Home Property Post MCO & CMCO Impact On Retail, F&B and Other Industries

Post MCO & CMCO Impact On Retail, F&B and Other Industries

Dato’ Seri Garry Chua- President of the Malaysian Retail Chain Association (MRCA)

What in your view will be the impact post MCO and CMCO — with RMCO now in effect? Please share the worst and best case scenarios.

Things will not be good for the next six months. Looking at the Food & Beverage (F&B) restaurant scene post lockdown in Shanghai – they are now only running at about 30% capacity. Even after the lockdown, people will not just come out just like that and they will conserve cash. I predict that it will take at least six months for normalcy to recover. Even Bill Gates said it will take at least 18 months for a worldwide recovery because the Covid-19 pandemic is global in its impact.

In Malaysia, some industries like the glove-making sector is doing well. I believe many retailers and Small and Medium-sized Enterprises (SMEs) will be trimming down their outlets and their overhead businesses especially those with borderline outlets in out-of-reach areas and other not-so-convenient outlets. Even with the subsidies from the Government – some companies are not taking up the offers. For example – “no pay leave” has to be based on labour law. We are not interested to ask anything from the Government in the event this Movement Control Order (MCO) and Conditional Movement Control Order (CMCO) didn’t take place but want to support the Government. The rate this is going however – with the MCO being extended with the CMCO – which has now reached the Recovery Movement Control Order (RMCO) stage will be even more devastating. There’s a survey that was recently done which anticipated that 47% of self-employed businesses entailing property agents, etc. will be out of jobs.

In terms of outlets – 20% to 30% of retailers with many outlets will also close shop. Even the big boys like AirAsia may be able to hold out only some six months. The SME Corp survey shows that 48% of SMEs can’t last for six months while another 46% are estimated to be able to last around six to 12 months – and not longer. In a best case scenario – the International Monetary Fund (IMF) projected that Malaysia will bounce back the fastest and greatest with a Gross Domestic Product (GDP) of 9% rebound for next year in comparison to other South East Asian countries.

What more can be done to stimulate growth in your industry and what more can be done to heal the damage already incurred with RMCO now in place?

The thing is that when there is no income – akin to having no water – one may die within a week. In business, you may own RM100 million priced properties but cannot liquidate them – so it’s a cash flow issue. Even the Government won’t have income tax – so how are they going to sustain the salary of the civil service? So right now, the Government needs to open up businesses with stringent Standard Operating Procedures (SOPs). Singapore and Taiwan have practised social distancing with Taiwan having a successful testing system. Taiwan reacted fast and was effective so they didn’t have a lockdown.

What can be done to cushion the blow following the after effects post MCO and CMCO?

Until today, there is no solid post MCO or CMCO action plan. Yes, they have the Economic Council. At least Thailand is trying to attract more investors so there will be a bit of recovery – either by way of foreign investments or local reinvestments. This could see multinationals reinvesting – either going for higher deficit or by taking a Covid-19 bond. After World War II, many countries took a bond after the war so we should establish a Covid-19 bond. Malaysia has to ask for help. Malaysia has good rapport with many countries which is a good thing. So, Malaysia should capitalise on the good relationships. Palm oil is also an important commodity. Malaysia should ensure that after the lockdown, it must do aggressive exporting, pursue foreign direct investments and address how it can help SMEs as the stimulus Prihatin package is not stimulating at all.

The good thing is the Government is helping the micro SMEs as well as the B40 and M40 groups. But, what about the rest of the SMEs that form 70% to 80% of the nation’s businesses? There must be a sense of urgency and SMEs are here to help the government because if the SMEs don’t survive – the government won’t have the Service and Sales Tax (SST) or income tax revenue and the Bumiputera companies too are suffering.

What do you think “The New Normal” will be? What more can be done to stimulate growth in your industry and what more can be done to heal the damage already incurred?

In facing “The New Normal” – the first thing that is very important is to address health facilities from the Government. Fortunately, the Government has been doing the right thing from day one. Our healthcare treatment is good but general hygiene is poor. So, we must wash hands more often, use the sanitisers and wear masks, etc. All food workers should also be scanned.

