17/2020 – Focus on successful strategies in Covid fight

Before the conditional movement control order (CMCO) in early October, my friends who have businesses in retail and food and beverage (F&B) were pretty upbeat about the recovery of their businesses over the period of June to September.

Salaries of employees were restored as sales recovered, some even bringing back workers who were let go of in May. From May to September, minimal Covid-19 cases were reported in Malaysia and consumer confidence was slowly restored to almost the pre-Covid era.

After flattening the curve in May, Malaysians have complied diligently to the SOP set by the Health Ministry (MoH), wearing masks, washing and sanitising their hands and practising safe social distancing. Imported Covid cases were identified at the point of entry and isolated immediately.

We were balancing life safety and economic livelihoods quite well.

Then came the elections in Sabah. According to the MoH, illegal immigrants from the Philippines and Indonesia came in through our porous land and sea borders bringing in the virus which started transmissions among our locals.

Then the campaigning amplified the transmissions and peninsular politicians, helpers and the returning voters who went to Sabah, caught the virus and brought it back to Peninsular Malaysia.

From experience, we know that a total lockdown of the whole country for two months will be the most effective way to flatten the second wave but we also know that a second total lockdown will damage our economy badly to the extent of no recovery.

Due to severe economic consequences, no country in the world will implement another total lockdown. Partial lockdown of certain economic and cultural group gatherings will be implemented from time to time and only when necessary.

Our mortality rate due to Covid-19 is less than 1% and our hospitals are better prepared in terms of equipment, personnel and effective treatments.

Our MySejahtera app, contact tracing and sufficient test kits are also efficiently managed by the MoH. We have in place one of the best medical infrastructures to handle this pandemic. And we also have the most SOP-obedient citizens in the world after Singapore.

Our government has wisely imposed a lockdown in Sabah in a bid to contain further inter-state transmissions, but other than the standard emergency MCO lockdowns in certain villages and housing areas, economic activities have been allowed to continue albeit with some restrictions in place. Prisons and remand centres have seen major clusters but they are contained and manageable.

The strangest decision made by our National Security Council was the special guidelines specifically for the Klang Valley.

Besides implementing CMCO for the Klang Valley which includes Selangor and Kuala Lumpur, additional restrictions were enforced:

  • A dining table to sit only two persons in restaurants. This was later changed to four persons.
  • Private cars to sit only two persons which is absurd as a family of three to four persons are not allowed to travel together.
  • No inter-district travelling in the Klang Valley. This is confusing as the districts are inter-connected by a comprehensive road system with employees going from their homes to offices within the Klang Valley itself.
  • Management staff in public and private sector offices restricted to 10% of the staff strength, on limited working hours and only on certain number of days in a week.

But the damage has been done.

The objective of keeping one million management/supervisory staff working from home has resulted in a loss of at least RM15mil daily for food vendors in the Klang Valley, assuming each individual spends RM15 per person on food and drinks during lunch time.

At least 20,000 food stalls, kopitiams and restaurants have seen their daily sales drop by RM500 to RM1,000.

Since the CMCO has been extended for another two weeks ending Nov 9, I urge the government to rethink these guidelines immediately.

They serve no purpose, are not effective in controlling the transmissions and cause too much economic damage to the hawkers and other food vendors.

The private sector is in total disarray, suffering a big loss in productivity due to this directive.

Are they aware that most of the SMEs do not have 10 management staff on their payroll which means that if you follow the guideline of 10% staffing, there will no managers reporting for work everyday!

The private sector has been practising working from home since May.

Most companies have planned for half in, half out work from home schedules and it has settled down quite nicely despite some losses in real productivity.

Most businesses have trimmed their staff strength to conserve cashflow, now these guidelines practically caused many offices to close down for the first two weeks of the CMCO.

This directive also sends the wrong message to the non-managerial staff that it is ok for them to be exposed to the possibility of catching the virus but not their managers.

This directive has done more damage than saving lives.

It is no wonder that no other government in the world has implemented such a policy in the fight to control Covid-19 and in the efforts towards economic recovery.

