they only wish for more wealth. The more ang pows they give away, the more wishes of ‘more wealth’ they receive.

HOPE you are celebrating Chinese New Year with a happy mood. For those who missed the reunion dinner due to the ban on interstate travels and the 10km restriction, there will always be another reunion dinner next year and the next 60 years.

Chinese tradition and culture have existed for a few thousand years and it will survive minor disruptions by viruses and human bugs.

Chinese culture has the funniest greetings. Everyone from young to old wishes everyone ‘Gong Xi Fa Cai’ which literally means wishing you more wealth. A Happy New Year greeting is not sufficient for a child who finally visits his 80-year-old grandfather after a year of lockdown. The grandfather and his five-year-old granddaughter simultaneously wishes one another Gong Xi Fa Cai as the ang pow crosses hand. No Gong Xi Fa Cai, no ang pow.

When you have 1.45 billion Chinese in China and another 400 million overseas Chinese diaspora wishing one another ‘more wealth’, non-Chinese must think Chinese all over the world only think of being wealthy. Well, you are right.

Wealth have a different meaning for different segments of Chinese society. For the poor, it means improving livelihoods and being financially able to provide education for their children all the way to university. The Chinese people often say that ‘Education is Wealth’ which means that an educated child will amass more wealth in life. More wealth means more success.

For the wealthy Chinese, they only wish for more wealth. The more ang pows they give away, the more wishes of ‘more wealth’ they receive. Which is why the Chinese rich gets richer all the time. The wealthy migrant Chinese, however, do realise that they are not able to take their cash with them when they live in the afterlife. So they become philanthropist, donating to their clans association, helping to build Chinese schools and temples.

The older generation Chinese businessmen were like the Japanese, they looked after their staff for life. My late father worked for Petaling Gardens Bhd (under Ang family then) till past 70 years of age until I asked him to retire. Mr Ang gave him a gratuity payment upon his retirement despite no such retirement plans for staff leaving the company.

Another funny greeting that non-Chinese do not understand is instead of greeting ‘How are you?’ (Ni hao ma) to friends and guest, the older generation, including myself, would ask ‘Ni chi le ma’ as in ‘Have you eaten?’

The main reason for the greeting is to start a conversation but I suspect that in the older generation, food was scarce and it was not unusual for neighbors to share whatever food that was available in their house. As it was impolite and embarrassing for an hungry person to ask, the host will cordially invite you to eat in their house. I find this cultural act of compassion to neighbours and community at large has slowly disappeared among the new generation.

In the 1950’s and 60’s, many Chinese families started sending their children to English type schools. My uneducated mother decided to send me to a missionary school, La Salle PJ, because of the high quality education reputation. She also believed that having an English education will help me find a good job and career, bearing in mind that all the major trading houses were British and Dutch, and English literate graduates were in demand.

She was right.But I am now regretting the decision not to send my children for at least six years of Chinese primary school. The main reason is China has become the biggest consumer market in the world and the lingua franca required is Mandarin. I am lucky that my second daughter in-law is from China. She is proficient in both Mandarin and English, having studied in USA and England. She is now my eyes and ears for everything Mandarin and provides an insight into China culture and norms.

I am now in discussion with my sons and daughter in laws of eventually sending my grandchildren to Chinese primary schools. I am however waiting impatiently and in desperation for the first grandchild to arrive. Sigh. Children don’t listen to their parents like before.

My late brother’s three children attended Chinese schools from Primary One all the way to Form Six (UEC). Their schools fees for attending Hin Hua independent school was RM300 a month which was reduced by half upon application for scholarship.

As the UEC results is not recognised for admission into local universities, his eldest son got a place in Nanyang Technological University, Singapore. Without my knowledge, my brother asked for an interest free education loan of RM6,000 (max) from Klang Hokkien Association to send his son off to Singapore. Payback was RM500 a month after he started working. Upon his graduation, I immediately paid off the loan in full so that another deserving student have access to an education loan.

Nanyang gave full scholarship to him with the condition that he stayed back in Singapore to work for at least two years. He is now still in Singapore and with a PR status.

