Initiatives and incentives for small businesses a sign of their vital role in the economy
AS Malaysia progresses towards its goal to be a developed high-income nation, there is rising pressure to strengthen the contribution of SMEs to drive growth for the country.
By 2020, Malaysia aims to push SMEs’ contribution to GDP to 41% and its share of exports to 23% from the current 37% and 17.8% respectively.
The SME Masterplan 2012-2020, which includes a structured framework to advance SME development, is one of the many plans drawn up to bring this vision to reality.
Minister in the Prime Minister’s Department Datuk Seri Dr Wee Ka Siong recently said the target set in the masterplan could be achieved if Malaysia were to maintain its SME development pace at 6.7%.
“In the recent period between 2011 and 2015, SME grew at an average annual rate of 6.7%, outperforming the overall average growth of the economy of 5.3%. Currently, 97% of business establishments in Malaysia are SMEs,” he said.
Small businesses, no doubt, play an important role in propping up the nation’s economy.
In a World Bank report, its senior director of global practice on trade and competitiveness Anabel Gonzalez said Malaysia’s transition to a high-income economy will depend highly on SMEs’ contribution to GDP growth.
Regulators are recognising the sector’s importance and are increasingly putting more emphasis on bolstering small businesses across various key industries.
Over the last year or so, regulators have rolled out several initiatives and incentives to encourage the growth of SMEs.
Dr Wee said the Government spared no expense at developing the SME sector, having allocated RM5.88bil this year for 167 SME development programmes.
Prime Minister Datuk Seri Najib Razak had also declared 2017 as the year to promote SME development and business startups in efforts to increase the contribution of SMEs to the country.
In recent years, the Malaysian annual national budgets have also given considerable allocations to the development of SMEs. Various efforts were implemented to facilitate financing and market access for small businesses. Focus was also given to capacity building and talent development.
“Our overall vision is to have globally competitive SMEs across all sectors that enhance wealth creation and contribute to the social wellbeing,” SME Corp chief executive officer Datuk Hafsah Hashim said in a report.
Secondary goals include increasing business formation by 6% on average per year and increasing the number of high growth and innovative firms by 10% per year.
Another recently launched initiative to boost the profile of SMEs was the launch of the Leading Entrepreneur Accelerator Platform (LEAP) Market in July this year.
The new market will provide SMEs with an alternative and efficient fund raising platform and visibility through the capital market where wealthy investors can lend money via the capital market to the SMEs. Trading on the LEAP market is limited to sophisticated investors.
While support for SMEs has been forthcoming, Dr Wee also said the Malaysian Government was pushing to grow local e-commerce capabilities.
Going digital is the new frontier for SMEs as it opens up a wider market for small businesses and their products. SMEs can also utilise digital technology to innovate, increase their efficiency and reduce cost.
Notably, embracing the digital economy also means facing the possibility of stiffer competition.
This will require SMEs to be reskilled, upskilled and to innovate their products and services to ensure they meet international standards.
Regulators advised SMEs not to be complacent in order not to be left behind.
“I urge SMEs to embrace the digital economy and innovate. Those that do not innovate will perish,” Dr Wee said.
Malaysia is not the only country looking towards the small business segment to drive growth.
Fostering SME development was one of the priority areas under the establishment of the Asean Economic Community (AEC) at the end of 2015.
Policymakers noted that AEC will provide a lot of opportunities to the SMEs in the Asean region. However, in order for them to gain benefits from the AEC, there is a need for the SMEs to be better connected, better resourced and better engaged.
Once again, plans and programmes have been drafted and implemented to give small businesses the boost that they need to be able to tap into the vast potential the region has to offer.
Malaysia External Trade Development Corp (Matrade) Asean Unit Director, Raja Badrulnizam Raja Kamalzaman, said the association had eliminated many trade barriers, and trade among the countries should grow further as their economies continued to develop.
Malaysia’s exports have increased after the establishment of the AEC, with total exports to Asean markets rising to RM230.93bil in 2016 from RM213.4bil in 2014.
“Asean governments have been working together to formulate strategies to increase exports of services, especially for SMEs.
“As such, SMEs will have bigger opportunities to penetrate the global market, and are expected to account for 30% of total trade in Asean by 2020, driven by AEC initiatives,” he said.
He also notes that there is a SME Masterplan under the AEC to integrate small businesses in the region and to encourage them to tap each other’s expertise and network to grow.
These developments prove that SMEs really are the bedrock of the economy.
It is really high time that SMEs be given the recognition as various efforts are put in place to strengthen their contribution to the growth of nations.