The budget revisions last week, boosting funding for SMEs and startups by RM6bil and announcing visa exemption for tourists from China, have given businesses something to cheer about, writes HO WAH FOON.
THE small and medium enterprise (SME) sector will be invigorated by measures in the revised Budget 2016, particularly the RM6bil addition to SME funding and visa exemption for tourists from China.
Prime Minister Datuk Seri Najib Razak, presenting the revised budget on Thursday, announced that the Government would increase funding by RM6bil to state-owed development financial institution and venture capital funds to provide financing to SMEs and startup companies.
He also announced that from March to December this year, China nationals visiting Malaysia would be accorded free visa for a maximum stay of 15 days.
The continuous plunge in crude oil price and the slowdown in the region has forced Malaysia to revise its budget and economic forecasts tabled last year, and to look for new ways to stimulate the economy.
In this revised budget, the GDP growth assumption has been narrowed to 4.0-4.5% from 4.0-5.0% previously.
“We are happy with the revised budget. It’s good for SMEs, particularly the removal of visa for Chinese tourists and the additional RM6bil funding for SMEs via government agencies,” says Michael Kang, president of the SME Association of Malaysia, in a telephone interview.
Kang expects an influx of Chinese tourists after the visa-free measure takes effect.
“When tourists come, they will stay in hotels, see places, buy food and things. Our SMEs are involved in the supply chain. Once all this starts happening, the economy will be stimulated.”
Kang notes that the fear of retrenchment amid economic slowdown has led Malaysians to cut down on their spending. In the last quarter, members of the association reported a fall of 30-40% in sales.
Sales have also been sluggish during this period leading up to Chinese New Year.
“Locals are very conservative in their spending now. They only buy the necessities. Hence, getting more foreign tourists to come in is important to help our economy now,” Kang explains.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) says the visa-free measure will encourage more Chinese to visit Malaysia, which in turn will boost consumption, promote tourism and related industries.
“The impact of this visa-free measure is not limited to tourism. It will have a major impact on the economy as a whole. The airlines, hotels, shopping malls, hawkers, retail stores all will benefit from this expected influx of Chinese tourists,” says Datuk Ter Leong Yap, president of ACCCIM.
“We hope that this free visa relaxation will be implemented with immediate effect so as not to miss any further peak season visitors from China,” adds Ter.
He says ACCCIM proposes that the Ministry of Tourism and Culture and travel agencies strengthen collaborations and “vigorously design a series of packages and activities” to promote in-bound tourism, and to undertake extensive publicity.
Indeed, Chinese tourists with their lavish spending have helped to boost some economies in the West and Hong Kong, and more recently in South Korea and Japan. There is no shortage of news about Chinese tourists frantically snapping up electrical household items and luxury goods in the places they visit, and even buying up branded condoms in Tokyo.
In Malaysia, they look for coffee, bird’s nest, durian cakes and other local food items, as well as imported Chinese tea and liquor in Kuala Lumpur, as they do not trust their own food producers after the melamine milk scare of 2008.
ACCCIM also welcomes the increase in RM6bil funding for SMEs and startups, but it hopes the interest rates from this fund will be “low and affordable”, and the application procedure simplified.
Kang believes the RM6bil additional funding will help startups tremendously as these firms normally find it difficult to get financing.
“When new companies start business, they will need a place to do business. They will have to hire people and buy furniture etc. This will trigger the whole supply chain in which SMEs are in,” says the leader of SME Association.
But he hopes the procedure to apply for funding will be transparent.
“Implementation and execution must be transparent. In previous budgets, SMEs ended up not knowing where to get the funds allocated for SME financing. If they cannot get funding, the whole purpose would be defeated.”
The reduction of 3% EPF contribution by employees to free RM8bil for private spending is also a positive news for SMEs.
“Any news that stimulate economic activities is good for SMEs,” states Kang.
Nomura International, in a short note, opined a cut in employee contribution to the EPF and a special tax relief of RM2,000 to taxpayers earning up to RM8,000 a month for the 2015 year of assessment will stimulate the economy.
Similarly, the Government’s move to maintain its original plan to implement major infrastructure projects will also help.
“Once the infrastructure contracts are farmed out to contractors and work start running, SMEs will come in and join the supply chain,” Kang says.
Both Ter and Kang welcome the Government’s move to streamline the management of the foreign workers system.
“The Government, however, should clarify and announce as soon as possible how levy is to be clustered into two categories.
“ACCCIM would like to suggests that the relevant ministries solicit feedback from the business community so as to formulate a simple, efficient and cost-effective mechanism to meet the needs of employers,” says Ter.