In the meantime his two younger siblings failed to achieved the minimum 6A’s out of 9 papers in the UEC exam. So their only choice was to join the local private universities like HELP and Inti. Luckily, they managed to get a PTPTN loan of RM40,000 each to pay for their school fees. As they are now gainfully employed, they have started paying back the loans at RM400 a month over nine years.

For the B40’s, sending their children to even a Chinese independent school is a financial burden, let alone to universities without any scholarship help. My mother had to run a canteen in a construction site to put me through a local university back in 1980. And if I remember correctly, the school fees at Universiti Malaya’s economics faculty was about RM560 per term.

To develop the young generation of tomorrow, a good education from schools is of upmost importance. Chinese parents will choose schools that provide the best education in terms of quality teachers and excellent standards. The poorer families will work harder to provide the best education for their children as best as they can but with the rising cost of education, their struggle is real and sometimes insurmountable. Their children will drop out of school.

As such, there is a real need for the local community associations and the Chinese schools to ensure that no B40 child is left behind and bereft of a quality education due to financial constraints faced by their parents. Yes, there is already financial support for such cases but is it enough? What is needed is to build local community support within and having these support easily accessible.

Consistent with our Chinese culture, parents in distress are normally too embarrassed to ask for help. Association and school staff should adopt a new mindset and new greetings to such parents.

Wo ke yi bang ni ma? Can I help you?

Community Spirit to Overcome Pandemic Recession

In the blink of an eye, I turned 60 last year. I was born in 1960, just three years after Merdeka. I have been a Malaysian citizen from birth whereas my brother, who was born eight years earlier, had to go through a naturalisation process, from a red identity card to blue identity card to finally a naturalised citizen of Malaysia.

My father went through the same process even though he emigrated from China to Malaya in the 1930s. My mother was born in Jasin, Melaka, in the late 1920s and she too had to go through the process to become a naturalised citizen.

Countries since independence with a young history (less than 500 years) tend to have a vast number of naturalised citizens. The United States, Australia, Singapore and Malaysia are just some of the countries that gain independence from the colonial master at that time, Great Britain.

Citizens by law have sworn allegiance to the country that they live in and they have to abide by the laws of the country.

Nobody can force a citizen to leave the country but citizens can make personal choices should they decide to leave and emigrate to another country. Citizens leave because of economic or political reasons, and to escape domestic civil wars.

As a country that embraces democracy, Malaysian citizens above 18 years old have the right to vote.

One citizen, one vote. Voting trends in Malaysia since independence have been by race, for example, a Malay candidate for a Malay majority constituency and so forth.

If this voting trend continues, we will continue to see the same composition of politicians by race in our Parliament in the future.

Due to slower growth rate and naturalisation policies, the minority Chinese and Indians have, by percentage to population, been on a reducing trajectory – the Chinese from 37% in 1957 to 22% in 2020 and to 18% by 2040.

It is inevitable that there will be a diminishing Chinese voice in Parliament.

With a diminishing influence in the decision making of government policies, minority communities will face diminishing share of economic and educational opportunities in this country.

What then can the diminishing minority communities do to ensure a fair share of economic and educational opportunities for the next 60 years?

As a Malaysian Chinese going into my twilight years, I have no answer to this dilemma.

Perhaps the Chinese community, especially the younger generation, would like to start a conversation on this topic.

My only advice is that the conversation tone must be positive and reconciliatory and not confrontational. It must be a win-win strategy, never a zero-sum game.

The conversation should be centered on self help within the community if no help is seen coming. The dialogue must be about the Malaysian Chinese investing their loyalty into this country in the hope of a brighter future.

The discussion must focus on helping the poor of all races and to bridge the gap between rich and poor Malaysians. Only then will we have a stable and just society.

Lending a helping hand

Most immigrants from China in the early 1900s were housed, fed and given a job by their clansman upon arriving at the shores of Malaya. They were identified by their village, district, province and by their spoken dialects.

As such, in Malaya then and Malaysia until the 1990s, you can still identify the dialects with the trade and concentrated communities of the same province in particular towns.

