Business conditions are likely to remain tough this year, but SMEs will still need to spend on the essentials — talents, professional services, membership fees of business associations, etc — if they are to successfully negotiate the pitfalls and opportunities.
LAST year was a difficult year for small and medium enterprises (SMEs). Many — even the more established ones — had hard time dealing with the challenges brought about by the implementation of the 6% GST in April 2015, as well as the unexpected ringgit plunge and the political instability.
I remember phoning the founder of one major SME in August with the intention of writing a success story. But he said the GST was giving him hell with delays in refunds causing cash flow problem. The fall of the ringgit also forced him to abandon an investment plan overseas. Understandably, he was in no mood to share his tale.
Except for the established export-led industries that sell gloves, furniture and food products in US dollars, many SMEs — particularly those with an import component — had a bad year.
Life may not be any easier in 2016 either because the general economic conditions are not expected to improve.
China, Malaysia’s largest trading partner, is still facing a slowdown. Crude oil prices have fallen to 11-year lows and the rebound in the ringgit may be minimal — if any. The weakness of the ringgit vis-a-vis the dollar will continue to plague Malaysia after the US’s Federal Reserve decided last month to raise rates and might continue doing so into 2016.
But if there is an influx of foreign investments and Beijing decides to invest heavily in Malaysian bonds, things could look up for the ringgit.
On the ground, SMEs will have to contend with the higher cost of doing business when another hike in minimum wages comes into force in mid-2016 as announced in Budget 2016.
The official establishment of the AEC (Asean Economic Community) in December also poses challenges for inefficient SMEs, even if in essence the AEC offers lots of opportunities for SMEs in the wider Asean market with its 625 million people, versus Malaysia’s 30 million.
With the operating environment seen getting tougher and more unpredictable, it seems only the fittest will survive.
To avoid falling on the wayside, SMEs — particularly family-own Chinese firms — need to hire the right professionals to help them move up the value chain and overcome hurdles. Indeed, many SMEs faced difficulties with the GST in April because they refused to pay accountants and tax consultants to help them out.
From my interviews with SMEs, I find many do not hire the right talents to perform tasks that require specialised skills. Apart from not trusting outsiders, they also refuse to pay market price for the services of professionals.
That’s why the websites of many successful SMEs, for example, are outdated. The writing is sometimes incomprehensible to readers. The English is horrible.
In between jobs in May last year, I was invited by one SME to improve its website. While work was about to start, the cash-rich company proposed to stretch payment via instalments. While full payment was made upon completion of work, the company did not leave behind a very good impression.
Then there’s the case of this company which has been planning to list on Bursa Malaysia — for the last 10 years. Due to its reluctance to pay experienced professionals to do the job, it is still shopping around.
In contrast, the Associated Chinese Chamber of Commerce and Industry of Malaysia (ACCCIM), which serves SMEs, stands out because its secretariat is manned by professionals. As a media person, I could not find fault with the ACCCIM at its functions. They are always well organised, and the executives know how to project the image of ACCCIM and its leaders.
Even the toilets in ACCCIM are well-kept. They are so clean and bright that one wonders if one weren’t in the washroom of a four-star hotel.
With the TPPA (Trans-Pacific Partnership Agreement) likely to come into force in two years, it is imperative that SMEs hire professionals to help them understand complex issues and prepare for the future. Like the AEC, the TPPA offers vast opportunities but also poses many challenges.
And to ensure they are up-to-date with the latest developments, SMEs not affiliated to any organisation should now join reputable trade associations, chambers of commerce or SME associations with strong leadership and track record.
Michael Kang, the president of SME Association of Malaysia, says only 10,000 out of 650,000 SMEs in the country are members of the association, even though membership fee is only a couple of hundreds. But non-members often come to him for assistance all the same.
SMEs have to change their mindset now.
They should not be deterred by a yearly membership fee of several hundred ringgit. The benefits they gain in joining a good organisation and getting relevant information and advice far outweigh the money they fork out for the fees.