Our government is well- advised to focus on the macro approach of controlling this pandemic and continue with its successful strategies that have been implemented from March to September.

The business affairs of the private sector are best left to itself. If the politicians had followed the SOPs set by the MoH, we will not be having this second wave.

The citizens are suffering from unemployment, loss of business and going hungry. Even though we are angry, we will still obediently follow the SOPs set by the MoH.

We hope the politicians will follow the rules set by the government too. No double standards please.

Published: https://www.thestar.com.my/business/business-news/2020/10/31/focus-on-successful-strategies-in-covid-fight

16/2020 – 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. I truly hope that our Prime Minister will retain you as the Minister of Finance in the next (imminent) cabinet reshuffle.

Comparing the current political struggle for power to Star Wars: Princess Leia (of the SME Resistance) said, “We are in our most desperate hour… Help me Obi Wan Zaf… you are our only hope.”

May the force be with you to do right.

Published: https://www.thestar.com.my/business/business-news/2020/10/24/a-letter-to-the-finance-minister

15/2020 – SME’s Should Not Depend On The Government to Survive

2020 will be remembered as a year of surprises. Within months, global recession happens, consumer behavior and lifestyles changed big time, massive unemployment looms and inept governments exposed. Every country takes on more debt, and to parody President Donald Trump – “We have taken more debts like you have never seen before, incredible amount of debts that only our great USA can create, and only I know how to borrow so much for the great American people so that our bigger mountain of debt (bigger than China) will make this country great again”.

Then we have our very own politicians. This year will be remembered as the year of the frogs. The wrestle for power has been intense to say the least. Ideals and principles are thrown out of the window. Collaboration for mutual benefit is the name of the game. Pandemic recession? No problem. Raise government debt and give pittance to our voters. Lower income for the general population? No problem as long as my personal remuneration is intact. Third wave COVID? No problem as I can now ask them to stay at home. Easier to control and manage crowds without bringing out my rotan. All in the excuse of a healthy Malaysia.

The smart population is enraged by the carelessness and selfishness of our politicians. But just like another country (hint hint), these politicians are supported by the dumb population who values the pittance thrown at them. Not easy to change 60 years of cultural habits.

The recent unnecessary Sabah elections has brought about the 3rd wave of COVID infections, to the extent that lockdowns are necessary. Immediately after the announcement of a CMCO, the malls and restaurants were empty and sales across the board plummets. Consumer spending plummets. No problem. The politicians are too busy forming new coalitions to wrest control and to stay in power. More pittance thrown.

The non-political Minister of Finance is left on his own to prepare the new budget 2021 even though the previous budget has not been ratified by parliament. No problem. A new Finance Minister will be appointed soon once the new coalition is in place.

In defense of the politicians, keeping their jobs is their livelihoods. Staying in power improves their livelihoods and for some, their personal freedom. This is what they live for. It is their constitutional right. Fooling some of the people all the time is a compulsory skill set for a politician to maintain his livelihood.

As for the entrepreneurs, learn to survive without government aid. It is not that they don’t care, they are just too busy trying to stay afloat, just like you. You will need to grasp quickly the constant changes that is happening around you and you will need to adapt fast. Pronto. As you should have done it yesterday instead of tomorrow. So, what are the trends to look out for?

Bank loans and credit cards are not cash reserves. They are liabilities that need to be paid. Cash reserves is cash in the bank, cash at home, properties that you can sell and jewelry that can be pawned. Entrepreneurs realise that the moratorium holiday is over and they now have to start repaying debt (hopefully over a longer period). Most SME’s now have to dig into their cash reserves (if any) and now wish that they should have saved more when times were better. Learning from hindsight is only useful if you survive this crisis. Cashflow management 101.

Changes instituted by government authorities. USA declaring trade war on China resulting in Chinese companies being denied access to markets, supply chain and even threats of closure to TikTok. Closing borders killed international air travel business and tourism trade. These are ‘stop dead’ changes.

