Economic Stimulus Package No.2

The Prime Minister Tan Sri Muhyiddin Yassin has on Friday, 27 March 2020 unveiled an economic stimulus package known as package prihatin or caring package valued at RM250bil that will benefit all Malaysians.

Of this, almost RM128 billion will be channelled to preserve rakyat’s welfare, RM100 billion to support businesses, including SMEs and RM2 billion to strengthen the economy. Meanwhile, RM20 billion has been announced in the earlier stimulus package.

  1. In the previous announcement, the Government allocated RM500 million to provide a 15% discount on electricity bill in the tourism sector as well as 2% for commercial, industrial, agricultural and household sectors in Peninsular Malaysia beginning 1 April 2020. In addition, the Government together with Tenaga Nasional Berhad will increase the allocation to RM530 million to introduce a tiered-discount with rates ranging between 15% and 50% according to electricity usage with a maximum limit of 600 kilowatt per month. The 50% discount will be given to electricity consumption below 200 kilowatts; 25% for electricity consumption between 201 – 300 kilowatts; and 15% for 301 – 600 kilowatts. This discount will be valid for 6 months beginning with bills charged for the month of April 2020. Meanwhile, the 2% discount announced previously will be still applicable to all households. 
  2. The Government will also introduce the Wage Subsidy Programme to assist employers in retaining their workers. Through this programme, the Government will provide a salary of RM600 per month to every employee for 3 months. This programme is dedicated to workers earning less than RM4,000 and employers experiencing more than 50% decrease in their income since 1 January 2020. Employers must ensure that there is no retrenchment or imposing unpaid leave or forcing a wage cut for the next 3 months after the implementation of the programme.  This measure is estimated to benefit 3.3 million workers with an allocation of RM5.9 billion.
  3. To assist SMEs, including micro-entrepreneurs, the Government and Bank Negara Malaysia will provide additional funds worth RM4.5 billion which covers 5 key initiatives:

    First: Increasing funds to the Special Relief Facility (SRF) for SMEs by RM3 billion bringing the total to RM5 billion. In addition, the interest rate for the entire fund will be reduced from 3.75% to 3.5%.

    Second: Increasing the size of the All Economic Sector Facility fund by RM1 billion to RM6.8 billion to enhance access to financing for SMEs.

    Third: Providing additional funds of RM500 million under the Micro Credit Scheme, to a total of RM700 million for soft loans. The scheme will be administered by Bank Simpanan Nasional at 2% interest rate with no collateral. Loan eligibility requirements are also relaxed to a minimum of 6 months of operation compared to 1 year of operation. Maximum financing amount is also increased from RM50,000 to RM75,000 for each entrepreneur. The initiative is open to all micro-entrepreneurs in all business sectors including child-care centres, taxi and bus operators as well as the creative industry and online traders.

    Fourth: SMEs with business records of less than 4 years can also leverage the BizMula-i and BizWanita-i schemes for financing up to RM300,000 under the Credit Guarantee Malaysia Berhad (CGC).

    Fifth: Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will provide RM5 billion worth of guarantees and increase the guarantee coverage from 70% to 80% for SMEs that face difficulties in obtaining loans.

To assist those affected, the Government will implement following measures:

First: The EPF will introduce the Employer Advisory Services (EAS) programme on 15 April 2020. This service includes options for deferral of payments, restructuring and rescheduling of employer contributions. The measure is expected to provide cashflow to employers which is estimated at RM10 billion, benefitting over 480,000 SMEs and affected companies while securing more than 8 million jobs.

Second: Exempt payment for Human Resources Development Fund (HRDF) levy for all sectors for a period of six months beginning April 2020. This measure is expected to assist the company's cashflow with a total savings of RM440 million;

Third: Empathising problems faced by some 750,000 SMEs, the Government also allows the postponement of income tax instalment payments to all SMEs for a period of 3 months beginning 1 April 2020. This is in addition to the previously announced measures where the Government has postponed tax instalment payments to affected businesses in the tourism sector for 6 months beginning 1 April 2020. For other affected sectors, they are also allowed to revise the amount of income tax imposed in the third, sixth and ninth instalments during the basic accounting period.

