SME growth in Malaysia: Overcoming ‘long unsolved’ problems to reach the top

SMEs are a crucial pillar of Malaysia’s economy, forming 98.5% of the total establishments in the country. According to the latest mid-term Review of the 11th Malaysia Plan 2016-2020 report, SMEs are expected to contribute up to 41% of the country’s GDP by 2020, and approximately 32 initiatives will be intensified to develop resilient and sustainable SMEs.

Industry professionals A+M spoke to commended the government’s added support for SMEs, with some saying that the SME Master Plan is bringing positive impact to the SME community, while others described the initiatives for SMEs as a “wise move”.

Wayne Lim, group CEO of Malaysia, SME Media Group, said over the past years, SMEs in Malaysia are receiving more assistance from trade and business associations, as well as private organisations. This comes as more parties begin to realise the importance of the SME community. According to Lim, more avenues to access financing instruments allow SMEs to continue operating or growing their business without financial constraint.

Meanwhile, Deric Wong, managing director of local SEO company Locus-T described SMEs as a ready resource for the government to boost the country’s revenue and welcomes government initiatives to grow SMEs’ GDP contribution from 37.1% to 41%.

However, he said this is a “very challenging goal” to achieve as SMEs in Malaysia are currently facing “long unsolved problems” such as shortage of foreign workers, challenges of obtaining a business loan, being unable to attract or retain talents, unclear tax policy and being slow to adopt new technologies. Some SMEs have also been hesitant to step out of their comfort zone. “Until now, there has been no concrete solution suggested by the government to solve these problems,” Wong said.

Wong also pointed out broader factors that could potentially impact the SME community in Malaysia. For example, he said that the country is currently high in debt and witnessed a few mega projects either being kept on hold or cancelled, such as the Kuala Lumpur-Singapore High-Speed Rail, East Coast Rail Line and trans-Sabah gas pipeline.

What can be done to boost SME growth in Malaysia?

In order for the government to succeed in bolstering SME growth, Wong said it needs to have more conversations with SMEs and the small and medium-sized industry (SMI) to understand the challenges they face. Additionally, the government can also assist SMEs by push forth Malaysian products to the global stage and bring on board potential foreign partners to work with local SMEs and encourage technology transfer.

Wong also said it would be useful for the Malaysian government to offer SMEs with business consultations to help them in better decision making, as well as allow local SMEs to participate in mega projects or economic master plans moving forward.

Meanwhile, SME Media Group’s Lim cited productivity, human resource and financing as the three major challenges that hinder the growth of SMEs, and as such, the human capacity development programmes within the SME Master Plan are also important for the growth of SMEs in Malaysia.

To boost productivity and push SMEs towards Industry 4.0, Lim suggested developing a super mobile app specially to assist SMEs in automating their processes. While the cost of building the super mobile app might be exorbitant, it will become extremely cost efficient once it is used by millions of SMEs in Malaysia, much like WeChat which currently has about 500 million users in China.

Lim also described SMEs to be the “biggest talent management and development centres”. This is because fresh graduates tend to prefer working for larger and more renowned companies. Those who are unable to land a job at a large company will settle down with an SME but eventually move on to multinational corporations (MNCs) once they have gained two to three years of experiences.

The larger corporations once again have an added advantage of selecting and recruiting the best talents available, Wong said. He added that this leaves SMEs being unable to recruit and retain talents. “There must be a policy to incentivise and compensate SMEs for helping the large corporations and the country to develop talent,” Lim said.

Reducing trade credit and credit term practice between SMEs and large corporations would be helpful to the SME community. According to a survey by MALAYSIA SME and INTI University, it takes about 95 days for SMEs to be paid when they are offering credit term to larger corporations. Lim is of the view that larger corporations should be paying SMEs more quickly for the purchase instead of demanding long credit terms from their SME suppliers, since the former are financially stronger.

“An act or a policy is required to enforce this since SMEs are in weaker position to demand payment,” he added.

(Read also: What firms can do as PM Mahathir asks Malaysians to be ‘patriotic’ towards local brands)

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