00:10Hi, welcome back to Consider This. I'm Melissa Idris. Let's continue our discussion about the
00:15global supply crisis and the impact on businesses, especially small and medium enterprises.
00:22Could rising costs and tighter supply affect production and pricing and ultimately survival?
00:29Well, let's ask this question to Dr. Chin Chi Siung, who's the president of the SME Association
00:36of Malaysia. Dr. Chin, thank you so much for joining us on the show today. It's good to
00:40have you back. We've been talking in this episode specifically about how the global supply crisis
00:46is affecting plastics input and plastic supply. But I'm curious to know how, from an SME perspective,
00:55from a business perspective, how these disruptions, not just limited to plastics and packaging,
01:00but how all of these supply disruptions are impacting businesses. What have you heard from
01:05your members?
01:07Okay, I think we all know that the plastic product relies a lot on the resin from the petroleum
01:16by-products. So it is very important that we have a good source and also a cheaper kind
01:23of supply. But at the moment, we all know that prices have high up and many SME, in fact, are
01:29very much exposed to all this hype in the material. In fact, it's not only the manufacturer, it's
01:36not only the plastic manufacturer. In fact, we have a lot of plastic manufacturers have been
01:39complaining already, right? But more to more is for SMEs, we are a lot in now, F&B businesses,
01:47right? The retailer, and a lot are e-commerce reseller, and manufacturer as well. And in various
01:55fields like pharmaceutical, you know, logistics, and many of us also do a lot of export, and all
02:02depend on this plastic packaging in one way or another. So we have been facing the issue
02:09right from, in fact, we've really feel it since last month. You know, one of the members
02:13telling me the material, the raw mat of the plastic has gone up almost as much as 30%. So what
02:21do they feel is that the supplier who's doing especially on the plastic packaging industry, we
02:27have a, I have a so-called members who are doing chocolate product manufacturing, right? And
02:34he has put out the PO months ago to, you know, to purchase plastic packaging, everything. The
02:40supplier came back and returned the PO to him. Sorry, we cannot accept your order anymore. You
02:45can take back your PO even decide to accept it. So because the hype is too high, they cannot afford
02:51to give the old price. So they have to come out with the new costing to all the customer they
02:56have. So that part, in fact, a lot of increase from even up to 20% of the packaging product.
03:03So
03:04for many of us, we are difficult to adjust the price because our, our many of our products
03:09already out there, and the price are fixed. And we have also, you know, a lot of our distributor,
03:16retailer are selling the price that have been fixed. So there's hard for us to increase the
03:21price right now. So we have to absorb it. And really, we are trapped.
03:25Okay. So what I'm hearing is that margins are being compressed on the SMEs, for the SMEs. Can
03:31you tell me what you're seeing, Dr. Chin, in terms of signs within, within industry, within
03:40businesses? Are they, are they, you know, cutting production? Are they reducing their output?
03:45Are they delaying their orders? What, what has been the contingency plan to manage with some
03:52of these price hikes and supply disruptions?
03:54I think many of us are beginning to, to hold on the production. You know, the output for sure,
04:02that's number one. And number two is that because of this, this cost of the increase in all the
04:09cost, not only because of plastic or all the packaging increase, because we are also facing
04:15the transportation charges, the fuel costs, right? And also utilities are all been going up.
04:22So that's where most of us have to tighten our expenses. You know, we beginning to, you know, keep,
04:28not to spend so much or even we stop hiring. Many of us have stopped hiring. And if they go
04:34back to our,
04:35our, our supplier and asking for more, better terms and better, you know, negotiate for better,
04:42you know, costing and rather than increase the price yet. So like I say again, it's not only we,
04:48we lack of sales. We can see that, you know, last, last couple of months and also because of work
04:54from home,
04:54many of us are suffering, right? Especially in F&B. I have one or two Muslim F&B customer,
05:03and also our members are complaining, you know, his sales dropped more than 30% during this period
05:08and how he could survive, you know, and the business cost is the same, right? The renter SST
05:13you have to pay, the renter never go down and everything is up. So what we need now, in fact,
05:20to manage our cash flow, most of us are having a really cash flow problem.
05:25Okay. All right. Just a couple of questions on what you've mentioned, some follow-up questions.
05:30When you talk about tightening expenses and you mentioned stop hiring during this period,
05:36can you talk to me a little bit about that? How these, the current supply chain disruptions
05:42or the crisis around supply is affecting planning and investment decisions for businesses,
05:48but also what are the risks to employment? Is there risk of layoffs, risk of closure of businesses?
05:58Talk to me about that, Dr. Chin.
06:00Okay. It depends on which business are we in. I can see that many of our F&B customers, our
06:07members,
06:07they are not hiring anymore. If there's any staff who are going to resign or retire,
06:14they are not going to even replace them. So the first thing they do, right?