As previously announced, to assist SMEs and individuals, the Government welcomes the willingness of banking institutions to offer a 6-month moratorium, conversion of credit card balance to term loans and restructuring of corporate loans. This measure is important to enable the companies to continue to be able to retain employment and immediately resume its business activities. This initiative is worth at least RM100 billion. I am confident this initiative will provide relief to borrowers.

The Government has also agreed that the bank's income from interest or profit from loans or financing involved with the moratorium will only be taxable when the income is received after the moratorium period.

In addition, the moratorium will be extended to loans from TEKUN, MARA and cooperatives as well as other government agencies providing financing to SMEs beginning 1 April 2020.

To assist B40 entrepreneurs and people who lose their jobs, a social financing programme will be introduced in collaboration with Islamic banking institutions, the state Islamic religious council and key implementing partners. Social donations will be channelled in the form of initial capital for micro-entrepreneurs using zakat funds and matched with microfinancing at affordable rates.

The first phase of the collaboration between Bank Islam Malaysia Berhad and the Federal Territory Islamic Religious Council will commence in May 2020. Eligible entrepreneurs will be given training in entrepreneurship and financial management as well as support to develop their businesses.

The Government welcomes the efforts of banking institutions which are willing to restructure repayments of the corporate sector in line with their business performance.

In addition, the Government will also provide a RM50 billion guarantee scheme with a guarantee of up to 80% of the loan amount for the purpose of financing working capital requirements. The scheme will be managed and subject to credit evaluation by Danajamin. The facility is targeted at viable businesses in all sectors facing difficulties due to the COVID-19 outbreak.

The minimum guaranteed loan size is RM20 million per business. This facility will be available for application from 1 May to 31 December 2020 or until the fund is fully utilised.

The Government will focus on domestic investment activities that have high multiplier effects and preserving jobs.

For this purpose, the Government has identified a number of small projects such as improving roads, upgrading dilapidated schools in Sabah and Sarawak, cleaning houses of worship and police stations as well as upgrading tourism facilities that will benefit contractors from G1 to G4 class with an allocation of RM2 billion.

At the same time, the RM2 billion for small projects announced in the previous package will be implemented in April 2020. These projects include infrastructure projects in FELDA and other areas valued at RM600 million, upgrading dilapidated schools in Sabah and Sarawak (RM350 million) and upgrading the Perumahan Rakyat Termiskin (RM150 million).

The Government will also continue the implementation of all projects allocated in the 2020 Budget including ECRL, MRT2 and the National Fiberisation and Connectivity Plan. This is in line with the Government's focus to ensure the sustainability of economic growth.

The PRIHATIN package manifests the Government’s concern for the welfare and well- being of the rakyat. The Government will provide direct fiscal injection of RM25 billion to ease the burden of rakyat and businesses in this difficult economic situation. The strategies and measures that will be implemented are based on current fiscal capability and availability of liquidity in the domestic financial market.

The Government will ensure surplus in the fiscal current account and will not borrow to finance operating expenditure. Almost all of these measures are one-off to ease Federal Government’s financial burden in the medium-term. This is important to ensure the country's fiscal sustainability and debt position. Thus, the Government will need to reimplement fiscal consolidation measures in the medium-term to create fiscal space in the long-term.

Prime Minister Tan Sri Muhyiddin Yasin together with members of the Cabinet and Deputy Ministers have agreed to a 2-month salary deduction whereby it will be channelled to the COVID- 19 Fund. This fund will be used to help the affected people following the outbreak of COVID-19.

In addition, the Prime Minister have also instructed all Ministries to review their budgets to look for savings so that it can be used to meet the medium-term measures to curb the outbreak as well as directed the Ministry of Finance through the Unit LAKSANA to ensure that this PRIHATIN package worth RM250 billion will reach the rakyat swiftly.