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Assisting SMEs to Manage the Impact of Higher Costs

[ 31-07-2008 ]

Small and medium enterprises (SMEs) are an important segment of the economy accounting for 99.2% of total business establishments, employing 5.6 million of the work force and contributing about 32% of gross domestic product. To ensure that SMEs remain viable, the Government wishes to announce the following measures to assist SMEs to better manage the impact of higher costs on their operations. The measures are aimed at:

providing avenues for SMEs to seek assistance; and
enhancing efficiency and productivity of SMEs.

Providing Assistance to SMEs

With rising operational cost, some SMEs may face difficulties in managing their financial position. The following measures are being introduced:


i)	RM700 million SME Assistance Facility
	Bank Negara Malaysia will establish a RM700 million SME Assistance Facility to assist viable SMEs that are facing financial difficulties to manage temporary cashflow problems due to the rising costs. The Facility is intended to assist viable SMEs to continue their business operations and to preserve employment. Under this Facility, viable SMEs will be able to obtain financing at 4% per annum from any commercial and Islamic banks, SME Bank, Agro Bank, Bank Rakyat and EXIM Bank, with an 80% guarantee coverage by the CGC. The maximum amount of financing under the Facility is RM1.5 million per SME, with a maximum tenure of 5 years. Application for new financing under the Facility will be open for 2 years, commencing 1 August 2008. For further details, SMEs can approach the participating financial institutions or contact BNMTELELINK at 1-300-88-5465.

ii)	SME Loan Restructuring
	CGC-guaranteed customers facing cash flow problems due to increased operating costs can discuss with CGC to review their loan packages. Repayment schedules may be restructured accordingly. Customers of Direct Access Guarantee Scheme (DAGS) are encouraged to call the CGC's helpline at 03 7880 0088 to seek advice and assistance. For CGC's non-DAGS customers, SMEs need to approach their respective bankers directly for such restructuring of their existing facilities. Non-CGC borrowers facing financial stress or cash flow problems in the current business environment are advised to approach the SME Units of their respective banking institutions to discuss possible restructuring solutions. Timely action can pre-empt and avoid problems with respect to the financing facility.

b)	In addition, SMEs may also avail themselves to the following advisory services:


i)	Advisory Services on Managing Cost
	The CGC and other relevant agencies will provide SMEs with advisory services on cost effective measures that may be taken. Free briefing sessions will also focus on providing SMEs tips on how to better manage escalating costs and their businesses better in this difficult operating environment. SMEs are encouraged to participate in these sessions. Client Service Centre (CSC) Credit Guarantee Corporation Malaysia Berhad Level 2, Bangunan CGC Kelana Business Centre, 97 Jalan SS 7/2 47301 Petaling Jaya, Selangor Tel: 03-7880 0088 Fax: 03-7803 0077 E-mail: csc@cgc.com.my

ii)	One-stop Centre on Financial Advisory at Bank Negara Malaysia
	SMEs can contact BNMLINK (walk-in counter services) and BNMTELELINK to know more about the available financial and non-financial programmes provided by the Government. BNMTELELINK Jabatan Komunikasi Korporat Bank Negara Malaysia P.O.Box 10922 50929 Kuala Lumpur Tel: 1-300-88-5465 (LINK) Fax: 03-2174 1515 E-mail: bnmtelelink @bnm.gov.my

iii)	SME Units at Banking Institutions
	SMEs can also contact the SME Units of the banks, which assists SMEs by providing information on the various sources of financing available, facilitating the loan application process, addressing difficulties faced by SMEs in securing loans from financial institutions, and providing advisory services.

iv)	SME Bank's Advisory Centre
	SME Bank's Advisory Centre works in tandem with other Agencies that register with the centre to offer support and advisory services to SMEs. Services are offered to SMEs in all phases of the business cycle to help SMEs grow, innovate and achieve excellence in their business activities as well as to overcome financial problems. Expert advice is also available on marketing, business development, operations and customer service. Advisory Centre Level 7, Menara SME Bank Jalan Sultan Ismail Peti Surat 12352 50774 Kuala Lumpur Tel: 03-2615 2888 Fax: 03-2691 0727

2.	Enhancing Efficiency and Productivity of SMEs


a)	In the current business environment, it is imperative that SMEs undertake measures to modernise and upgrade machinery, equipment and operation, as well as utilise energy-saving devices in order to enhance their efficiency and productivity. To assist SMEs in modernising their operations and to reduce companies' costs of production, the following measures are being introduced:


i)	RM500 million SME Modernisation Facility
	Bank Negara Malaysia will establish a RM500 million SME Modernisation Facility to provide financing to SMEs to modernise their operations, in particular to purchase or upgrade machinery and equipment, as well as for energy saving equipment. Under this Facility, viable SMEs will be able to obtain financing at 4% per annum from any commercial and Islamic banks, SME Bank, Bank Rakyat and Agro Bank, with an 80% guarantee coverage by CGC. The maximum amount of financing under the Facility is RM5 million or up to 95% margin of financing, with a tenure of up to 8 years. Application for new financing under the Facility will be open for 2 years commencing 1 August 2008. For further details, SMEs can approach the participating financial institutions or contact BNMTELELINK at 1-300-88-5465.

ii)	University - SME Internship Programme
	The Government, through SMIDEC, will also intensify efforts to provide consultancy and business advisory services to assist SMEs to strengthen their business operations. In this regard, a "University - SME Internship Programme" will be introduced, providing linkages between universities and SMEs. Under this programme, final year university students will be attached at selected SMEs for three months to assist SMEs in strengthening their business operation, in particular, in the areas of basic management, financial management, marketing as well as practices and applications of technology. The Government will bear the cost of this programme.

iii)	Skills Upgrading Programme
	Being small in size, SMEs often are faced with the problem of not being able to send their employees for training. For these, SMIDEC implement Skills Upgrading Programme with the objective to enhance skills and capabilities of employees of SMEs in the technical, managerial as well as marketing through training programmes. To further assist SMEs, the training grant provided by SMIDEC has now been increased to cover 80% of total cost of training.

b)	In addition, SMEs may also take advantage of the currently existing incentives to reduce the cost of their operations:


i)	Import Duty and Sales Tax Exemption on Machinery and Equipment Purchased by SMEs for their Operations
	All manufacturers, including SMEs, are eligible for import duty and sales tax exemptions on machinery and equipment used directly in their operations. The exemptions are given provided that the machinery and equipment are not manufactured locally and the importation is done directly by the SMEs. In cases where the machinery and equipment are manufactured locally, the SMEs are eligible for sales tax exemption. In cases where the importation is not done by the SMEs themselves, exemptions can also be given to cooperatives of associations that import the machinery and equipment but consigned to the SMEs.

ii)	Energy Efficiency Initiatives
	SMIDEC has since 2004 encouraged SMEs to undertake energy audit to implement cost saving measures relating to energy usage at factory premises. To assist companies to undertake these energy audits and to purchase related equipment or devices related to energy saving, SMEs can apply for a matching grant for process improvement from SMIDEC. Maximum grant per application is RM500,000. To facilitate SMEs in undertaking and identifying cost saving measures, SMIDEC collaborates with Malaysian Association of Energy Service Companies (MAESCO) to create awareness and promote energy efficiency initiatives among SMEs.

iii)	Incentives for Investing in Energy Saving and Energy Efficient Equipment
	Companies, including SMEs, that incur capital expenditure for energy conservation for own consumption are eligible for Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within 5 years. The allowance is to be set-off against 100% of the statutory income for each year of assessment. In addition, companies including SMEs are also eligible to claim for capital allowance on energy saving and energy efficient equipment.

source: http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1659