Government imposed lockdowns dampen consumer demand. Strict enforcement results in ‘stop dead’ consequences on pubs, cinemas etc. There were jokes flying around that our Health Ministry should quarantine our politicians indefinitely until a vaccine is found. Most business models now on a ‘stop-go stop-go’ mode. ‘Today good business, tomorrow no business’ kind of conundrum. The more variable costs you have, the better you will survive. So restructure your costs from fixed to variable as much as you can.

Elimination of excess capacity. Stop dreaming of growth if your market has shrunk tremendously. Your management is hopeful that the business will pick up soon. Well, it won’t. If traditional advertising spend has gone to digital competitors, your market will stay shrunken. Deal with it. Right-size your organisation and get rid of excess capacity.

For industries that have excess capacity (built up due to optimistic projections), consolidation is the way to go. Two factories merge into one. Poof! 50% capacity disappear. If you are a small player barely surviving and nobody wants to marry you, just close shop and go do something else more profitable. No point in delaying certain death unless you enjoy suffering further.

For oversupply situations, reduce your ego and stop thinking that you are smarter than your competitors. If the market is saturated with high end residential apartments, office space and malls with no new buyers or tenants in sight, stop being a smartass. You can never beat the market, never mind your competitors.

Whether it is excess capacity or oversupply, this is the time to consolidate your business. Merge or close. Rightsize or disappear into the horizon.

The same goes for startups thinking that you can compete with the market leaders just because you think you are offering a better product. Just remember they are market leaders for many good reasons. They are better than you in all aspects of the business and they have the volume and tonnes of cash reserves to outlast you.

If your customers have bought less cosmetics, clothes and shoes because they are working more from home, pivot to selling them items that they can use at home via online and home deliveries. If your F&B business is now mainly takeaway but hefty margins goes to GrabFood, remodel your restaurant to a central kitchen, raise your prices and focus on shorter delivery time and keeping the food hot when it reaches the consumers. Be different and stay focused on your strengths.

Do what the politicians are doing. Stay alive, protect your livelihoods as selfishly as you can, pivot, change, jump if you must but make sure it is to a new pond full of freshwater and not into a pot of boiling water.

Stay safe and stay afloat!

Published: https://newswav.com/A2010_ZJ9ucP

14/2020 – Slow recovery, but we are all in this together

A few days ago, I chatted with the owner of a popular Indian banana leaf eatery.

There was the usual lunch time crowd, all the tables were full and a line was forming outside waiting for tables to be cleared.

I was surprised to be told that his business has only recovered to 70% of pre-Covid sales. The main reason was due to physical distancing, which resulted in his restaurant seating capacity being reduced by 30%.

Many companies in the last three months have to conduct heavy promotions, giving big discounts to clear inventory and to improve cashflow. Profit margins are reduced but the cash inflow helps to pay the rent and staff costs. Not all companies have recovered to this level. These are the better performing companies.

Some companies are not so lucky, their industry decimated by the virus-induced drastic dropped in demand or health regulators preventing them from conducting their regular business.

When will recovery start for these companies? Even if vaccines are found, it will take another 12 to 24 months of having to live with the coronavirus. With the recent spike of Covid cases in populated countries like India, Indonesia and the European continent, this pandemic will get worse through winter which means we will not see any real sign of economic recovery till the spring of 2021.

Except for a few industries, the year 2020 will be remembered as a disastrous year for all concerned. If your 2020 revenue exceeds 70% of 2019 numbers then you would have done tremendously well. You are on survival mode if your 2020 sales have dropped by half compared with 2019. If 2020 is less than half of 2019, your company will be in need of critical care, cash starved and malnourished.

Malaysian companies and individuals, to a certain extent, have been saved by the brilliant implementation of the six month moratorium on loans. Starting from April and ending in September, borrowers found themselves not having to worry about loan repayments of any kind. From the total of RM80bil, individuals could rollover RM60bil loans for another six months whilst companies rollover RM20bil loans.

Some individuals treated the non-payment of monthly installments as excess cash for investment into stock markets, others cut their spending and saved the money. Some people lost their jobs and many people had their salaries reduced. Most people have ongoing housing mortgages and car monthly payments to service. The honeymoon of non payment is over.

