THE export market is an area of growth that SMEs should look into in order to widen their market base and boost economies of scale.
International Trade and Industry Minister II Datuk Seri Ong Ka Chuan noted that the potential that SMEs can tap into in the region is vast.
“SouthEast-Asia is a game-changer. In the past, this region was not appreciated because of political instability. So there was not much interest from countries like the US.
“But now it is an important market. And they are coming in,” said Ong.
He explained that while the country was mainly producing old aircraft in the past, large producers like Boeing has set up maintenance, repair and operations centres in the region to service the market here.
“This really shows a change in the situation. All the new aircraft that are being purchased are for the Asia Pacific countries. For the next 20 years, Airbus has to deliver 10,000 aircraft to Asia,” he said.
Additionally, the China growth story still has its appeal.
Note that in 2016, car sales in China topped 28 mil, which is higher than the combined sales volume of the US and the Korea and Japan markets.
“That has created a very big market, a lot of innovation, a lot of new ideas, a lot of entrepreneurs and a lot of people looking at developing other types of cars,” he said.
This development presents SMEs with an opportunity to grow their export market by supplying to large players that are coming into the region or to countries that are booming.
Malaysia has been enjoying strong export growth over the last few years thanks to a favourable currency and a solid manufacturing sector.
Note that in 2016, Malaysia achieved total trade of RM1.485 trillion, an increase of 1.5% from the previous year. Export grew at about 1.1% to RM785.93bil while import grew around the same rate to RM698.66bil.
Trade surplus for the year stood at RM87.27bil.
While this demonstrates a strong performance, Ong pointed out that 2017 showed an even better performance.
“Up till November 2017, we have already achieved RM1.622 trillion in trade, an increase of 20.8%,” he said.
Export for the 11 months was at RM856.05bill, an increase of 20.4% from the same period in the previous year, while import rose 21.2% to RM766.07bil.
“This is indeed very encouraging growth,” Ong added.
Ong also highlighted that products and services exported from Malaysia has changed over the years.
In the 1960s, commodities made up about 70%-80% of our export. In 2016, 82.2% of export, equivalent to RM646bil, came from manufacturing. The electric and electronics (E&E) sector made up 36.6% of manufacturing.
Meanwhile, commodities and agriculture products, including palm oil and crude petroleum, only added up to 17.2% of total export.
Ong said this was due to a stronger downstream ecosystem that has been established in Malaysia.
For example, back in the days, Malaysia mainly exported rubber and palm oil. Today, the palm oil industry has moved downstream into oleochemical products and Malaysia has also established a name for itself as a top rubber glove exporter.
However, Ong said Malaysia’s economy needs to transform further.
“This is particularly so for the SMEs. We have relied on low quality value-add for some time. We need to look at high quality value-add.
“You need to value-add to grow so that we can transform to a higher value chain, and that will help us move towards becoming a high-income nation. We can’t just say that we will reach high-income nation status by 2020 and not do anything to get there. We need to do our R&D,” he said.
For the first 11 months of 2017, manufacturing made up an even bigger portion of export. The segment contributed 82.1% or RM703.08bil to exports, with E&E making up 36.7% of manufacturing.
Ong also noted that this increase was due to the advent of Industry 4.0, which gave Malaysia a wider market to supply E&E components to.
Ong urged SMEs to look at the opportunities that are available to them with the dawn of Industry 4.0 in the region.
He emphasised that SMEs are a catalyst for Malaysia to move towards becoming a high-income nation by 2020. Hence, the contribution of the SMEs plays an integral part to the growth of the economy and supporting them is key to the growth of the nation.
At the moment, some 98.5% of businesses in Malaysia are SMEs, with the majority of them being in the services sector, particularly in the wholesale and retail segment. This is followed by the manufacturing, construction, agriculture and mining and quarrying sectors
In 2016, SMEs had contributed 36.6% to Malaysia’s GDP, 65.3% to employment and 18.6% to export, said Ong.
“The outlook for SME performance in 2017 is expected to be better with growth of between 5.5% and 6%,” he said.
“Their contribution plays an integral part in the progress and development of Malaysia in our country’s aim to becoming a high-income nation as well as to be a strong contender in the global economy.
“For the SMEs, we are trying to support them to go international. We hope to set up automotive centres to produce parts for the China market. This is part of a concerted effort that we are looking into and this is also an area that SMEs can look into.
“The government currently and will continue to provide support in terms of services and information through our agencies in MITI where SMEs can continue to gain access to markets with export potentials. It is with this that I believe that Malaysia would be able to come out as a highly competitive and strong economic powerhouse,” he added.
Ong also lauded private sector efforts such as The Star Outstanding Business Awards (SOBA) which help SMEs benchmark their performance against the industry to help them grow beyond their boundaries.
“Quality awards such as SOBA not only recognises the role and contributions of these outstanding businesses but also provides a healthy and competitive environment for them to continue growing their businesses. Competition generates ideas and innovation, both of which are essential in making a business successful,” he said.