Small businesses and manufacturers say they could do with a boost from Budget 2017, to be unveiled this Friday, given the sluggish business environment and the prospect of open competition following recent trade agreements. JOY LEE and LIM WING HOOI report.
GIVEN the current situation of slowing growth, weakening ringgit and rising cost, there is a need for governmental support for small and medium enterprises (SMEs) in terms of funding, exports and the maximising of opportunities available through e-commerce, says Secretariat for the Advancement of Malaysian Entrepreneurs (SAME) chief executive officer Neil Foo.
Foo hopes there will be more financial support for SMEs in the upcoming Budget 2017, which can be channelled through loans and development finance institutions (DFIs).
“We also have to look at the export support for within Asean and the linkages with the One Belt One Road initiative by China. I think that is what we want to look into. And also the e-commerce side,” he says.
However, he notes that it has been a challenging year and there is pressure on the Government’s revenue. Thus, it is hard to tell what kind of goodies will be available for SMEs next year.
In the revised Budget 2016, the Government had increased funding by RM6bil to state-owed DFIs and venture capital funds to provide financing to SMEs and startup companies.
At the recent SMEBiz Think Tank conference, Minister in the Prime Minister’s Department Datuk Seri Dr Wee Ka Siong assured businesses that there would be measures to help boost SMEs.
“I’m sure the Government will come up with incentives to spur or stimulate more economic activities for the SMEs,” he said.
According to Wee, the Government would continue to support SMEs as these companies make up more than 98% of all businesses in the country.
“It has become our collective responsibility to play our own roles in making sure SMEs continue to share in our combined wealth-creation, achieve excellence and be export-ready in their own right,” he added.
Datuk Michael Kang, president of the SME Association of Malaysia agrees that allocating grants for export promotion and capacity-building activities will be vital in these challenging times.
“SMEs would appreciate having grants for their export activities, which could range from branding to packaging activities,” Kang says.
On top of that, Kang says there are many free trade agreements that Malaysia is a signatory of, and as such SMEs should be trained in various aspects to meet international standards. Hence, grants for capacity-building activities such as training would greatly help SMEs as well.
Kang adds that there should be measures to improve the local tourism industry to attract foreign tourists.
“When tourists visit Malaysia, they would naturally spend in our local environment, from trying different foods to visiting local specialty stores,” Kang says.
To boost the local green industry, Malaysia Biomass Industries Confederation president Datuk Leong Kin Mun hopes that there will be more funding available for green SMEs in the form of a Government-backed green VC fund and a provision for Angel Tax Incentive to cover the biomass and green technology sector. This, he says, will serve as a good catalyst to stimulate the growth of innovative green SMEs who do not meet the appetite of the banking system.
Leong notes that the current VC ecosystem has too much focus on the IT sector.
He adds that it would help small businesses in the industry if the scope of the Green Investment Tax Allowance was expanded to include re-investment of existing set-ups and not just for new projects.
“Also, if a Green IPO path is created for companies venturing in green technology commercialisation, it will be a game-changer strategy to transform the development of biomass sector pillared on market-based incentive, like how MESDAQ provided a green lane for ICT companies to raise funds from the capital market previously,” Leong says.
And as Malaysia’s economy move towards high-end, high value-added manufacturing, Federation of Malaysian Manufacturers president Tan Sri Saw Choo Boon is advocating for the extension of the capital allowance (tax breaks) for automation expenditure from Budget 2015. Saw says the validity period from 2017 to 2020 was too short.
“Industries are increasingly looking at investing in automation to increase productivity, enhance efficiency and reduce reliance on foreign workers. For maximum effectiveness, automation of processes needs to be integrated. These are the trends in the Fourth Industrial Revolution or Industry 4.0. As such, automation is quite a long-term undertaking which requires substantial investments,” Saw explains.
FMM also proposes to remove the time bar for the capital allowance incentive or to extend it for another 10-15 years, with the qualifying expenditure increased to RM10mil from RM4mil.
Apart from that, Saw says manufacturers should also benefit from training in lean management practices through a double-tax deduction on expenses incurred in implementing such systems.
A lean management is low-cost and targets low hanging fruits, thus, allowing companies to move gradually to more extensive changes, he says.