As the moratorium ends on Sept 30, Bank Negara and our commercial banks have announced to the public that help is available to all those affected by this recession. The six months non-payment – principal plus interest (P+I) can be be restructured by adding on additional repayment months to the existing loans. But you have to resume your normal monthly payment starting Oct 1 2020. With the onset of recession, our country do not need a banking crisis with high NPL across the board. In a way, Bank Negara has taken a prudent approach to allow our banking system to flatten the NPL curve. Since most companies and individuals face a short-term cashflow problem, the restructuring of loans will allow many good companies and credit worthy individuals to recover from the recession.

Due to the uncertainty of the economic recovery, all individuals are advised to take up this once-in-a-lifetime offer from the banks. For those who have lost their jobs or in danger of losing your jobs or have suffered permanent pay cuts, you are advised to restructure your loan to a smaller monthly repayment by increasing the loan tenure (eg from 20 years to 30 years housing loan) or the banks allowing you to pay interests only for next 12 months, or smaller monthly payments for next 12 to 24 months with bigger monthly payments in the later years.

Different banks offer different solutions but the general consensus is all banks want to help you to get through this unprecedented pandemic recession.

“Deserving cases will get maximum assistance, ” that is the message from my discussions with senior bank officials. If the banks can reduce the interest rates (especially the BLR plus loans), the debtors burden will be further reduced. One can only argue the BLR rates set by the banks are not in sync with the current low interest and lower effective cost of funds that the banks enjoy.

Treatment of SME’s and corporate loans will differ depending on the types of business and types of loans but the principle treatments are the same. Prolong loan tenure, pay interests only, reduce monthly repayments and conversion of short term trade bills (P+I) into a 12-month term loan.

The type of loan restructuring for SMEs will depend greatly on your next 12 months projected cashflow. Banks will require a cashflow statement detailing your projected sales, operational expenses, installment payments, interest expense etc basically projected cash inflow minus your cash outflow.

Even though financial year 2020 is a washout year, it is still prudent to present a 2020 9+3 cashflow statement to your bankers together with the 2021 full year forecast.

I understand that forecasting for 2021 will be difficult due to the economic uncertainty of the pandemic (potential lockdowns and change of regulations/MCO etc), but you will find this exercise to be very useful to your company in terms of evaluation on viability of business, cashflow sustainability and the desired operational expenses that you will need to adhere to.

If you have the time, do two separate statements and projections, worst scenario and best scenario. Be realistic and prudent with your projection. Help your bankers by helping yourself first. Just remember your bank loan officers have a few hundred cases to manage. So prepare your projected cashflow statements before you meet the bankers. It will speed up the processing time for final approval from the loan committee.

For SMEs that have multiple loans from multiple banks, just be forewarned that you will get different treatments from each bank.

So a detailed cashflow projection will help to show the multiple banks the kind of assistance you would need to survive the next 12 months.

With the help of friends who have offered their pro bono services, Clifford Clements (ex-banker), Sang Hoe, Ryan Sim and Boon Hooi (Ernst & Young), we have produced business cashflow templates that can be downloaded at this link, from the QR code below, or email malaysia.covid.help@gmail.com.

Three different templates are available for use by SMEs – manufacturing, trading and services. We hope SMEs will find the templates useful. If you still need help, I would suggest you approach your auditors for assistance to fill up the cashflow statement. We also hope the bankers will evaluate genuine applications with empathy and compassion, offering their kind assistance to deserving SMEs.

It will be a slow recovery but we are all in this together. Maju Bersama!

Published: https://www.thestar.com.my/business/business-news/2020/09/26/slow-recovery-but-we-are-all-in-this-together

13/2020 – Doing more for the business community

I confess that I have a box of face masks at my reception table where I keep my house and car keys. I will not leave my house without taking a face mask with me. On occasions when I forget, the backup supply found in my car and office bag does come in handy. I am not kiasu, I am kiasi.

The face mask is now part of my life, daily wear and routine. If I want to stay active, going out for meetings and visiting my favourite food stalls and restaurants, I know wearing a face mask and having hand sanitisers with me will help reduce the chances of being infected by the coronavirus. Life goes on. We all just have to live with it, managing the risk as the world adjust to the new norm.