Till today, the older generation of the same dialects share a special friendship-bond as it was with their forefathers

These individual communities then set up associations by dialect, first in townships and then grew into a national association. Leaders of the association were normally business and academic leaders of the community.

The associations helped their members (mostly uneducated) to deal with government matters, for example land matters, and offered scholarships to bright students as well as financial and welfare assistance to the poor and the elderly.

The various associations and the local rich donated to build schools and temples.

Like all associations and societies, sustainability over the long term depends on new membership enrollments.

But the younger generation has no interest in joining and now the association’s role in the community is diminishing as well.

How can these associations reinvent themselves to play the community leader role again, especially in this pandemic recession? Offering refuge to their clansman or the poor Chinese community at large like before?

Many unemployed families are having reduced or no income and have problems putting food on the the tables and paying rent for a roof over their heads.

Can the association and the immediate community distribute foodstuff to these families like the Foodbank model in the US? These people have no place to turn to.

The Chinese community leaders can play a bigger role in protecting the welfare of the Chinese community.

When no help is forthcoming, the leaders must step up, the younger generation must participate and contribute in whatever ways they can to help the community and that no clansman goes hungry and is left behind.

In my next article, I would like to discuss about education and career choices for the new generation of Chinese youth.

I would like to start a conversation about our Chinese SMEs who are suffering in silence and in clear desperation of financial assistance.

In the meantime, help your community by buying from your local SMEs and hawkers. Help the elderly and the poor by whatever means possible. Let us build a caring and supportive community.

That will be a good start. One small step towards the next 60-year journey.

Getting through tough times together

HOW time flies..it was 10 years ago that I started this column. How things have changed. I would have never thought that my personal freedom would be restricted, that I would be forced to stay at home and not allowed to travel freely.

Corruption, though, has not changed much. Politics all over the world has become uglier, moving more right, more nationalistic and more confrontational. Political systems in many countries are showing cracks and fractures and in need of a reset in beliefs and values.

We have learnt many new words over the last two years. Trumpism, back-door government, lives vs livelihood and K Recovery. These are topics/phrases that I had never heard of in my university days nor read about in any books on business and economics.

For those not familiar with K recovery, it just means that the economy is still in recession, the rich are getting richer and the poor are getting poorer. Some industries are doing well and surviving, some businesses are still suffering while some have died. Overall, it is still negative but recovering quarter-on-quarter from the global March 2020 meltdown.

Due to massive quantitative easing (QE) by central banks all over the world, we now have a disconnect between stock markets and the real economy, which will eventually lead into an asset bubble in the financial markets. But this QE will not solve mass unemployment. Direct cash put in citizens’ pockets will support domestic consumption temporarily. Only reinvestment in the real economy will bring back jobs. Only when international travel resumes will pilots and cabin crew be re-employed.

Despite the availability of vaccinations, our economy this year will be the same as last year in what I call the on-off economy. For restaurants and retailers, today they “got business”, tomorrow “no business”. For airlines, hotels and tourist guides, “no business last year and no business this year”.

Many business owners are crying “how to survive like this?”…I have no answer.

Domestic consumption has fallen because consumer confidence has fallen drastically. The fear of being infected and the fear of losing jobs have taken hold. Most families have reduced combined income (politicians and civil servants are not affected though) and government subsidies are too little too late. The latest budget mainly covers health and government operating expenses (which is not reduced).

The declaration of an Emergency makes no business sense to me. It does not promote consumer confidence. It does not promote foreign direct investment. And worst of all, it does not encourage domestic investment.

Politicians should be mindful that the interest of the people comes first and they are in power to serve the interest of the nation. If there were no Sabah election, we would not have the current crisis. This power grab play by all parties must stop now.

If Malaysia were to join the world in a V-shaped recovery in 2022, we would require the following forces to act in concert. There needs to be mass vaccination of 80% of the population by the end of the year.

It’s the only way to restore consumer confidence. International travel will require vaccination passports and a negative Covid-19 test. Then our airlines can start flying international routes again and allow foreign tourists with the V passports to come to Malaysia.

It will still be compulsory for everyone to wear masks and sanitise their hands, plus the normal social distancing guidelines.

