China’s New Silk Road initiative, which seeks to connect and develop Eurasia via a network of roads, rail lines and ports stretching from China to Europe, presents a great opportunity for businesses. But it would seem Malaysian SMEs aren’t ready to capitalise on it, reports HO WAH FOON
MANY local small and medium enterprises (SMEs) are not ready to seize business opportunities brought about by the entry of Chinese investments and China’s New Silk Road a.k.a. One Belt One Road (OBOR) initiative, according to a senior official from the Malaysia-China Chamber of Commerce (MCCC).
This is because many SMEs lack unique selling point (USP), are not fast enough to take advantage of market changes, and do not file honest tax returns to the Inland Revenue Department (IRD), said MCCC vice president Datuk Joseph Lim at a forum.
On tax matters, Lim noted that many local SMEs refuse to pay taxes.
Apparently, they have one set of beautiful accounts for themselves to celebrate in private and another set for the IRD showing losses so they wouldn’t need to pay corporate tax.
“If you always make ‘losses’, how are you going to convince investors from China to do business with you? And how are you going to get the banks to provide financing for your projects?” Lim said pointedly.
To compete with other SMEs, Lim said small businesses needed to show that they had unique selling point before they could get a Chinese partner.
“As a SME, I have never dreamt of partnering with any one to develop green energy in Malaysia. Yet, our USP has made it possible,” said Lim, whose Global Green Synergy, a biomass firm set up in 2008, is a beneficiary of the OBOR economic strategy of China.
It is now in a RMB1bil partnership with China’s Elion Resources Group to green the Kubuqi Desert in an afforestation programme.
“Chinese investors only want to work with SMEs that are ready. Many of our SMEs are not ready. When the economy is good, there is a lot of opportunities. But when there is a downturn, you will have to show that you stand out among the herd with your USP,” Lim said.
To illustrate his view of the abundance of opportunities in China, Lim said every year there were 500 activities linked to trade and investment in China, including 30 trade fairs.
Many of these Chinese shows allocate 150 free booths and free accommodation for SMEs from Malaysia, due to the close bilateral relations between the two countries.
“Malaysian SMEs are given preferential treatment in China. What you need to do is to get your own flight tickets and bring your products to the show,” said Lim.
He added that during the annual Malaysia-China Entrepreneurs Conference held either in Malaysia or China, business matching were always done ahead for SMEs with solid business proposals.
“But many of our SMEs do not know how to write business proposals or are too lazy to write one. For this inaction, they miss opportunities.”
Another shortcoming of local SMEs compared to their counterparts in China is that they lack the ability to react to changes and to improvise.
“There are plenty of business opportunities linked to China. But you have to act fast. In the past, it was a ‘big fish swallow small fish’ scenario. But in today’s business environment, it’s ‘fast fish eat up slow fish’. As a SME, you are your own boss. You can change and get ready quickly.
“The choice is yours,” he stressed.
Lim urged Malay SMEs to join MCCC’s delegations to China’s trade shows as there were many opportunities and synergies for halal products due to international recognition for Malaysia’s halal certification.
In fact, there is a Halal Industrial Park in China to help the Malays explore the halal market and business opportunities among the New Silk Road nations.
Datuk Ng Kek Kiong, president of the Asean-China Economic and Trade Promotion Association, noted that many Chinese investments now wanted to enter Malaysia, after the “big boys” had set foot here.
He noted that there had been more interest in the property segment in Malaysia as property investors get “ownership right”, whereas in China you were only entitled to the “right to use land”.
The plunge in the ringgit has also made it cheaper for foreigners to invest in local properties now, and many believe now is the time to enter Malaysia. Under the Second Home project in Malaysia, China nationals — numbering more than 20,000 — are the most numerous among all foreign residents.
In fact, Chinese developers are planning to invest in towns where the proposed Kuala Lumpur-Singapore high-speed train will have stops, according to Ronald Pua, vice president of Malaysia Property Investment Association.
Xia Yao, director of China’s BCEG International, said Malaysia had five favourable factors: it had adopted the British administrative system, it is multi-cultural and multi-lingual, it is an important member of Asean, it is named as a beneficiary under the OBOR initiative, and finally, it is a member of the Trans-Pacific Partnership Agreement.
He said China’s latest official policy was to encourage large corporate groups to guide smaller firms to overseas countries, including Malaysia, to help them explore investment opportunities.