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On this episode of #ConsiderThis, Melisa Idris examines Budget 2027’s allocations and potential impact for two critical sectors: public healthcare and SMEs. The Health Ministry’s allocation rises to RM47.7 billion. However with healthcare needs growing and development spending barely increasing, will the budget strengthen public healthcare capacity and improve patient care? Meanwhile, for SMEs, the budget offers expanded financing facilities and lower corporate tax rates for qualifying businesses. Will these measures ease business pressures after a challenging year? Melisa speaks with Dr Sivanaesan Letchumanan, president of the Malaysian Medical Association (MMA), and Datuk William Ng, national president of the Small & Medium Enterprises Association Malaysia (SAMENTA)
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NewsTranscript
00:00Music
00:10Hi, welcome back to Consider This.
00:13Budget 2027 is offering businesses billions in financing support,
00:18lower tax rates for qualifying SMEs,
00:21and exemptions from the new minimum wage requirement for smaller firms.
00:25But the real test will be whether or not businesses will feel the difference,
00:31especially after a challenging year of rising cost pressures following the global supply crisis.
00:37Now, joining me on the show now is Dr. William Eng,
00:39who is the National President of the Small and Medium Enterprises Association of Malaysia,
00:43better known as Samantha.
00:45Good to have you back on the show, Dr. William.
00:47Thank you so much for taking time to speak with us today.
00:50So, in your post-budget statement,
00:52Samantha has actually praised the budget as an SME budget.
00:57And I've noticed that there are other industry bodies
01:00that are not as complementary to the budget allocations.
01:05Maybe you can begin our conversation today
01:07by explaining why Samantha takes this position.
01:11Thank you, Melissa.
01:12I think it is very clear that if you ask around,
01:15most SMEs are struggling.
01:16In fact, in our recent survey,
01:187 out of 10 SMEs told us that they have less than 6 months cash reserves.
01:23It's very bad because of the 6 months cash reserves,
01:25even the smallest crisis will actually tilt you over
01:29and you will end up closing shop.
01:32And it's not just the consumers having a cost of living issue.
01:36Most SMEs are also having a cost of operations issue.
01:39We all know energy costs have gone up.
01:42That's in the news every day.
01:43With or without this new minimum wage,
01:46salary has also gone up.
01:48Logistics, of course, has also gone up.
01:50Compliance costs, and that's very crucial,
01:51has also gone up quite tremendously.
01:53So, what has happened is that this has resulted in
01:55most SMEs having severe margin compression
02:00where businesses, because of this margin compression
02:02and very tiny profit,
02:04they're not investing in technology,
02:06they're not investing in automation,
02:07they're not investing in digitalization
02:08as they absolutely have to
02:10in order to increase their productivity.
02:12So, I think, against this very difficult backdrop
02:14where SMEs are trying for help,
02:17we see that the budget 2027 is delivering,
02:19I think, the highest ever,
02:21no, I think it is the highest ever financing package
02:24for SMEs,
02:25totaling 57 billion ringgit
02:28in both direct low-interest loans
02:30backed by Bank Negara,
02:31as well as credit guarantee via SGPP and CGC.
02:35And this is crucial because given the technical margin
02:37that most SMEs are experiencing,
02:39we don't have the cash flow to convince banks
02:41to give us clean loans.
02:43So, obviously, SMEs will be asked for collaterals,
02:46and not every SME has collateral,
02:48you know, the factory, the land, the equipment,
02:50and so on,
02:50to pledge to the bank to get a financing.
02:53So, the 57 billion ringgit
02:55solves much of that problem.
02:56So, we're grateful for that.
02:57We're happy that the amount, in fact,
02:59has been popped up,
03:00and also the direction that's given
03:02to ensure that dispenser is as soon
03:04and as fast as can be.
03:06Then, of course,
03:07there's the 1% cut in corporate tax,
03:1014% for the first $150,000,
03:11and 16% for up to $600,000.
03:15What this means is that
03:16all of us who earn up to $600,000
03:19will not have $6,000 ringgit
03:20already going back
03:22to all the $300,000 or so eligible SMEs.
03:26If you think about it,
03:26$6,000 may not be a lot,
03:27but I think it's both symbolic of the support
03:30that the government has for SMEs
03:32and we go directly to the cash flow for business.