Political stability with the right thinking leadership is important. Practice what you preach and lead by example. Plan thoroughly before implementing new rules and regulations.

Reduce the operating budget and spend only on necessities. Invest in beneficial infrastructure projects. Promote unity. Control religious extremism. And most important of all, help the poor and the unemployed of all races.

Bank Negara and banks continue to support SMEs through the moratorium and extension of bank loans through 2021. Compassion not numbers should be the main criteria in extending assistance to the struggling SMEs now that recovery has been pushed to next year.

Similar moratorium assistance should be given to unemployed home owners who are not able to keep up with their monthly installment payments. It is more crucial that they be allowed to put food on the table for their families. Help them survive so that you survive too. Never lose a profitable and loyal customer.

SME owners must fight to survive over the next 12 months. Those that are surviving should stay prudent, save and prepare to expand when the economy recovers next year. Those still struggling will need to reduce cost further if they have not reduced their operating expenses according to the sales decline last year. They have to assume that this year will not be better than last year. This MCO lockdown will continue to be extended till the Covid-19 numbers decline by a lot. And that means potentially by up to two months.

Employees in the private sector must be appreciative that they still have a job. Do not give a reason to your bosses to render you unemployed. Jobs and opportunities are scarce. There are already sufficient grab drivers and online delivery workers. Forget about opening a stall or a restaurant as current hawkers and F&B operators are suffering like you have never seen before.

Consumers are advised to support their local hawkers and small business operators. For those who can afford it, don’t ask for discounts but instead leave some change or tips. We should help these small businesses who have received little help from the government.

Forecasting sales is no more an art nor based on previous track records. You have a much better chance at predicting four-digit draws which by the way have been completely banned across the nation during the MCO.

Thank goodness, the beer factories have been allowed to operate unlike the last MCO. Even if you cannot drink in the pubs, you can still enjoy a can or two at home. If you are lonely, just toast to yourself facing a mirror and count your blessings that you have survived 2020. Wish yourself Happy Chinese New Year.

Follow our Health DG’s advice – stay at home, wash your hands and stay away from the virus. Be safe.

Preparing A Budget Need Not Be A Zero Sum Game

Ever since I venture into business in 1985, I have been conditioned not to do any business with our government. It was not possible to register as a supplier to the government as my company is required to have a minimum 51% Bumiputra (Bumi) ownership. Some government contracts are reserved only for 100% Bumi entities. So I ventured into the private sector and has stayed there ever since.

I remembered that any company going for an IPO listing had to reserve 30% shareholding for Bumi participation. These shares were distributed by the Ministry of Trade and Industries to Bumi institutions and entrepreneurs listed with the Ministry. Traditionally institutions like PNB were given the option to take up to 20% of the listed concern with the balance 10% shared by the list of individuals as determined by the Ministry.

The New Economic Policy (1971-1990) had 3 main objectives – to achieve national unity, harmony and integrity, through socio-economic restructuring of the society and poverty eradication. As most of the economic activities at that time were controlled by the non Malays, the government had to step in to acquire ownership in various economic activities for the Malay population and helped to find employment and securing participation for the Malays in economic activities.

At that time, all multinational corporation and major local corporations like banks etc were given instructions to have a minimum of 30% Malay management staff in their organisation. The UMNO led government was working hard on the objective of securing at least 30% share of the economic pie for the Malays.

In education, at least 70% of the places in the local universities were reserved for the Malays. Institute Teknologi Mara had almost a 100% Malay enrollment institution and it has retained the same policy to this day. Most of the overseas scholarships managed by the Public Services Department were given to Malays and these educational endeavors have been responsible for building a knowledgeable and capable cohort of Malay Managers.

Through the GLC’s and GLIC’c, many of their investee companies are managed by capable Malay Managers. Via these sovereign Malay funds, the Malaysian government is now controlling all the  major sectors of the economy, from banking to properties to shipping to oil and gas etc. The only problem left for the government is how to equitably distribute this accumulated wealth to the mass Malay population.

All these efforts have over the years yielded many successful Malay entrepreneurs. Malays now form the biggest middle class income cluster as compared to the non Malays. Unfortunately, there is also a big population of Malays who are in the B40’s segment of society. Income inequality is now intra-race rather than inter-race. The same problem exists among the Chinese and the Indians too as in all the other races in Sabah and Sarawak.

