Help businesses stay above the water

Government urged to reduce losses, provide assistance and streamline claim

PETALING JAYA – Climate change is causing floods to occur more frequently, so a long-term strategy for mitigating flood risks will be needed to protect the small and medium businesses (SMEs).

The SME Association of Malaysia stressed the need for the government to take a targeted response, especially after the severe flooding in Sri Muda, Selangor and Klang in Selangor in 2021 caused massive losses in businesses.

Ding Hong Sing, President of the SME Association of Malaysia, highlighted that 60% of factories are located in the state. He also stressed the importance of water irrigation systems in protecting SMEs from damage caused by flooding.

Manufacturing plants are usually insured, but the claims process can be too long for small businesses. Floods can be devastating for companies that export goods. They may lose customers if they stop operations.

In 2021, the severe flooding in the Klang valley prompted the government’s approval of low-interest loans at 2% for RM100,000. This was to assist distressed SMEs. According to Ding, the government could offer streamlined loans, particularly to SMEs affected by flooding.

Ding emphasized the need to simplify the loan process for the affected SMEs, even though the government offered low-interest rates as a way to ease the impact of floods.

He suggested the government offer special financial support to help affected SMEs resume their operations within a week of a catastrophe.

Malaysia’s SMEs account for 98.5% all businesses, and contribute 36.6% to the gross domestic product.

Datuk Ng, president of the Small and Medium Enterprises Association of Malaysia (SMEMA), has asked the government to give clear guidelines to insurers and banks to help speed up the processing of claims related to floods. This should be done within 21 to 30 days.

He said that this would help in the recovery of floods and encourage more SMEs purchase flood insurance.

In flood-prone zones, particularly industrial zones, authorities must have separate disaster management plans to cater for both the public and business. The damage control and recovery tasks for each group are very different. To prevent theft and burglary, for example, patrols of police officers should be sent to industrial and commercial areas. Prioritising the clearance of access to these zones should be equally as important as residential zones.

It could take six months for a factory partially submerged to resume normal operations. It includes cleaning, sanitation and loss detection, employee counseling, financing repairs, re-establishing contract, and obtaining funding for repairs. He explained that insurance can only cover a small portion of the downtime and losses.

Ng says that during the Taman Sri Muda flooding in 2012, reports of looting were made even before the floodwaters receded. This caught many SME owners by surprise.

Many insurers have completed their assessments within 30 days, due to government pressure and the well-publicised flood events.

Banks offered interest waivers or loan repayment moratoriums. In other floods, however, the claims process can last up to six month, and banks have the discretion to grant loan restructuring requests.

Datuk Ali Mydin, president of the Bumiputra retailers association, called for tailored insurance products and increased support for SMEs. These measures are vital in protecting their interests and fostering resilience.

He emphasized the urgent issue of climate changes affecting businesses and SMEs in particular, as well as the need for government intervention to tackle the challenges facing the sector.

Some economists consider insurance an unnecessary expense because of the cost and possible difficulty in claiming payouts. He said that it was important to educate SMEs about financial management. This includes opening bank accounts, maintaining books, and complying with tax laws.

Ameer Ali emphasized the lack of insurance options specifically tailored to SMEs for risks like floods and fires.

He said that the insurance industry should take proactive measures to help SMEs mitigate potential losses.

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