The Health Ministry has been giving good advice to the government: first an early lockdown to flatten the curve, then the border control, a compulsory quarantine and the quick response to identify clusters, contact and trace all leading to a successful campaign to control the spread of the virus.

Over the past six months, the Home Ministry, however, has made some bizarre decisions that has not been helpful towards an economic recovery. The latest ruling on border control to blanket ban citizens from 23 countries is one of them.

There were so many complaints by professionals with long working passes of not being able to come back after traveling for business meetings even though many are willing to serve the compulsory two-week quarantine upon return. Professional engineers and specialist from these countries who are needed to start new machines have been denied entry and this has caused unnecessary delay to factory production schedules. That decision, thankfully, has been reversed and now expats, skilled visit pass holders, students, spouses and permanent residents are allowed in.

Long-term residents from My Malaysia Second Home are also refused entry and these retirees have invested their money and time to stay in our country. They should be treated with respect and courtesy like any Malaysian citizens, let them return, take the Covid-19 test at the airports, serve the mandatory two-week quarantine at a hotel and then allow them to go home.

What is the SOP for getting permission from the Immigration Department? You can only write in to the two email addresses and hope for the best. Approvals or replies will come in one to three weeks. It is difficult to plan a business trip on such uncertainty. Can we hope for a decision within three days?

Cinemas have to practise alternate seating thus reducing capacity by 50% but airlines do not need to. Have you seen the sardine packed crowds at mamak shops and night markets lately? If everybody wears mask and practises hand sanitising then the risk is reduced substantially.

Just as we impose restrictions on countries with a high number of Covid-19 cases, we should also relax immigration rules with “safe” countries that manage the Covid-19 situation as well if not better than us. If we want to save our tourism industry, I would recommend we establish a green lane bubble with China to bring in the Chinese tourists. The early bird catches the worm.

Not only will it kickstart the international routes for our airlines, the multiplier-effect on economic benefits cascading down to hotels, tourist guides and transportation will be immense. As the Chinese tourists are currently the biggest spenders in the world, our airlines, shopping malls, shops and restaurants will see re-employment of a few hundred thousand workers.

Yes, there is always a risk but with smart planning and strict safety protocols, the immense economic benefits that it brings will be well worth taking the calculated risks.

Even though there is good recovery on our domestic front for many sectors of our economy, most companies are still 30% to 50% below pre-Covid-19 revenue.

If total consumption has fallen by 30% year-to-date, the lost sales are not recoverable. The global supply chain will have a negative 30% setback from consumption to distribution to production. As we speak, purchases have been delayed or postponed to next year.

Civil servants and politicians do not understand the difficulties faced by businesses, especially the SMEs as no MPs and civil servants have suffered from pay cuts and retrenchments. It is imperative that prior to issuing new movement control orders, the Home Minister should consult the business community to gather relevant feedback on the consequences of such rulings. As no bright ideas have emerged from the Trade Ministry and Tourism Ministry, the business community will continue to suffer in silence.

With massive unemployment looming, the Human Resource Ministry has been mute as to re-allocating the unemployed to sectors that are still employing.

A central data base of companies that are looking to employ people should be set up for the public.

The electronic and glove industries are doing well and expanding. Logistics and e-commerce sectors are booming and the soon-to-be-opened Cainiao Global in Sepang will be employing thousands of employees across all levels. Cainiao is the global logistic arm of Alibaba Group.

What the government has to do is to offer as much assistance as possible to the business community, not restrictive anti-business rulings. As my good friend, Sang Hoe told me over dinner last night, it is crucial during a recession, that the government must step up, show leadership and offer hope to its citizens.

To the suffering SME owners, do not lose hope. With help and empathy from your understanding bankers, you will survive and pull through, with or without government help. I am assuming you have sorted out the loan moratorium with your bankers. The clock is ticking.

Anyway hope for the best and the bankers will do the rest.

Published: https://www.thestar.com.my/business/business-news/2020/09/19/doing-more-for-the-business-community