SMEs need to beef up capabilities


Go beyond: SMEs need to be more innovative in their products, services and processes to ensure they maintain an edge.

AS positive news of vaccine developments become more frequent, businesses are looking forward to borders reopening and the economy slowly coming back to full steam. Many are hopeful that 2021 will indeed be a better year.

But companies shouldn’t be complacent about riding on the recovery wave.

For one, consumer behaviour has changed. In addition, supply chains would have been adjusted, competitors may have gained an edge, customer requirements could have changed and organisations’ needs and wants would have been different.

And with the signing of the Regional Comprehensive Economic Partnership (RCEP) in November, SMEs will have to further strengthen their capabilities to face not just a new business landscape, but also in preparation for a more open market.

The RCEP, a free trade agreement (FTA) between the 10 Asean countries and Australia, China, Japan, South Korea and New Zealand, will present SMEs with the opportunity to tap a wider market to help them recover sales faster.

The trade deal covers about 28.2% of the world’s population and 31.6% of global gross domestic product (GDP) with total trade amounting to US$12.4 trillion.

Notably, there is also a worry that many of our local small businesses may not be able to endure stiff competition from other countries once the RCEP comes into enforcement, possibly in a year’s time.

This is where Socio Economic Research Centre executive director Lee Heng Guie thinks that SMEs need to step up and be more innovative in their products, services and processes to ensure they maintain an edge.

“SMEs are concerned about the level playing field when you open up your market, it may put them in a less competitive position for those who are not that competitive. They are worried that local market share will be eaten away.

“Even before the RCEP, when we talk about China investments into the country, there’s already this concern about supply of cheaper goods coming in from China and edging out our local SMEs.

“But we have to look beyond that. Trade deals are not necessarily fair for everyone. Some may win, some may lose.

“Some sectors may be pushed to be more competitive to be bolder to face the international players. It is time for us to think harder on what we can do to make our products achieve a certain quality and that boils down to innovation, ” he says.

He also urges businesses to embrace digital technologies and e-commerce to have a wider reach in the market.

The Covid-19 pandemic has certainly pushed businesses to start exploring -- if they have not already implemented -- the use of new technology in their operations. For sure, more SMEs are making enquiries on digitalisation and the use of analytics.

According to a survey by the Malaysia Digital Economy Corp, about 20%-30% of SMEs are adopting digitalisation, but many of them are not there yet.

It notes that 90% of SMEs are aware that digital solutions will increase productivity and generate more sales and 54% of them say they have started some form of adoption. However, 18% have yet to do anything.

Most SMEs are focusing their digital efforts on their front-end operations, leaving their back-ends for a later time.

But Lee also expresses concern that many SMEs may fall back into their old ways of doing things once the vaccine is here, particularly for those that have yet to embark on any digitalisation or are only just beginning to look at digital.

“They need to move forward. Once there is a vaccine, they should think about how to prepare for the next level of competition, not

just in the digital sense. With this RCEP coming into play, I urge the SMEs to be bold. We have to open up again.

“Otherwise, some of them will be overly edged out and there will be a long term implication on the long term industrial development of the country. We should grab this opportunity.

“I would advise SMEs to continue to beef up your competitive advantage through innovation and embrace technological development. That is key.

“And we must realise that post-pandemic has heightened the need for businesses to reconsider their supply chain, look at reshoring, near-shoring and rebasing their manufacturing. I think it’s the time for us to capitalise on this as the RCEP will enhance all the members in the regional supply chain, ” adds Lee.

Similarly, International Trade and Industry Ministry (Miti) Deputy Secretary-General (Industrial Development) Datuk Sri Norazman Ayob advises SMEs to upgrade themselves in order to be more competitive.

Although the government has rolled out various assistance and incentives for businesses under the different stimulus packages, Norazman says it is up to the businesses to push themselves forward.

“The FTA like RCEP only opens the door for you. But more importantly is how you plan to take advantage of it. The FTA provides market access in terms of tariff reduction and easing of non-tariff barriers.

“But as we know, there are a lot of factors that go into marketing a good product, like the quality, pricing, after-sales service, functionality and technical features of the product. So apart from looking at the FTA, there are certain things that SMEs themselves have to undertake to upgrade themselves to be more competitive, ” he says.

He urges small businesses to have a regional mindset and to take the initiative to learn and understand the incentives that are made available by the government to take advantage of them.

Miti will also be rolling out outreach programmes in the near future to educate businesses on the RCEP. Norazman encourages SMEs to participate in these sessions to have a better understanding of the trade deal and how they can further benefit from it.

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