03:35Of course, then,
03:36I think you remember
03:37there's also the introduction
03:38of the e-commerce bill.
03:39That has not been presented yet,
03:41but the PM has promised
03:43that it will be brought up
03:44in the next parliament session.
03:45Most SMEs today have to compete
03:47with overseas e-commerce sellers
03:48who, of course, price it below cost.
03:51You can buy a box of tissue
03:53for $0.30 a packet,
03:54and if you buy 10 packets
03:56for $3,
03:57they even send it to you
03:58for free from China,
04:00it causes $8 to $10 ringgit
04:01just to ship from, say, PJ to KL.
04:03So you can see that these goods
04:04are coming in below cost
04:06and inclusive of shipping.
04:08So I think with the e-commerce bill,
04:10we're not saying that
04:11these sellers cannot sell below cost.
04:12What we want them to do
04:14is follow our regulations.
04:15For example,
04:15if we sell a power bank in the EU,
04:17you will need the C mark.
04:18If we sell in China,
04:19you will need the CCC mark.
04:21So what we are doing
04:23is we're asking the sellers
04:24to now have a steering mark
04:25if they're selling to or in Malaysia.
04:28So essentially,
04:28that's what the e-commerce bill will do.
04:31And hopefully,
04:31help our SMEs a bit better
04:33in terms of completing more fairly
04:34in the market.
04:35So given all this
04:37entire parcel of support
04:39that the government is giving,
04:42it's quite clear
04:43that they're recognizing
04:44the challenges SMEs are facing.
04:47And this is why I say
04:48this is a budget for the SMEs.
04:50Okay.
04:51Well, let's unpack that one by one.
04:52Let's start with the financing package.
04:54You're right.
04:55It's really,
04:55it's a huge package.
04:57Billions in Ringgit,
04:5857 billion.
04:59Let's talk about
05:00whether the financing announcements
05:02will actually translate
05:04to tangible benefits to SMEs.
05:07These announcements
05:08don't necessarily translate to approved.
05:11loans.
05:11They don't necessarily translate
05:12to accessible working capital, right?
05:15So how much of this package
05:16do you think
05:18the smaller businesses,
05:20the ones who are,
05:21as you said,
05:21less than six months of cash flow,
05:24how much will it go to them?
05:26Will they struggle to secure credit?
05:27How do we make sure
05:28that access for them
05:31becomes easier?
05:32Thanks for raising that.
05:34You've already raised
05:34a very raw point
05:35and I think right on the dot.
05:38The issue with the market right now
05:40is not just accessibility,
05:42or rather availability of financing.
05:44I think there are plenty of that.
05:45As you can see,
05:46the 57 billion Ringgit
05:47that's been promised
05:48in budget 2027.
05:49The real issue that we have
05:50is actually access to financing.
05:52Very often,
05:53you find that SMEs,
05:54despite having this large amount
05:56of money promised to them,
05:58despite the fact that,
05:59look,
05:59if you don't have collateral,
06:00the government can even provide
06:01the collateralization
06:03via credit guarantee,
06:04many SMEs still find
06:06that they're unable to borrow.
06:07And the reason is
06:08because most banks
06:09take a risk-based approach
06:10and most banks,
06:12unless your accounts are fantastic,
06:14unless you have multiple years
06:15of business record
06:17and they're all positive,
06:18they may not even want
06:19to take a 30% or 20% risk
06:20despite the correct guarantee
06:22that's provided by the government.
06:23So that's one,
06:24the lack of collateral.
06:25And the fact that most banks
06:27still adopt this,
06:28what I call,
06:29the Pajak Kadai mindset.
06:30So when you want to borrow money,
06:32they'll ask you,
06:32okay, where's the land title?
06:35Where's the personal director's guarantee?
06:38Where's the title
06:39to your equipment?
06:39So I'm going to hold on to it
06:40in case you don't pay.
06:41So,
06:42and that's very odd
06:43because if you think about it,
06:44today,
06:45we are no longer
06:46in a manufacturing,
06:49how to say,
06:50era.
06:50You know,
06:51the fact that
06:51services has overtaken
06:53manufacturing as our largest sector
06:55for over the past 20 years.
06:56And as a sector,
06:57people do not have collateral.
06:59People don't own factories.
07:00People don't own large equipment,
07:01but they still need to expand
07:02and they still need
07:03business financing.