06:18And then for the fact that coming to delivery costs, you know, I know one distribution company
06:26who is doing sort of fraction material distribution, delivery for their client,
06:31and because of the diesel hype, all, you know, some of them, they use a lot of Hilux,
06:37and the Hilux cannot move now. And they have to, you know, provide a less customer service to their customer
06:43because they want to consolidate deliveries. They're trying to bring down their costs by using other way,
06:50because there's no choice, right? And because of that, you don't need many delivery people.
06:56So a lot of them also start looking into contracture out, subcontract it away.
07:01You don't do it themselves, all right? And where you contract out, then you terminate the service of your own
07:06staff.
07:07So that is where many, many of us have to do it, no choice, because the first thing we need
07:14to do is cut our basic costs, right?
07:17The basic is where we can move it. The variable, we really can't really touch it, right?
07:23Petrol go up, diesel go up, we have no control, right? We have to absorb it.
07:27And if you are using a third party, you know, especially when you are using freight services for instance right
07:34now,
07:34when freight services have been increasing, air freight, sea freight of course, right?
07:39The air freight also increased. And many, many issues we are facing, right?
07:44And all this add to what should SME do? What should the owner do right now, right?
07:50If you face a short in your revenue and you face a high in your costs,
07:57the only logical thing to do is minimize your basic overhead, right?
08:02And we are definitely, we can see a lot of companies start, you know, reducing their staff.
08:08And you can see that the last report, right?
08:12I think if not mistaken from the DOSM, that the amount of job loss has increased, right?
08:20I mean increased. That is where we see all come from the SMEs.
08:24Are you concerned that the impact could be similar to or reminiscent of the pandemic,
08:31the COVID time impact on businesses?
08:35I think it is not as bad as COVID, but it is rather something that we have to take extra
08:43precaution
08:43because we don't know when the war going to end, right?
08:47At the same time with COVID, we don't know when it's going to end.
08:49So we will continue to be very cautious.
08:52And in the meantime, those companies are not doing well.
08:55For instance, many of our SME members, they couldn't even get financing.
08:59Even government announced the 5 billion facilities going to announce by Bandegara.
09:04But even the Kuskok have given some loans, you know, to the SME to ease their cash flow.
09:11But those people that get access to this fund, are those companies doing well?
09:17Because the banks still go back to their basics.
09:20You know, when I assess the company performance, whether you are capable to pay or not,
09:26whether you are able to pay back and then you want to see your project,
09:29are you running any project that coming, you know, on the way,
09:33or you need some fund to make some profit.
09:35So that taking into consideration that so many of the loans are not accessible by many SMEs.
09:42Okay. So what kind of support would SMEs need most from the government?
09:46You mentioned that, yes, there are, you know,
09:48there's all these initiatives and measures being announced.
09:51But if they're not getting to the businesses that need them the most, then the point is moot.
09:57So how should the government readjust or tweak so that these measures are actually impactful?
10:03I think first thing is, at least you have a less stringent kind of assessment,
10:09meaning you cannot use the normal commercial bank assessment to the company who facing issue, right?
10:16And sit down with them using whatever knowledge that you have from your assessment team.
10:22Because all these go back to commercial bank, right, the loan.
10:25So the commercial bank team always has the SOP.
10:28You got to have, you know, you have to qualify for this.
10:32For instance, the CTOS report.
10:34You need this report. You need that.
10:36And finally, I need your sign as a personal guarantor.
10:39Right? Okay.
10:40Even you're willing to sign personal guaranty.
10:42Then they say, oh, sorry, you have signed a few personal guarantors for a few facilities.
10:47You cannot afford anymore.
10:49So those are the things that maybe government can have a special team with the bank.
10:54Sit down with each company.
10:56Look at their past performance.
10:58Are they able, possibility to repay you back with their past business performance?
11:03And also their future projection, right?
11:06And give them a lifeline.
11:09Maybe you don't have to give so big amount.
11:11For instance, government announced $750,000 a max for those $5 billion things.
11:15But you can give a smaller, you know, $200,000 or $300,000 of a fund.
11:19So they're easy to access.
11:21And then give them a longer period to pay back.
11:23And not so stringent on the guarantor.
11:25Because if you ask them to sign a guarantee, no issue.
11:28But you still say that you're not qualified.
11:31So these are the things that I see can be more helpful to them.
11:37So that they can ease over this period of problem.
11:40It's a buffer to get through some of these difficult times, right?
11:45Dr. Chin, thank you so much for being on the show with me today.
11:48Dr. Chin Chi Siong there from the SME Association of Malaysia.
11:52Wrapping up this episode of Consider This.
11:54I'm Melissa Idris signing off for the evening.
11:56Thank you so much for watching and good night.
11:59Thank you, everyone.
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