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Keeping Your Business Out Of  Trouble And On Track

Issues 20




Welcome to year 2017! As we usher the New Year 2017, Malaysians are hopeful for a better year. Every sector of lives has been affected. We heard and read of people losing jobs or agreed for payreduction just to stay with a hope that things will turn around soon. However, reality might be different from what is apparent to our eyes. Most Malaysians are already cutting spending and this affects small enterprises. While many say the current economic crisis is a replica of the 1997 recessions, many have predicted that we are probably heading worse than 1997 and 2008 with impact to be felt much in 2018. With Ringgit sliding further it becomes more expensive to sustain businesses especially for import oriented trading. However, it does not make it more profitable for export oriented businesses. It just relatively cheaper for foreign entities to do business with Malaysian firms. Unfortunately every time there is economic turbulence the SME is the most affected sectors in Malaysia. With Malaysians lower spending ability, many SME businesses can hardly sustain their overheads.

SME forms 97.3% of Malaysia’s total business establishments which accounts for 65% of the country’s employment. SME collectively contributes 36% of the country’s domestic GDP with 28% exports revenue.It is in no doubt any negative impact on these enterprises will send a spiralling effect in the whole economic spectrum in Malaysia. Many experts as well as layman have cautioned Malaysians to hold their cash or invest in gold and reliable foreign currency.

Looking at the new developments around the world, while we try not to be over alarmed, we cannot deny that the current world affairs will have impact on our already fragile market. The UK Brexit plan might have satisfied just over 51.9% of the UK population but it has opened new row with EU block. We are yet to anticipate a much global outcome on this issue. The Trump government of the USA is another issue that may put pressure on the already weak world economy. Trump’s stance of protectionism is seen as a threat not only to giant economy such as China but it will no doubt have negative impact on smaller emerging economic.

If US companies are forced to pull out manufacturing in rather cheaper labour countries and back to US to provide jobs to Americans at higher costs, small economy will have no choice but to trade at much higher costs with the US.

Malaysia, with its already shrinking foreign investments will in no doubt be much affected than what it experiencedin previous recessions. Domestically we are also faced with looming political saga. With the next general election which many perceived a call for a snap election anytime this year, the impending political uncertainty further hurts effort to lure foreign investment and domestic growth.

What does this translate to SME? Running a business will become more expensive than it is now. Without strong domestic consumption to support the SME, it will push our GDP even further below than what has been expected.

Without a strong and positive stimulus from the government to inject more funds to create jobs; which is in doubt at the moment; small business owners will have no choice but to close shop to hold whatever cash left with them with the hope to start again when it is right time to come back. Just imagine if many of the 97.3% establishments cease operation, thousands will join the already unemployed Malaysians.

Perhaps, the best way to combat the impending notorious economic slowdown is for SME to join hands to pool their resources and manpower together and retain jobs as many as possible. It is indeeda win-win situation in times of turbulence. Small enterprises that join hands with other similar capacity will benefit from shared experience and will come out stronger in times of economic recovery.


Note:

We at KIQ have been consulted and drafted business agreements and mergers to our clients.