Liquidity support critical as SMEs reel from Middle East disruptions

KUCHING (March 30): The stimulus package under consideration should prioritise liquidity support as small and medium enterprises (SMEs) grapple with rising costs and supply chain disruptions due to the ongoing Middle East conflict.

Small and Medium Enterprises Association Malaysia (Samenta) national president Datuk William Ng said global oil prices have breached US$100 per barrel, driving fuel and energy costs to as much as 50 per cent of total operating expenses in some sectors.

Furthermore, shipping delays of up to two weeks, as vessels reroute to avoid the Middle East have further strained cash flow.

He said although some European buyers are willing to renegotiate and absorb higher freight costs, payments are typically only released upon delivery, leaving SMEs to shoulder the financial burden in the interim.

“As such, the stimulus package being considered by the government should focus on liquidity support.

“This would include getting banks to restructure loans for impacted SMEs and provide additional banker’s acceptance (BA) of up to 6 months to exporters to fund higher costs of materials and longer sales cycle.

“We also call for accelerated tax refunds and an expansion of the Syarikat Jaminan Pembiayaan Perniagaan (SJPP) guarantee ceiling to ensure that SMEs, especially those in the manufacturing and export sectors, can get help with working capital without rigid collateral requirements or paying higher interests on unsecured loans,” he said in a statement on Monday.

The association also proposed that the Ministry of Investment, Trade and Industry (MITI) waive charges for Preferential Certificates of Origin (COs). It also highlighted losses incurred by SMEs that had paid for trade fairs in the Middle East and Europe but are now unable to attend due to the conflict.

Further, Samenta expressed hope that the Malaysia External Trade Development Corporation (Matrade) would allow affected companies to claim Market Development Grants (MDG) for such losses without deducting them from their annual allocation, describing these as extraordinary costs with no commercial return.

For longer-term resilience, the association urged the government to introduce additional MDG matching grants to support market expansion into non-traditional regions such as Central Asia, Africa and South America, enabling SMEs to diversify away from high-risk markets.

SAMENTA also called for stronger support from larger companies, proposing that government-linked companies (GLCs) allow SME suppliers to make interim price adjustments.

Similarly, it said MITI should encourage multinational corporations (MNCs) and large firms to offer similar flexibility.

“Many OEM suppliers are locked into long-term contracts that did not account for this sharp, sudden spike in costs. A temporary flexibility in contract pricing is essential to ensure our local supply chain doesn’t collapse under the weight of these external shocks,” added Ng.

To avoid long-term dependency, he stressed that support measures should be outcome-based, including encouraging digitalisation of supply chain tracking and shifting towards Asean-based suppliers to reduce reliance on volatile routes.

The stimulus package should also provide incentives for energy efficiency, including grants for solar adoption and automation, to help SMEs reduce structural costs over time rather than relying on short-term subsidies.

Beyond government measures, SMEs were urged to review their operations to reduce costs, including adopting flexible work arrangements for administrative functions to lower energy and overhead expenses.

“If tighter cash flow is expected, SMEs must be proactive and meet their bankers as soon as possible to discuss the restructuring of loans or guarantees before the situation becomes critical,” he said.