- Over 80% of companies experienced challenges with communications, connectivity and infrastructure during the Movement Control Order (MCO) period
- Businesses require appropriate incentives and policies to accelerate digital transformation and thrive in the new normal
- Corporate Malaysia and Government need to work together to restore trust and confidence in the public and business realms
Business leaders in Malaysia are focusing on leveraging technology and digital to recover and thrive in the new normal, according to the EY COVID-19 business impact survey of nearly 700 companies, large and listed as well as small and medium enterprises.
Dato’ Abdul Rauf Rashid, Malaysia Managing Partner, Ernst & Young PLT (“EY”) says, “COVID-19 has emerged as a game-changer for digital transformation. Where previous initiatives and programmes to go digital have met with lukewarm responses, particularly from the SMEs, COVID-19 has spurred Corporate Malaysia to accelerate its digital transformation.”
The Movement Control Order (MCO) has revealed that businesses in Malaysia are insufficiently equipped to transition to a more digital-enabled work environment. During the MCO, most companies (83% large and listed companies; 84% SMEs) experienced difficulties with online connectivity and communicating with their suppliers and customers, in addition to issues with infrastructure.
In response to COVID-19 and the restrictions that followed in its wake, businesses have accelerated the adoption of technology. Thirty-seven percent (37%) of SMEs and 32% of the large and listed companies have taken steps to expand or upgrade their technology capabilities. Close to 30% of businesses (30% large and listed companies; 26% SMEs) have also invested in Work from Home hardware and software to ensure connectivity with their employees and improve employee productivity. Clearly, substantially more effort is needed from businesses. They need to step up their digital transformation and adopt technology-enabled processes and systems in preparation for a more digital-enabled environment in the new normal.
Shankar Kanabiran, Malaysia Financial Services Consulting Leader, Ernst & Young Advisory Services Sdn Bhd (“EY”) says, “To support this demand and enable digital transformation, there needs to be significant enhancements to the businesses’ and nation’s digital and communications infrastructure, online connectivity and broadband speed, besides ensuring the stability of the technology infrastructure. About 40% of the respondents have identified better and less costly online connectivity as areas for intervention.”
“The Government can take the lead in such a transformation by transitioning its own processes and operations to be more digital-enabled to handle online transactions, for example, accepting digital documents for import clearances. The increasing need for higher technology capabilities to connect businesses, customers and supply networks is fast-tracking the world into digitalization. Malaysia must not be left behind,” notes Kanabiran.
Financial relief and appropriate policies paramount for recovery
Almost half (48%) of the large and listed respondents and 40% of the SME respondents say that they will need direct government aid in the immediate future to restore financial strength and liquidity in preparation for economic recovery. Then only can they consider investment and development priorities for the new normal.
Nearly half (52% large and listed companies; 48% SMEs) of the respondents have already initiated cost-cutting measures to maintain cashflow and operations. These include deferring capex and payments, managing indirect overhead costs and implementing cost improvement measures. Some have also leveraged the Economic Stimulus Packages. However, businesses say they need more support in the form of financial reliefs from the Government to restore financial strength and liquidity.
According to Kanabiran, “Financial aid, technology grants, incentives, tax reliefs, easing of tax compliance, lower interest rates and extending moratoriums on principal repayments are among some measures sought by businesses. There is also a call for greater flexibility on the part of banks towards businesses impacted by the crisis.”
Over half of the companies (60% large and listed companies; 56% SMEs) have also cited the urgent need for the easing or lifting of the MCO in tandem with other measures in order to resume business operations and relieve financial burden.
Corporate Malaysia and Government to work together
The extent and depth of disruption caused by COVID-19 is unprecedented. It is simultaneously a demand and supply-side crisis that has affected industry ecosystems and consumer behaviors at many different levels. The size of rescue and stimulus packages indicate its enormous economic impact. Against the challenging economic backdrop, rebuilding trust and confidence in the public and business realms is vital to restore economic activities.
“Given the impacts of the pandemic and restrictions on people's lives, jobs, businesses and the wider economy, recovery is likely to be lengthy, challenging and multifaceted. The start of the journey towards economic recovery is contingent on rebuilding trust and confidence in the public and business realms and the deliberate intervention by the Government. Businesses need to work hand-in-hand with the Government to resume operations and kick-start economic activities through well-considered, decisive and effective measures,” concludes Dato’ Rauf.
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About the survey
EY conducted the COVID-19 business impact survey between 27 April and 19 May 2020 to understand the impact of COVID-19 and the Movement Control Order (MCO) on Malaysian businesses and the measures and assistance that businesses need. The online survey involved nearly 700 large and listed companies as well as small and medium-sized enterprises (SMEs) across diverse sectors (61% services; 22% manufacturing; 9% construction; 5% agriculture; 4% mining) and revenue sizes.