The income inequality has widen between rich and poor Malaysians, whether you are Malay or non Malay. This is now a national problem not just for Malaysia but in many developed countries as well. Our Malaysian government must arrest this problem as soon as possible. Widening income inequality will only cause discontent and unrest among the poor citizens, Malays and non Malays alike.

Then comes this 2021 budget, the biggest national budget ever to stimulate the economy back to life amidst the pandemic recession. Over RM 320 billion to be spent in 2021 and it was interesting to watch the reaction of the politicians and the man in the street.

Within minutes of the budget being read in Parliament by our non-political Minister of Finance, one particular text was circulated over social media that caught my attention.

‘Very generous budget for the rakyat. RM100 million for Indian, RM177 million for Chinese education, RM1.4 billion for Islamic affairs, RM 4.6 billion for Bumiputra businesses, RM6.5 billion for Bumiputra education.”

I was not surprised with the allocation breakdown as similar allocation had been implemented in every budget since 1971 from the government of Barisan Nasional to Pakatan Harapan and now

Perikatan Nasional. What disappointed me most was the lack of financial assistance and support to the non Bumi SME’s as our country has gone into deep recession.

Since the lockdown started in March, the Malaysian SME’s have suffered the most. It has been reported that 50,000 SME’s have closed shop and a further 100,000 SME’s will follow suit. The Malaysian government must extend financial assistance to help all Malaysian SME’s irrespective of race and religion.

Preparing a budget need not be a zero sum game. If you allocate RM4.6 billion to help Bumi businesses, then allocate a proportionate amount to help the non Bumi SME’s based on population ratio of 65:35 which means an allocation of RM1.6 billion should be provided. The budget policy should emphasize on bridging the income inequality between the rich and the poor and not based on the outdated National Economic Policy.

Fair enough that the politicians in the Malay political parties continue to push the Malay agenda, I am utterly disappointed that the politicians from the so called multi racial parties like PKR and DAP have not uttered a single protest for the non provision of financial assistance to the non bumi SME’s in Parliament while debating the budget.

I am utterly disgusted with our National leaders who called for a unity government and announced that they will be a government for all Malaysians while continuing to promote unfair racial policies. During such unprecedented times of extreme economic stress, we need a courageous leader to rise above the archaic politics of yesteryears, and who can provide leadership towards a unified  vision of equality for all Malaysians irrespective of race and religion.

Chinese SME’s who have overwhelmingly voted for DAP in the last general elections must be greatly disappointed with DAP for not looking after their interests in the last PH government and now in opposition. Whimpering excuses replacing roars of a fake lion.

Unfulfilled manifestos, broken promises and shattered dreams.

Just a bunch of pathetic politicians who have lost their plot.

A letter to the Finance Minister

DEAR Datuk Seri Tengku Zafrul Aziz,

The business community is now confused with the new regulatory conditions imposed on them by your colleagues in the Cabinet in their attempts to control the spread of Covid-19.

Amid the scenes of power play among the politicians, we hope that you stay focused on the job at hand, which is to look after the livelihoods of the businesses that require government support and assistance to survive the next 12 months of a pandemic recession.

As an ex-banker who had managed businesses before, you are the best-placed minister to figure out the macro and micro needs of industries that have been badly affected by this pandemic.

The next 12 months will be the most crucial, as many SMEs fight for survival to stay afloat.

The most affected industries are tourism, retail and food and beverage (F&B). It is absolutely crucial that the government extend as much assistance to these industries as soon as possible. There are direct and indirect assistance that you can implement for the next 12 months.

I hope you will consider the following proposals.

> Indirect assistance – Business recovery was going along well for two to three months and then the new CMCO was implemented and consumer confidence shot to pieces again.

It looks like a stop-and-go kind of economic activity for these industries until a vaccine programme is fully implemented.

When revenue falls, operating expenditure has to be lowered accordingly. Most SMEs have reduced their employee count to the bare minimum and salary reductions have been implemented. Internal wastage has been reduced. Some owners have stopped taking salaries and their savings are being poured in to sustain salary payments for their employees.

