The Malaysian Bar calls on the Government to look into the plight of small and medium enterprises (“SMEs”), which also include many law firms. The nationwide Movement Control Order (“MCO”) imposed by the Government from 18 March to 14 April 2020, with the aim of curbing the spread of COVID-19, has impacted national commerce and the economic feasibility of SMEs across the board. These include the majority of law firms in Malaysia.
The imposition of the MCO on the nation has also led to potentially ruinous consequences on the economy. In light of this, the Government announced a stimulus package — the PRIHATIN Rakyat Economic Stimulus Package (“PRIHATIN Package”) — reportedly worth RM250 billion, set “to benefit everyone”.1 However, upon examination, it appears that the PRIHATIN Package might only be beneficial for B40 citizens, and also for a sliver of the M40 group. The provisions made for law firms are wholly insufficient. The domino effect of the MCO period on the economy requires much stronger support from the Government in bolstering law firms. There are liabilities to meet, as well as salaries and bills to pay. Even prior to the MCO, several legal firms were already facing dire financial situations, and have had to dip into their reserves.
The Malaysian Bar would therefore welcome additional funding, as a special relief facility for law firms, instead of the existing mere offerings of further options for increased debt burdens. Initiatives such as microcredit schemes and loan deferments, will not do much to help law firms in the long run. It is unreasonable to expect law firms to take on such debts without the necessary sustainable income. The Malaysian Bar also urges the Government to instead provide interest-free grants and special funds for law firms, and calls on the Government to persuade the Central Bank or Bank Negara Malaysia, as well as financial institutions, to waive or reduce interest rates on loans, for the relevant duration of the loan deferments. The Government is also urged to consider subsidising 50 to 80 per cent of law firm staff salaries.
Further, as the MCO period continues to affect the cash flow of law firms, the Malaysian Bar calls on the Government to either provide for an extension on the submission and payment of income tax beyond 30 April 2020, or to do away with tax instalment payments (“CP500”) for the year 2020, instead of the option for deferment offered as part of the PRIHATIN Package. The Malaysian Bar notes that the PRIHATIN Package makes provision for the deferral of payments, and the restructuring and rescheduling of employer contributions. However, the Malaysian Bar also calls on the Government to look into reducing the allocated percentage of employer contribution to the Employees’ Provident Fund (“EPF”). A balance must be struck between providing for business owners as well as employees, in protecting and defending the economy from a crisis.
The Bar Council, with its own limitations, is trying to reach out to Members of the Bar with assistance in any way possible during this daunting period.
The Malaysian Bar urges the Government to support SMEs and law firms, as they form the lifeblood of our national economy. It must be emphasised that the purpose of an economic stimulus package, is to stimulate an economy that is severely strained. It is not about bailing out a business but about helping out people that rely on that business. The Government must do so by assisting law firms in maintaining sustainable businesses, through creating opportunity and providing incentives. Such support for law firms will spur a revival of the economy, through the revitalisation of other business operations and sectors that rely on legal services.
Salim Bashir
President
Malaysian Bar
30 March 2020
1 “PM’s full speech on Prihatin Economic Stimulus Package”, New Straits Times, 28 March 2020.