The COVID-19 pandemic overshadowed some of the year’s biggest events and set well-laid plans into a tailspin. Now, on the brink of a new year, as economies look to open up, the focus is firmly on the future. In Malaysia, as the government eases pandemic-imposed curbs, businesses are hopeful that the year ahead may be one of recovery, but they’re not out of the woods yet.
In November, after a contraction in the third quarter, Malaysia’s central bank announced that 2021 would offer a healthier outlook. Reuters reported. The same month, as the government released a budget-focused around COVID-19 recovery, it projected that the country’s economy would rebound with growth in the new year.
While these indications are positive, Munir Abdul Aziz, managing partner at Wong & Partners, a member firm of Baker McKenzie International, says the mood in Malaysia is far from jubilant.
“While firms are doing their best to respond, the year has been tough. Conserving cash, staff layoffs, or placing employees on no-pay leave are among the ways that businesses are responding internally,” Aziz says, noting they are also increasingly focusing on core business “moving to a line of business for which there is demand in the COVID environment, drawing down on credit facilities and seeking indulgences on obligations wherever they can from lenders and trade creditors” he adds.
In Malaysia, a “pensive and uneasy” mood has taken grip, he says, noting there are concerns that the re-intro-duction of the Conditional Movement Control Order (CMCO) is reversing the “strong bounce-back of the economy” during the Recovery Movement Control Order (RMCO). The real question, he says is how much longer SMEs withstand a continued CMCO lockdown.
Of course, there are also concerns about the longer-term effect of the downturn should it be prolonged. “Supply chains that have taken many years to build may be irreparably damaged”, says Aziz.
But there are some positives. The financial sector remains “largely unaffected” by the downturn.
“If the government is able to get the budget approved, there will be a massive further stimulus in the form of up to 80 billion ringgit [$19.6 billion] being injected in the economy from the withdrawals from employee provident fund accounts of affected members (estimated by the government at 8 million, each of whom is permitted to withdraw up to a maximum of 10,000 ringgit from their accounts),” notes Aziz.
For other businesses, the impact has been mixed, observes Aziz, with affected sectors “in a dire state”, while glove makers and electronic manufacturing services companies “have been well placed and are thriving,” he adds.
As law firms head into 2021, they do so prepared for an uptick in work.
“If the economy continues to recover, we expect all of our practices to reap the benefits. The transactional practices are already seeing an uptick in activity as companies and investors have been able to factor in the impact of the pandemic in their decisions and sensitized their business plans and models to it,” says Aziz.
While from a client perspective, there has also been a realisation that the pandemic affords “not only serious challenges but also major opportunities” he adds, noting there will be a certain element of a fear of missing out “if there are signs of recovery and competitors make moves in an environment when access to financing remains intact.”
“Our advisory practices are helping clients in an environment where regulators are doubling down on enforcement across all areas and especially the revenue authority,” Aziz says.
Going forward, client service will remain a priority. “We’re continuing to build deep and meaningful relationships with our clients and investing in our talent. These priorities will be enabled by innovation, a focus on industry knowledge and service lines, and maintaining and enhancing the profitability of our practices,” he says.
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