> Exemption from EPF payments – I agree with your argument that it is not fair to exempt EPF contributions for workers as some companies are still doing well despite the pandemic.

My counter argument is that you should help out the companies that are not doing well. The tourism and retail/distribution segments of the economy are not doing well. It is a matter of life and death for these businesses. My counter argument comes with these facts.

Restaurants and retail outlets generally have a composition of staff cost at 25%-30% of sales. Rental cost will be 7%-15% of sales. If there is an exemption from EPF contributions, the business reduces 12% from their payroll cost, which will translate into a 3% to 5% reduction in operating expenditure. More importantly, much-needed cash flow requirement is reduced.

From past recession experience, companies not doing well tend to pay salaries (net of EPF, Socso, etc) first, banks and then suppliers. EPF payments are normally delayed. Businesses that collapse end up not paying EPF, Socso, etc.

From your experience as a banker, you know what it is like to take legal action against bankrupt companies. Recovery is like squeezing blood out of a stone.

In addition, the 11% contribution from employees is paid to them. Just imagine a salaried person earning a reduced pay of RM3,000 having an extra RM330 in their bank account. It might not be a big amount to you and I, but it does help them put food on the table, provide pocket money for their school children or pay the instalment for their motorcycle.

Assuming that these sectors (major employers) of the economy affect 25% of employment, then there will be an impact of reduced contribution of RM1bil a month to the EPF’s monthly collection of RM4bil. The EPF will not suffer and with still have sufficient reserves to handle withdrawals.

Just imagine businesses suffering in these sectors reducing their cash-flow requirements by RM522mil a month, and employees having an additional RM478mil a month to pay their debts or spend on essentials. The multiplier effect on consumption will be many times over.

As the world economic recovery is now patchy going from bad to worse, leading economists are now re-forecasting that the actual recovery will start from 2022 rather than next year.

As such, I would recommend that the exemption from paying EPF contributions for these sectors (tourism, retail, distribution, entertainment, etc) be effective for a 12-month period, hopefully till end-2021.

It will be good if you allow suffering businesses from other sectors to apply for this exemption. Let it be accompanied by revenue and cost forecast certified by accounting firms based on certain guidelines set by the MoF. Again, I would like to point out that this exercise does not cost the government a dime.

The next indirect assistance that can be extended by the government concerns rental. Assuming landlords give a 30% discount to their tenants, the total amount of discounts given will be considered as tax credit to be offset against taxable rental income for financial year 2020 (FY20) and FY21.

I am no tax expert but what I know is no rental income for landlords means no tax income for our Inland Revenue Board (IRB). Landlords who are not able to secure new tenants means no rental income to repay bank loans. Again, these claims will be verified by auditors and tax consultants.

Fair enough that our country does not have any reserves at all to help pay rental for businesses like the Singapore government, but we Malaysians are well known for our entrepreneurship and creativity in solving problems.

As property loans are a major component of our banking portfolio, this move will help to reduce systemic risk to our banking system.

> Direct assistance, Prihatin SME – Small and micro SMEs will need direct assistance from the government. I suggest setting up a Prihatin SME fund of RM1bil for direct grants to such businesses on the following conditions.

Small and micro SMEs with an annual turnover of less than RM500,000 should be given a RM5,000 grant. This grant is to be disbursed to companies, partnerships and sole proprietors who have submitted annual filings with the IRB or Registrar of Companies. Again this is to be verified by chartered accountants or audit firms,

The RM1bil fund will help 200,000 small and micro SMEs who are taxpayers to the government. Assuming an average of five employees per company, this sector would employ one million people.

The grant will be considered as other income and taxable if the company makes a profit.

The loan moratorium did help by pushing debt commitments to a later date, but it had no impact on lowering operating expenses. Politically, Prihatin Rakyat was a good move for a new government but it does not solve the unemployment problem and the loss of business revenue for the SMEs.

As a non-political minister with vast business experience, you are in the best position to help the SME community.

Tan Thiam Hock is an entrepreneur. The views expressed here are his own.