Executive Summary of Key Findings The Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) Malaysia’s Business and Economic Conditions Survey (M-BECS) was conducted from mid-May 2020 to early July 2020, covering the first half-year of 2020 (Jan-Jun 2020) and expectations for the second half-year of 2020 (Jul-Dec 2020), has received 828 responses. During the implementation of Movement Control Order (MCO) to contain the Coronavirus Disease 2019 (COVID-19), ACCCIM via the Social-Economic Research Centre (SERC) has proactively conducted four Quick-Take Surveys (QTS) to gauge business community’s feedback regarding the coronavirus’s impact on business sector as well as the effectiveness of Government’s counteract measures to limit the economic damage. The QTS results and feedback gathered have been submitted to the Government. The brief details of QTS were as follows:

1. QTS on PRIHATIN Economic Stimulus Package and Retrenchment Plan (Survey period: 29 March 2020 – 4 April 2020, received 2,041 responses)
2. QTS on Preparation of Post MCO’s Exit Strategy (Survey period: 13 April 2020 – 21 April 2020, received 916 responses)
3. QTS on Financial Impact due to the MCO’s Extension (Survey period: 24 April 2020 – 25 April 2020, received 323 responses)
4. QTS on Reopening of Economy (Survey period: 3 May 2020 – 6 May 2020, received 728 responses)

The ACCCIM’s M-BECS is a good barometer to gauge Malaysian business community’s assessment and expectations about domestic business and economic conditions as well as their prospects. It covers questions to measure expectations about the performance and prospects of economy and business, particularly during this unprecedented COVID-19 and MCO as well as post MCO; identify main factors affecting business performance; and to gauge the implications of current issues and challenges faced by businesses. An overview and summary of key findings of the survey are as follows: Overall, M-BECS results showed that most businesses have pessimistic views about economic and business conditions in 1H 2020 as inflicted by the unprecedented impact of the COVID-19 and MCO. While PRIHATIN and PENJANA economic and financial packages have helped to limit economic damage and ease cash flow burden, businesses’ pessimism expectations are expected to continue in 2H 2020, albeit a marginal improvement. At this juncture, the fragile economic and business environment remains highly vulnerable to new economic and financial shocks. While most respondents anticipate the economic recovery to take place in 2021, some cautiousness still prevail given lingering concerns about the containment of virus (through the availability of vaccines); the effectiveness of the Government’s stimulus and counteract measures; domestic political climate; and the recovery strength of our major trading partners.

1. Sluggish business conditions in 1H 2020 due to the COVID-19 pandemic. A majority (78.2%) of respondents revealed that their business has worsened in 1H 2020, reflecting the tough economic and business environment inflicted by the COVID-19 pandemic and the consequences of MCO (18 March to 3 May). Only 4.6% of respondents are better-off in their business performance while 17.2% registered a flat growth.
2. There is a widespread pessimism on the Malaysian economy. The share of respondents having bleak views about the economy has spiked to 68.4% in 1H 2020 and will rise further to 68.9% for 2H 2020. The 70.9% share of respondents’ pessimism for 2020 is lower than the highest previous spike of such sentiment (76%[1]) in 2008-2009 when the 2008-09 Global Financial Crisis unfolded.
3. More than 60% of respondents in all sectors are pessimistic about 2020’s economic conditions and prospects due to the substantial economic damage on demand and supply caused by the virus outbreak in domestic and global economy.
4. There is a glimpse of hope in 2021. Nearly all sectors have more than 60% of respondents hold a neutral view on economic conditions and prospects for 2021 amid lingering hope on the availability and affordability of vaccines. The number of respondents having pessimistic views will decline to 24.5% in 2021 from 70.9% in 2020.
5. A prolonged COVID-19 pandemic has pulled down respondents’ expectations on business conditions and prospects.7% of respondents anticipate deteriorating business conditions and prospects in 2020; only 28.6% hold a neutral stand; and 3.8% of respondents expect positive business conditions and prospects. Despite they are expecting the economy to recover in 2021, a majority of the respondents (63.7%) do not expect a strong comeback, holding a neutral view.
6. Businesses feel pessimistic about business conditions and prospects in 1H 2020 as indicated by 2% of respondents and the pessimism (64.3%) will continue in 2H 2020. Nearly all non-essential business activities were completely halted during the MCO from 18 March to April before allowing economic sectors to reopen gradually starting 4 May under Conditional Movement Control Order (CMCO) and Recovery Movement Control Order (RMCO) since 10 June amid still facing a slow pace of recovery in consumer demand and operating cost challenges.
7. Businesses are generally expecting somewhat cautiously better business outlook in 2021: (a) Lesser number of respondents (23.1% vs. 67.7% in 2020) have pessimistic views about business prospects in 2021; (b) A majority of respondents (63.7% vs. 28.6% in 2020) have a neutral view; and (c) Only 13.1% anticipate good business conditions in 2021 (3.8% in 2020).
8. On the cash flow conditions, 9% of respondent having cash flow problems in 1H 2020, much higher compared to 42.2% in 2H 2019. 36.9% of respondents unable to cover fixed operational expenses for 3 months while 41.3% can only last between 3-6 months. In addition, 42.8% of respondents are unable to cover debt/financing obligations for 3 months if the automatic loan moratorium is not extended.
9. The capacity utilisation rate of sectors surveyed has dropped drastically due to a “sudden stop” in non-essential sectors during the MCO and also limited manpower capacity for the allowable operative essential sectors. Most respondents (48.1%) reported that their plants are operating below 50% in 1H 2020 and are expected to improve marginally in 2H 2020 amid the strict SOP still in place and a gradual recovery in demand.
10. Business operations (production, sales and raw materials) were generally in line with the business conditions.

