IT is often said that small and medium enterprises (SMEs) represent the backbone of a country’s economy. According to the Department of Statistics, micro, small and medium businesses accounted for 97% of all businesses in 2023, and 48.5% of the nation’s workforce.
Despite this, Malaysian SMEs have generally been slow to venture into international markets, especially in comparison with counterparts in neighbouring countries including Singapore.
“International expansion is no longer just an option for SMEs seeking steep growth. It’s a necessity,” says Giuseppe Di Lieto, founder of boutique consulting firm Exponasia Growth Partners.
He notes that the domestic economy’s booming growth over the past few decades has afforded ample opportunity for local SMEs to flourish and thrive.
“This success has put Malaysia on the global map, most notably in the export manufacturing sector. However, as key sectors mature and market dynamics evolve, market spaces have become increasingly crowded and competitive.”
Internationalisation is thus crucial for businesses to stay ahead in an increasingly globalised world.
Di Lieto, a seasoned multinational corporation executive and long-time resident of South-East Asia, founded Exponasia Growth Partners in 2014 to help address expertise and resource gaps often faced by SMEs.
Specialising in internationalisation strategies and business development, the firm provides accessible, tailored solutions to small companies that seek effective transformation.
Di Lieto observes that although Malaysian SMEs have already begun expanding beyond domestic borders, this has largely been limited to geographically and culturally familiar markets such as Singapore and Indonesia, with some presence in China and India.
“Large-scale internationalisation has yet to gain momentum,” he adds.
One reason for this lag is the relatively small size of Malaysian SMEs. Medium businesses are best positioned for international expansion because they have better access to funding, talent and resources. However, they only account for 1.8% of micro, small and medium enterprises.
“Additionally, many SMEs are still run by first-generation owners who started from the ground up in the domestic market. Understandably, they are hesitant to take on the risks of internationalisation, which demands a different set of skills, knowledge and networks.”
Limited resources and internal capabilities often prevent such companies from pursuing growth beyond local markets.
SMEs typically function on lean structures geared heavily towards day-to-day operations, leaving little capacity for international expansion. Even when financial resources are available, businesses may be hindered by a lack of strategic expertise and global experience, as most employees are hired for operational roles rather than international market development.
To address the challenge of limited expertise, Di Lieto suggests SMEs look towards external support. “Government trade agencies, business associations and internationalisation consultants can provide valuable resources and guidance to help navigate foreign markets.”
Another approach that is growing in prominence is to use fractional managers who are brought in on a flexible basis to guide strategic initiatives.
“I believe this ‘flexible leadership’ model offers significant value for SMEs with international ambitions but limited access to specialised expertise in-house,” he says.
Beyond these obstacles, Di Lieto opines that Malaysian SMEs are typically characterised by a lower sense of urgency towards expansion abroad. As a result of the domestic economy’s rapid growth over the years, businesses have been able to thrive locally without feeling the immediate need to explore international markets.
“In contrast, Singaporean entrepreneurs recognised early on that growth beyond their city-state’s borders was essential for long-term success,” he says.
“This necessity-driven mindset fostered a culture of internationalisation, equipping businesses with the drive and capabilities to scale globally.”
He stresses that SMEs should recognise the importance of adapting to the evolving economic landscape. “As Malaysia’s economy progresses up the value chain, the traditional model of low-cost, export-oriented manufacturing will no longer be sufficient for sustained growth and prosperity.”
On a broader level, Malaysia can encourage and equip SMEs for international expansion by strengthening access to structural support.
“Trade agencies, business associations, and internationalisation consultants must take a more active role in connecting SMEs with global networks and offering clear market-entry roadmaps,” says Di Lieto.
To further fuel these businesses to expand internationally, government-backed grants and loans should be made more accessible.
Investors and financial institutions should be encouraged to support the growth of high-potential businesses.
Empowering local SMEs to compete on the global stage also means promoting and fostering innovative, internationally-minded leaders, he adds.
“In the short term, the Malaysian SME ecosystem must become more attractive to global talent. In the long term, the education system must evolve to equip future leaders with the skills and mindset needed for international growth.”
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