Restaurant and coffee shops can’t operate at full capacity. Already, Hong Kong and Taiwan only operate at 50% capacity. But, how will malls provide support? Malls should give retailers some 50% discount. Everybody is affected here so Tenaga Nasional Berhad (TNB) should step in to give 50% rebate for the next six months to help out the retailers. In the retail sector – people will still play it safe so the window period for recovery post MCO and CMCO I think, is about six months. Things will start picking up again after six months so it will take another six months to a year to return to status quo. Bill Gates in fact anticipated some 18 months. The Spanish Flu which lasted from 1918 to 1920 which lasted three to four years affected some 20 million people worldwide. People then didn’t have knowledge and healthcare was not even in its proper place.

Digital shopping will be more permanent. Transactions will go online and while previously, only the Millennials were shopping online, now even online training is rampant. Some countries have stopped the schools and used online teaching instead. You can see all the digital companies such as Alibaba doing very well. Online games and online transactions are aplenty. Here, Grab and Food Panda are doing roaring business. I’m told that they’re making more than 10 times on food delivery. So, we should encourage more delivery services to come to the fore to create increased competition to reduce the cost of delivery. Banks too should be more caring.


 

Jennifer Ong – Founder & CEO if HAPA Group

What in your view will be the impact post MCO and CMCO — with RMCO now in effect? Please share the worst and best case scenarios.

All business owners will not be spared the consequences of Covid-19, whether they helm large or smaller scale businesses. The Food & Beverage (F&B), hospitality and tourism industries are already hard hit by this Covid-19 pandemic. Employers are bleeding and employees are in distress. Despite the drop in revenue, obligations remain, including payments to landlords, utility companies, banks, the taxman, suppliers and not forgetting, wages. The potential percentage of business failures is growing every minute and employees will be out of a job if these businesses fail.

We will witness many businesses shutting down due to depleting cash flow which will cause a huge number of workers being laid-off. The F&B, hospitality and tourism industries face the most dire consequences, with a projected decline in revenue of approximately 83% and no idea as yet as to how long this Covid-19 driven downturn is going to last.

In any event, I think the good thing that will come out of this crisis is the sudden surge of new innovations in the way we do business. The offerings to customers will be a lot more creative and certainly will be technology driven. We will see a great amount of digital transformation taking place in many businesses. This will be the good side of things – the efforts and initiative made by the Government to move towards The Fourth Industrial Revolution (IR 4.0) is now being embraced by most companies, if not all in order to survive this crisis.

What can be done to cushion the blow following the aftereffects post MCO and CMCO?

As this is a “Black Swan” impact to the economy of our country and globally, we foresee it will take at least one year for businesses to recover their strength. Certainly, a long journey is ahead for all of us. We need to build up confidence to the public that Covid-19 is suppressed and we are safe to live with the lifestyle before. Industry players and relevant Ministries will need to work together to promote and support domestic tourism. We need to get people coming out back again to spend their vacation only in Malaysia, eating in their hometown restaurants, visiting Malaysia’s tourist places and buying local products at local stores.

What do you think “The New Normal” will be? How will this impact the nation? Any positive takeaways that can arise from this?

Due to the MCO and CMCO, the virus phobia that have been implanted into every Malaysian will change the way we live. For example, people will tend to takeaway or cook at home during the first

two weeks at the least, to confirm if the spread has finally halted for good. Distance dining will be the new norm after the MCO and CMCO. As such, business owners have to reinvent their business models as fast as they can, and the relevant Ministries must be able to support these new business innovations. Our country will start to move towards I.R.4.0 faster than expected. All the Digital Transformation initiatives implemented years ago will now be embraced by organisations positively.

What more can be done to stimulate growth in your industry and what more can be done to heal the damage already incurred?

The F&B industry will have to have the ability to change the way they do business to stimulate growth for this sector. They can start focussing on food deliveries and distant dining, so to speak.

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