07:05And we are,
07:05in a way,
07:06shutting down these SMEs
07:07in this sector.
07:08We're shutting down,
07:09shutting out SMEs
07:10who are too small,
07:11may not have the collateral,
07:12may not have the proper
07:13documentation or financing support
07:15to have access
07:16to this financing.
07:18So I think what we can do
07:19beyond making sure
07:20that this $57 billion
07:21is really there
07:22is to ensure that,
07:23look,
07:23we go into a regime
07:24where we look at
07:27day-to-day operations,
07:28records,
07:29e-invoicing records,
07:30sales records,
07:31and so on,
07:31determine whether
07:32an SME is eligible
07:35for financing
07:36instead of just
07:36whether they have
07:37a collateral to do so.
07:39Right.
07:39Can we also discuss
07:41the minimum wage
07:42requirement?
07:43So the $2,000 minimum wage
07:45by next June.
07:46How does Samantha
07:47view this announcement?
07:49What impact
07:50are you expecting
07:51to see by next June?
07:52I think first of all,
07:53I think we must be clear
07:54that the industry,
07:55not just SMEs,
07:56I think generally businesses
07:57are fully supportive
07:58of higher wages
07:59for old workers.
08:00Nobody I know of
08:01wants worker salary
08:02to remain stagnant
08:03for very long
08:06or for forever.
08:07Of course,
08:08we are quite happy
08:08that the government
08:09has decided,
08:10given the margin compression,
08:13given all these costs,
08:14inflation,
08:15if they're looking for SMEs,
08:16that they have decided
08:17to accept SMEs
08:18so that they can then choose.
08:20If you can't really afford it
08:22and your margin is really tight,
08:23then you stick to
08:24the previous $1,700 minimum wage.
08:27But if you can,
08:27then of course,
08:28you pay whatever you can pay
08:30and you're far above $1,700.
08:32But we must understand
08:33that of course,
08:34the minimum wage
08:34is not just impacting
08:35the lowest bracket.
08:37There's a cascading effect
08:37because when your production
08:39worker gets $2,000,
08:40your supervisor is going to ask,
08:41you know,
08:42my junior getting $2,000,
08:43I should be getting $2,500,
08:44$2,800,
08:44or whatever it is.
08:45So the cascading effect
08:47is very substantial.
08:49And we must also understand
08:50that employee wages
08:51were never stagnant.
08:54Even before the minimum wage,
08:56growth has been very strong.
08:57In fact,
08:58I did some research yesterday
09:01and I realized that
09:01before the implementation
09:03of the minimum wage,
09:06the median household income
09:07grew an average
09:08of 7.4% per annum.
09:10So the median average income
09:13grew by 7.4%
09:15before the minimum wage order.
09:16And after the minimum wage order
09:17came out in 2015,
09:20that growth has dropped
09:21to 5.7%.
09:22So what is happening then
09:23is that when you introduce
09:24the highest salary
09:25for the lowest round
09:26of employees,
09:27wage compression happens.
09:29So those supervisory,
09:30skilled workers,
09:31and so on,
09:31get lesser increment
09:32in order to compensate
09:33for the cost of paying more
09:35to the lowest round.
09:36So sadly,
09:37I think you know
09:38who benefits the most
09:38from the minimum wage increase.
09:40The foreign workers
09:42were earning minimum wage.
09:43Last year,
09:44revenues hit 35 billion ringgit.
09:46So my fear is that
09:48as we increase
09:49the minimum wage,
09:50it is not really
09:50the locals who are benefiting,
09:51but also some of the foreign workers.
09:53You don't think this will have
09:55a positive cascading effect
09:56for wages across?
09:58I mean,
09:59I understand the businesses
10:00might suffer for this,
10:01but there is a threshold
10:02of 50 million ringgit
10:03in turnover.
10:04So the smaller businesses
10:05might not be as affected.
10:07Might this be good
10:08for wages overall?
10:09As you said,
10:10there could be
10:11a cascading effect.
10:12I think obviously
10:13when you set
10:14the minimum wage
10:16for the lowest round,
10:17everybody would be compelled
10:19to increase wages
10:20across the board.
10:20So there will be
10:21a cascading effect
10:22across the board
10:22for everyone
10:23at every level.
10:24But what I've said
10:25is that it's going to be
10:26a bit of a push compression
10:27moving forward.
