Malaysia's debt limit can be raised if necessary, says MIDF Group MD

While Malaysia's debt-to-gross domestic product (GDP) ratio may hit the 55 per cent statutory limit by year-end, the cap is "self-imposed" and can be changed through parliament if deemed necessary for the people's well-being, said Malaysian Industrial Development Finance (MIDF) group managing director Datuk Charon Wardini Mokhzani.

Technically, the legislative body could increase the debt limit but this depended on what it had to say and Malaysia would wait for the decision, he said.

"Technically, we can go higher as the ceiling is self-imposed through an act, where they can change it through parliament (such as increasing) it to 60-65 per cent depending on the needs of the country presently," he said during a webinar on "Surviving and Embracing Malaysia's New Normal" today.

Yesterday, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the country's debt level, currently at 52 per cent, might reach 55 per cent later this year due to measures implemented under the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) and the National Economic Recovery Plan (PENJANA) that were aimed at saving lives and livelihoods as well as stimulating the economy.

According to MIDF, positively impacted sectors in the new normal era are information technology infrastructure, equipment manufacturer, software developer, cloud-based, glove, personal protective equipment, medical equipment, online education provider and e-commerce.

Meanwhile, sectors which are neutral are manufacturing and food processing, while negatively impacted sectors would be retail, food and beverages, tourism, airlines, entertainment and shopping malls.

In reality, MIDF said the outbreak of COVID-19 affected a spectrum of business sectors especially small and medium enterprises (SMEs) which entailed five main clusters of issues on the ground -- pressure on cash flows, loans available but not easily accessible, logistics and port issues, supply chain disruptions and constraints in meeting increasing demand.

Development finance head Azizi Mustafa highlighted that in terms of accessibility to finance, the government had announced close to RM300 billion worth of stimulus packages to help the economy and businesses to continue.

Malaysia has funded these stimulus packages -- the RM260 billion PRIHATIN and RM35 billion PENJANA -- to catapult from economic deterioration.

"(However,) I would say it is kind of impossible for the government to assist all the companies to the fullest, and to reach all the sectors, within the economy.

"The question is which sectors must (the government) go in and help out, which sectors to prioritise. We know it is impossible (to assist all)," said Azizi.

As an example, he pointed to the tourism sector which was the worst-hit sector.

He posed these rhetorical questions: should the government allocate a considerable amount of funds, and how much is sufficient? What happens to sectors that are not being helped or not getting enough help from the government?

Azizi also noted that there were also delivery issues on whether assistance to needy businesses was given fast enough.

Quoting the Ministry of Entrepreneur Development and Cooperatives, he said a survey on the SME situation in the wake of COVID-19 by SME Corp Malaysia on challenges faced in accessing incentives found that 30.1 per cent of the respondents said the loan approval process was not fast and easy.

Other challenges were stringent terms and conditions of loans (37.4 per cent), lack information and unclear procedures on stimulus incentives (29.2 per cent) and need for options other than debt financing (17.9 per cent).

Azizi also pointed out that the take-up rate for various loans provided by the government was only about two per cent; not many SMEs had benefited from these soft loans as well, as merely three out of 10 SME companies took up the incentives.

For micro-enterprises particularly, Prime Minister Tan Sri Muhyiddin Yassin has announced the PENJANA Micro Funding in collaboration with Bank Simpanan Nasional (BSN) and Tekun Nasional for the financing of RM400 million, of which RM50 million will be dedicated to women entrepreneurs.

Looking at micro-businesses, he said micro-credit loans approved by BSN and Tekun Nasional comprised only four per cent out of the 600 micro credit applicants.

On why the low micro-credit loan application numbers, Azizi opined that maybe the banks or financial institutions were being too cautious, or risk-adverse, in giving out loans.

"Perhaps they (the banks or financial institutions) only give loans to clients that they're comfortable with, that they know are good paymasters, or it could be the process of applying the loans are too cumbersome, or the speed is not fast enough, or the (lack of) clarity of the government assistance loans to the businesses," said Azizi, adding that perhaps the banks were still adopting the pre-COVID-19 approaches in terms of credit assessment.

"We need to address some of these issues immediately if we really want to reboot, jumpstart, and shift the gear of the economy so that we can recover faster," said Azizi.

-- BERNAMA