By Yap Keng Teck, National Vice President, SME Association of Malaysia,
On Nov 6, the Finance Minister tabled the largest budget on record for Malaysia totalling RM322.5 billion. I applaud the government’s commitment in protecting the livelihood of the people and economy. Overall, there is a lot of allocation for small and medium enterprise (SME) financing, upskilling and reskilling as well as some for digitalisation.
We saw the budget as a survival budget to mitigate the present challenges and to balance the importance of life and livelihood but it lacks focus on revitalising the economy which allows business to be sustainable in the long term.
SMEs face many issues including cash flow and supply disruption. Yet, the greatest challenge for businesses is reduction in demand due to the various movement control orders (MCO). It has affected both domestic and foreign demand for goods and services.
Increasing Market Demand
- Government Procurement for Malaysian Products/Services – Government had proposed to allocate RM150 million for Shop Malaysian Online Programme whilst RM25 million to promote Buy Malaysian Products. These are efforts to support local traders as well as promote ecommerce. It is a great move to promote domestic consumption, however, the government may want to be careful on the allocation as it supports more local ecommerce platforms selling products originated from Malaysia only. Yet, the biggest spender in the country is the government. Government and government-linked companies (GLCs) should buy products and subscribe from Malaysian SMEs instead of glorifying the quality of foreign products. A minimum of 50% procurement may be? Malaysia is an exporting country with products and services on par with international standards.
- SME Vendor Development Programme – Vendor/Supply Chain development programmes are not a new concept. These programmes do not only offer business but also consistent capacity and capability development which leads to greater competitiveness in the market. Bumiputera Vendor Development Programme has been able to nurture new and successful bumiputera entrepreneurs. It is timely in this challenging time for the government to introduce the SME Vendor Development Programme. For example, InvestKL has attracted over 100 investors to Malaysia in over a year and Malaysia Mid-Tier Companies which contribute about a third of gross domestic product (GDP) will also need to strengthen their supply chain. I urge the government to formulate certain incentives for these so-called “big boys” to support, nurture and develop SMEs to be global players.
Export Promotion and Marketing
It is rather disappointing that the proposed budget only allocated RM35 million to promote local products via trade and investment mission. Malaysian SMEs need greater market demand. Export is our only way out when the country continues to implement various MCOs.
In addition, Malaysia just signed the Regional Comprehensive Economic Partnership (RCEP) which opens up 30% of the global market. The national macro targets under DKN 2030 is to increase SME contribution to total export value to 30.0% from today’s 17.3%.
We need to start branding and marketing now. It takes time to build a brand and gain market confidence. SMEs will need to be more aggressive in marketing and exploring new markets. MATRADE should be allocated with a higher budget to support SME Go Global.
Capacity and Capability Building
The Ministry of Finance in the Economic Outlook 2021 Report acknowledged that with significant presence of SMEs in the economy, any crisis will inevitably affect various sectors and overall economic growth.
Moving forward, government key initiatives will be to accelerate digitalisation, adopt strategic financial planning and enhance brand capability of SMEs.
- Towards IR 4.0 – Government has proposed a budget for various digitalisation programmes including RM1 billion Industry Digitalisation Transformation Scheme, RM150 million SME Ecommerce Campaign, RM150 million SME Digitalisation Grant Scheme and Smart Automation Grant and RM100 million for Digital Upskilling under MDEC. Due to the pandemic, SMEs already have a number of loans on hand to service. The RM1 billion Industry Digitalisation Transformation Scheme may not be their choice or immediate need. They need subsidised investment which only totaling RM300 million which is also extended to micro SMEs. While the country aims to encourage mass digital economy, it is of great importance to support SMEs to gain competitiveness through higher productivity. Industry4wrd is a great framework but was only allocated RM30 million intervention grant in this year with maximum of RM500,000 to a company. We need a critical mass of advanced manufacturers. Sixty manufacturers embarking into Industry 4.0 will not be capable of advancing the Malaysian manufacturing sector.
- Business, Finance and Brand Plan – In general, SMEs are poor in planning. Very few SMEs have a documented business plan. They have accounts but not so much of finance. They have advertising and promotion but enough of branding and marketing. A lot of incentivised training by government are skill based. There is a need to allocate a budget for leadership development. It should not be limited to training but to include coaching and mentoring to be more effective. Malaysia need more SME business leaders.
Simplicity and Speed – Key Factor to Save SMEs
SMEs hope the budget will be passed without much delay. There is an urgency for the budget to be dispersed and reach the hands of the needy as there is great fear that they won’t be able to sustain their business waiting for the promised assistance by the government.
It is not over exaggerating that it takes up to 6 months before the applications are approved. Very often the relevant government department or agencies will take a month or two to draft out the detail incentive programmes, 2 months to allow businesses to apply and 2 to 6 months to get it approved depending on the complexity of the programme.
SMEs can’t wait that long anymore. Many will not be operating anymore to receive government assistance in 6 months’ time. In addition, there are a number of programmes which require application processes with different forms and formats. Many SMEs highlighted that they struggle to put in an application not to mention some with no clarity in process.
Our government has been constantly engaging with industries to better understand the real SMEs challenges. Yet, SME can only win the battle in this economic crisis if the budget allocation is managed and delivered. On the other hand, SMEs should continue to voice out their concerns through proper channels through surveys so that they can be heard and represented.
Keng Teck is also the Managing Consultant of Bizsphere Brand and Marketing Group