10:28So you see,
10:29if you are earning 1,007 now,
10:31you jump to 2,000,
10:33you're at about 17% jump.
10:35But if you're at a
10:35supervisor level at 2,000,
10:36it's very likely
10:37that you'll not jump as much.
10:38You have a lesser
10:41increment percentage.
10:42Okay.
10:43Can I also ask you
10:44whether this came
10:45as a surprise?
10:47Was there engagement
10:48with Samantha,
10:50with other SME associations,
10:52with SMEs themselves
10:53prior to the budget?
10:55I'm just trying to get a sense
10:56of how much the government
10:57is listening to businesses
10:59or whether you get a sense
11:00that government
11:01is listening to businesses
11:02or whether this came
11:03as a surprise
11:04to the industry.
11:06I think it is not a surprise
11:07obviously because
11:08as a wage consultant
11:09in the council.
11:10Samantha is not part
11:11of the council,
11:12but many of our industry peers
11:14as well as the unions
11:15are in that council
11:16that more or less
11:17made a recommendation
11:18to the government
11:19as to what quantum
11:20of the minimum wage
11:21is to be increased.
11:22So there has been talks
11:23about the increment
11:23for more than a year
11:25now.
11:26So we are actually
11:26more or less prepared
11:27and understand
11:28that there will be
11:29some form of increment.
11:30It's just the mechanism
11:31has not been finalized.
11:32And really to give credit
11:34to this government,
11:35a lot of engagement
11:36has happened pre-budget
11:38and even now
11:39post-budget
11:40to actually get
11:41the associations on board.
11:42Okay.
11:43Well, I'm curious to know
11:44how you think
11:45this budget will be
11:46impacting businesses
11:47in the following year.
11:49It has been a rough year.
11:502026 has been
11:51a really rough year
11:52for businesses
11:52with the cost pressures
11:54from the global supply crisis.
11:55But when we think
11:56about what's coming
11:57in 2027,
11:58was there anything
11:59in budget 2027
12:01that you were hoping for
12:02but didn't actually
12:03make the cut?
12:04Yeah, so there are
12:05two major areas
12:06that we have hoped for
12:07and more could have been done.
12:09One, of course,
12:10is the platform commission.
12:11We're quite glad
12:12that PM has announced
12:13that together with Grab,
12:15they've increased
12:15the commission
12:16for riders and drivers.
12:18But our concern
12:18is that these measures
12:20should not increase
12:21further the commission
12:22to merchants.
12:23Many people do not know
12:24that yes, of course,
12:25Grab has to pay
12:26riders and drivers
12:27but these money
12:28are coming up
12:28from whoever
12:30is ordering the services
12:32not from Grab directly.
12:34but Grab and other
12:36platform owners
12:37also charge merchants
12:38up to 32% commission.
12:40To me, the 2% is a lot
12:43because if a packet
12:44of Nassilamak
12:44is firing it,
12:45they're taking 30%
12:46of that straight
12:47as commission.
12:49So our concern
12:50is that given the fact
12:51that we want to increase
12:53the commission for riders,
12:55some of this
12:55would be further passed
12:56on to the SMH
12:58and we hope
12:58that the government
12:59can do something
12:59to either block that
13:01or even to go
13:02to the platform
13:02and say that
13:03it is time for us
13:04to review
13:04and put a ceiling
13:05to that community structure.
13:07Because 30-32%
13:08is unsustainable.
13:09The second area
13:10that I felt
13:10we could have done better
13:11is that we have always
13:13been talking about
13:13this made by Malaysia agenda.
13:15We were hoping
13:16that we can provide
13:17more direct incentive,
13:18perhaps some kind
13:19of double tax induction
13:20to allow Malaysian brands
13:23to promote themselves
13:23overseas
13:24so that we can then
13:25help our SMEs
13:26move away from the OEM
13:27to owning IPs
13:29and of course
13:29stronger brands.
13:30Again, unfortunately
13:31that was not
13:34in the budget
13:35this time around.
13:36Alright.
13:36Dato' William,
13:37thank you so much
13:37for being on the show
13:38with me today.
13:39Dato' William,
13:39I'm from Samantha.
13:40They're wrapping up
13:41this episode of
13:42Consider This.
13:42I'm Melissa Idris
13:43signing off for the evening.
13:45Thank you so much
13:45for watching
13:46and good night.