SMALL and medium-size enterprises (SMEs) form an integral part of the Malaysian economy as they contribute 38% or more than RM500bil to our gross domestic product (GDP).
With 1.15 million of SMEs nationwide, they form 97.2% of the total number of business establishments in Malaysia, employing close to 70% of the country’s workforce.
So naturally when the pandemic hit the economy last year, a majority of them were not spared the repercussions.
Some had problems with their working capital while others just could not afford to maintain their workforce. About 37,000 SMEs were unable to weather the storm and had to close down.
Ensuring that the bulk of SMEs survive and remain sustainable to face the future has always been at the forefront of the Government’s priorities – evident through the multiple stimulus packages that have been rolled out since last year with efforts further intensified in Budget 2022.
For starters, a total of RM14.2bil was made available to SMEs such as through Bank Negara’s special fund, especially the Targeted Relief and Recovery Facility (TRRF), which has been increased by RM2bil.
The TRRF offers a loan size of up to RM500,000 at a rate of up to 3.5% per annum, for a duration of up to seven years including a moratorium period of at least six months.
According to the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) treasurer-general and SMEs committee chairman Koong Lin Loong, there is an abundance of initiatives and assistance that have been rolled out by the Government.
“The allocations for SMEs in Budget 2022 itself may not be enough and we have to understand that this is a budget in a pandemic. We have to read Budget 2022 together with all the other stimulus packages that were rolled out.
“One of the initiatives is the wage subsidy programme. This is the first time in history that the Government is helping the private sector to pay their staff salary. It is still in place today, especially for the tourism industry,” he said.
The Government set aside RM20bil for wage subsidies and this effort is also continued through Budget 2022 for specific sectors to help employers retain their workers and keep their businesses afloat. The SMEs are expected to be the main beneficiaries of this allocation, due to its demographic.
Among other measures that would be instrumental in assisting the SMEs in their recovery are the 0% microcredit loans by Bank Simpanan Nasional and Agrobank for the first six months of the loan tenure; a deferment of income tax installment payment for six months until June 30 next year; a RM100mil matching grant for bumiputera SMEs to explore business opportunities in the aerospace field; and, RM25mil for the Halal Development Corporation to produce more halal SMEs.
Koong urged SMEs to study the Government assistance beyond Budget 2022 as various facilities in the stimulus packages have been extended and some allocations were also increased.
He stressed that there are a lot of avenues for SMEs to explore, including that of non-bank institutions such as SME Corp and Koperasi Jayadiri Malaysia Bhd (Kojadi).
Koong added that a popular measure that has been overlooked by SMEs under the annual budget is the SME Automation and Digitalisation Facility, which offers a loan size of up to RM3mil at a rate of up 4% per annum.
There is also the High Tech Facility which offers a loan of up to RM1mil for working capital purposes or up to RM5mil for capital expenditure or a combination of both – at a rate of up to 5%, including guarantee fee.
These efforts are meant to push for the adoption of digitalisation among SMEs and to support high tech and innovation-driven SMEs affected by the pandemic, which would strengthen Malaysia’s footing in the global value chains and safeguard high-skilled jobs.
While many SMEs have intensified the use of digital technologies due to Covid-19, the sector’s digitalisation adoption is still relatively poor compared to larger corporations – causing a digital divide.
This is at the top of the concern of the Small and Medium Enterprises Association Malaysia (Samenta).
Samenta chairman Datuk William Ng said Malaysia’s Digital Adoption Index stood at 69% as compared to Singapore (87%) and South Korea (86%).
“What’s even more worrying is that our business sub-index for digital adoption stood at 55%, lower than our regional neighbours such as Singapore at 86%, Brunei at 66%, Vietnam at 59% and both the Philippines and Thailand at 57% each.
“It is important therefore, that Malaysian SMEs speed up automation, reduce reliance on manpower and improve the educational level of our next generation of entrepreneurs,” said Ng.
He added that the better integrated the SMEs are to the global market, the quicker the drive will be for them to digitalise.
“At the same time, don’t set the bar so high that our SMEs are discouraged from investing in technology.
“Moving forward, it is important that we allocate the right resources to push our SMEs to adopt technology through more accessible matching grants that cover businesses of all sizes and sectors, and across all stages of digitalisation,” he said.
Ng added that with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) expected to be ratified in 2022 and with normalcy likely to return in 2022, Samenta expects SMEs to continue to do well – provided that the Government can step in to provide relief in the current labour shortage, further reduce red tapes and support SMEs in technology adoption and spell out clear and consistent policies.