China’s plan for a new Silk Road will require infrastructural investments of US$160bil and will, in time, generate annual trade volume exceeding US$2.5tril. Malaysian SMEs cannot afford to miss out, writes HO WAH FOON.
MALAYSIA’S small and medium enterprises (SMEs) must be proactive in seizing business opportunities generated by China’s one-belt-one-road initiative or risk being phased out from the market, warned a council member of the Associated Chinese Chamber of Commerce and Industry of Malaysia (ACCCIM).
Koong Lin Loong, the chairman of SMEs Committee of ACCCIM, opined that if SMEs did not pay attention to the far-reaching implications of this regional economic development and cooperation initiative by China, they would not only lose business opportunities but also find their markets being undermined or eroded.
This Chinese initiative was announced in 2013 by its top leader, Xi Jinping. One-belt refers to the old Silk Road economic belt linking China and Europe through Central Asia and the Middle East, while one-road refers to the 21st-century Maritime Silk Road to Africa, South-East Asia and the Pacific.
Together, this belt and road plan covers 65 countries and 4.4 billion people. It is projected that infrastructure development alone would bring about investment worth US$160bil, and China’s annual trade volume with the projected belt and road countries would exceed US$2.5tril in a decade or so. Malaysia is one of the countries named and expected to benefit under this plan.
This belt-road strategy will see Chinese companies building roads, railway lines, ports and power grids badly needed in many parts of Asia, Africa and the Middle East. This, in turn, will involve financing that will make the yuan a global currency.
“Most of our SMEs are not well aware of this massive one-belt-one-road economic strategy. They think this is only a macro-programme, and it has nothing to do with them.
“But if they miss this opportunity, they will go nowhere. Their markets could also be eroded as this one-belt-one-road strategy pushes China’s enterprises to come out to these countries to broaden their market reach,” said Koong.
Koong advised SMEs to register their interest with government’s trade and investment agencies such as Mida (Malaysia Industrial Development Authority) and Matrade (Malaysia External Trade Development Corporation), as well as chambers of commerce actively engaging in this area.
Apart from ACCCIM, the China-Malaysia Chamber of Commerce and Selangor Chinese Chamber of Commerce are also leading delegations to China to get firsthand information and look for business opportunities stemming from the belt-road development.
Koong believes that if a Chinese company comes to Malaysia to set up a factory, it will need supplies and services from local SMEs. And the same goes for major infrastructural development project.
“This belt-road initiative will have 10-15 years of economic and business impact on Malaysia,” Koong stressed.
Hong Kong, meanwhile, has projected 30-50 years of impact on the colony and has urged its bankers to focus on Islamic finance as many countries covered in the belt-road map may prefer Islamic financing.
The ACCCIM leader, who is a chartered accountant, added that SMEs involved in the one-belt-one-road projects would not need to worry about financing as they could turn to the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund set up by China alongside the belt-road initiative.
He lamented that “our SMEs are too slow” to respond to the coming business opportunties, which some have described as “gifts falling from the sky once in a thousand years”.
“Malaysian SMEs cannot depend on the local market anymore as 30 million people market is just too small. We must look at Asean, East Asia (China, Taiwan, Hong Kong and Macau) and South Asia. The world is moving East. The mindset of SMEs has to go abroad. In the past, we have missed a lot of opportunities. If this time around they don’t come forward, they will get nothing,” Koong said. He also advised SMEs not to act individually when investing in China. For example, those intending to export halal food to China would do well to liaise with Malaysia’s Halal Development Authority.
“Failure rate was very high in 1993 when people moved into China individually. This time, they should join delegations. They must get a lot of information and identify their business partners. And government agencies must also inform investors when opportunities arise,” said Koong, who was among the 160-member delegation to China recently led by MCA president Datuk Seri Liow Tong Lai for a two-day dialogue on the one-belt-one-road initiave.
As the government-to-government relations between Malaysia and China were strong, Chinese nationals had a deeper trust of Malaysians, hence, Malaysia had an advantage over other nations, Koong noted.
Koong said the Malaysian government, government-linked-companies and embassies must provide the leadership and support to SMEs.
“Our embassy must be manned by people who can think in business terms. Look at Singapore, Thailand and Indonesia. They are all very aggressive in their response towards this China initiative.
“I call upon our government to act instantly and positively before our importance is overtaken by all these countries surrounding us,” he exhorted.
Visa exemption, as well as the ease of getting work permits for Chinese nationals, are issues that the government should act upon now, he elaborated.
“The importance of the economic role of SMEs in Malaysia’s development cannot be ignored as SMEs account for 98.5% of our companies,” said Koong. Under the 2014 definition, firms with annual turnover of under RM50mil and employing fewer than 200 employees are deemed to be SMEs.