How BIMP-EAGA Countries Are Helping SMEs Survive COVID-19

Date Published
April 30, 2020
A shopkeeper asks customers to always wear a mask when buying from his store. Photo credit: iStock/Kong Ding Chek.

Governments worldwide are scrambling for ways to help small- and medium-sized enterprises (SMEs) that were forced to shut down to prevent the new coronavirus disease (COVID-19) from spreading.

The BIMP-EAGA countries are no exception. All four countries have confirmed COVID-19 cases, which totaled 22,379 as of 27 April 2020 according to the World Health Organization (WHO).

The pandemic has compelled governments in the subregion and other parts of the world to adopt measures to curb the spread of the virus, such as restricting social gatherings and travel, lockdowns, and quarantines. The lockdowns have disrupted businesses and supply chains and suspended the income of many.

In the BIMP-EAGA subregion, SMEs, which make up more than 90% of businesses, are among the hardest hit. Millions of people depend on them for their livelihood. There is much concern over SMEs’ capacity to weather the crisis as cash flows dry up.

Here is what BIMP-EAGA countries are doing so far to help businesses based on various sources (i.e., official announcements, Asian Development Bank, and International Monetary Fund).

Brunei Darussalam

Like other countries, Brunei Darussalam has announced initiatives to cushion the effects of the outbreak on its economy. As of end-March, its stimulus package amounted to 450 million Brunei dollars (about $316 million). Of the amount, B$250 million will finance measures allowing businesses to defer loan payments or restructure loans. This was on top of other assistance, such as letting businesses defer contributions to the employee pension funds and helping them boost worker productivity.

In a notice to banks dated 15 April 2020, Autoriti Monetari Brunei Darussalam, the central bank,  said all affected businesses may seek to defer principal loan payments and ask for a loan restructuring, which may entail waiver of fees and charges and revision of interest rates. Application for the loan relief took effect on 1 April 2020 and ends on 30 December 2020.

Earlier, the central bank said tourism, hospitality/event management, restaurants/cafes, and air transport businesses as well as importers of food and medical supplies may seek to defer loan repayments for 6 months, effective 1 April 2020.

The central bank also waived for 6 months all bank fees and charges (except third-party charges) that are related to trade and for payments of transactions of businesses in the affected sectors. To encourage social distancing and minimize visits to banks, online local interbank transfer fees and charges will also be waived for 6 months. Likewise, the central bank encouraged the public to use digital payment platforms offered by banks and other payment system providers.

Meanwhile, Darussalam Enterprise (DARe), a government body created to help SMEs, has come out with advisories to help SMEs cope with the pandemic, such as crafting business continuity plans. It also launched an online portal that links SMEs with e-commerce platforms, delivery, and logistics service providers. DARe also gives safety reminders and guidelines to keep workplaces clean and safe for workers and customers.

Indonesia

Indonesia came up with a major stimulus package amounting to 405 trillion rupiah ($26.1 billion) in March, in the heels of two fiscal packages amounting to Rp33.2 trillion announced earlier. The more recent package includes Rp255 trillion in additional spending and tax reliefs.

Measures include tax reliefs for the tourism sector; lower corporate income tax rates; support for the tourism industry, such as discount on airfares to 10 tourism destinations; tax compensation for hotels and restaurants; tourism grants; faster processing of value-added tax refunds; suspension of import taxes for selected manufacturing sectors; and credit guarantees.

The government is also granting SMEs tax incentives and credit payment relief. The Financial Services Authority (OJK) has relaxed loan classification and loan restructuring rules for banks to make it easier for companies to seek loan restructuring. Indonesia is also allowing affected businesses under its microcredit program to defer interest and principal loan payments for 6 months.

Apart from the stimulus packages, businesses can expect lower interest rates as Bank Indonesia, the central bank, reduced policy rates in February and March.

Malaysia

Malaysia announced a major stimulus package amounting to 250 billion ringgit ($57.2 billion) in March to finance measures to fight the outbreak, following smaller stimulus packages announced earlier.

Of the amount, RM100 billion will be used to support businesses, including a RM50-billion fund for working capital loan guarantees for all affected businesses.

Other measures include temporary tax relief, grants for micro, small, and medium enterprises, scaled-up wage subsidies to help employers retain workers, and a 25% discount on foreign workers’ fees.

Bank Negara Malaysia (BNM), the central bank, also lowered its overnight policy rate, which can mean lower borrowing costs for businesses.

On 25 March 2020, BNM announced measures to help SMEs, corporations, and individuals cope with the crisis by making it easier for them to restructure loans. Under the new measures, SMEs can seek loan deferment and restructuring for 6 months starting 1 April 2020. The central bank also issued a primer on how SMEs can avail of the loan relief.

Philippines

The Philippines put together a package worth 27.1-billion pesos ($532.8 million) in March to strengthen its capacity to fight the pandemic and provide economic relief to affected sectors.

The measures include support to the tourism industry amounting to ₱14 billion and ₱2.8 billion for the agriculture sector. The government is allocating ₱1 billion in loans to micro businesses and SMEs. It will also continue a program to help businesses find new supply sources and nontraditional markets.

Additional measures include wage subsidies as a way to help small businesses, extension of income tax filing deadlines, credit guarantees for affected businesses, among others.

The Bangko Sentral ng Pilipinas reduced the policy rate in February and March to lower the cost of borrowing. It also approved a package of measures to support micro businesses and SMEs. It eased compliance rules to encourage banks to provide financial relief to businesses by allowing them to restructure loans. The measures took effect on 8 March 2020 and would be in place for 1 year. The Bangko Sentral also pressed banks to waive fees and charges for online banking transactions.