• Sales: Overall sales performance was dampened as indicated by 65.8% of respondents and is expected to remain sluggish in 2H 2020 given still weak sales prospect.
• Production: Production level has dropped significantly in 1H 2020 due to the impact of COVID-19 and MCO, as reflected by more than half (52.7%) of respondents. The SOP and social distancing measures would restraint the production capacity for some time.
• Raw materials: Following the softening of global commodity prices, the percentage of respondents indicated an increase in cost of raw materials has dropped compared to previous surveys. Nevertheless, the shortage of raw materials has partially offset the effect as about half of respondents indicated an increase in cost of raw materials from domestic and overseas suppliers.

11. Clouded by the impact of COVID-19 and MCO, most respondents have chosen to remain unchanged or reduced their capital expenditure in both 1H 2020 (66.3%) and 2H 2020 (68.3%).
12. The top five factors that have impacted business performance are: (i) Impact of COVID-19 (as ranked by 87.7% of total respondents); (ii) Movement Control Order (MCO) (82.5%); (iii) High operating costs and cash flow problem (44.1%); (iv) Declining business and consumer sentiment (44.0%); and (v) Changing consumer behaviour (43.1%).

13. The respondents were asked to provide feedback and views on business impact and policy responses during the MCO, CMCO and RMCO as well as post COVID-19:

• Almost 50% of respondents expect the Malaysian economy to recover in 1H 2021, albeit gradually, i.e. “U-shaped Recovery” in 2020-2021. 40% of respondents expect an “L-shaped Recovery”.
• A majority of respondents (71.4%) can survive the COVID-19-inflicted economic downturn, though it is a tough journey ahead. However, about a quarter of respondents have “difficulty to hang on”, depending on how lasting the impact of COVID-19. The M-BECS results showed that 4% of businesses need at least 4-12 months to recover post MCO.
• The unprecedented COVID-19 outbreak has caused demand and supply shocks. The supply chain disruptions have resulted in a reduction in customers’ orders across all industries. In adapting to post COVID-19’s new normal environment, the survey results revealed that large enterprises are prepared to adopt more digitalisation, e-commerce and automation (voted by 62.7% of large enterprises respondents) whereas 4% of SMEs are prepared to retool and re-engineer their business model.
• PRIHATIN Economic Stimulus Package provides a timely assistance for all sectors to ease their financial burden. 71.8% of respondents have benefitted from the Wage Subsidy Program, followed by the deferment of loan repayments (50.2%) and income tax deferment (44.1%).
• 9% of respondents have tight cash flow problems and unable to cover business operations/productions, raw materials/inventory, manpower cost for 3 months while 41.3% can only last within 3-6 months, leaving 21.8% of respondents say can last for more than 6 months.
• Assuming there was no automatic six months loan/financing deferment for SMEs, 8% of respondents are unable to cover debt/financing obligations for 3 months and 33.0% can only cover 3-6 months.
• Nearly two-thirds (66.3%) of respondents hope that the Government will consider to extend the payment deferment on SME loans/financing for an additional 3-6 months as the business outlook remains cloudy in 2H 2020.
• For Budget 2021 expectations, the respondents proposed the following measures to revitalise private investment and to sustain private consumption.

(i) Stimulate private investment

1. Reduce corporate tax rate to 22% (24% currently) for large companies and 15% (17% currently) for SMEs (voted by 83.9% of respondents)
2. A suspension of foreign workers’ levy in 2021 or a 50% reduction in foreign levy (46.7%) [Note: Levy on foreign workers was reduced by 25% for the period of 1 April to 31 December 2020 as announced in PRIHATIN Tambahan]
3. Reintroduce the GST at 3% rate (40.3%)
4. Import duties reduction on machinery equipment related to automation or digitalisation (39.9%)
5. Extend Reinvestment Allowance (36.0%) [Note: Special Reinvestment Allowance (RA) for the manufacturing and selected agriculture activity for YA 2020 and YA 2021 as announced in PENJANA]

(ii) Sustain private consumption

1. A tax holiday for tax payers with taxable income below RM100,000 per annum for YA 2021 (voted by 72.6% of respondents)
2. Encourage domestic tourism via the exemption of tourism tax and service tax on accommodation as well as entertainment tax for parks (55.6%) [Note: Tourism tax exemption from 1 July 2020 to 30 June 2021; Extension of service tax exemption for hotels to 30 June 2021 as announced in PENJANA)]
3. Reduce Real Property Gains Tax (RPGT); a 50% reduction in stamp duty for first-home buyers between 2021 and 2025 (54.2%) [Note: Reintroduction of Home Ownership Campaign (HOC): Stamp duty exemption for property priced between RM300,000 and RM2.5 million subject to at least 10% price discount for S&P signed between 1 June 2020 and 31 May 2021; RPGT exemption for disposal of residential homes, limited to three units per individual from 1 June 2020 to 31 December 2021 as announced in PENJANA)]
4. Launch “Buy Malaysia made Products” every quarter using E-commerce platform (47.0%) [Note: Provide promotional codes and discount vouchers through e-commerce platforms to encourage online spending under “Shop Malaysia Online”; Promote consumption of Malaysian made products and services with dedicated channels for local products on major digital platforms under National “Buy Malaysia” Campaign as announced in PENJANA)]
5. Collaborate with retailers to provide e-vouchers and shopping discount vouchers (39.7%)
6. Reduce the parcel delivery cost below 5kg (39.7%)

20200806 ACCCIM MBECS 2020H1 and 2020H2F Full Report

20200806 ACCCIM MBECS 2020H1 and 2020H2F PPT (EN)