Malaysian small and medium enterprises (SMEs) are challenged more than ever in view of an uncertain global economy but help is on the way to ensure success in their business endeavours.
To assist such growth, the upcoming SME Innovation Showcase (SMIDEX) 2012 in June will be an opportunity for SMEs to put their best foot forward and present their services and products to the public while engaging in business matching activities with other enterprises. Presently, SMEs account for 99% of total business establishments in Malaysia and are key generators for growth and employment in the country.
Despite the anticipation for this large national event that hopes to encourage more SMEs to be more enterprising, they continue to face challenging times due to the volatile and unpredictable economy that may hinder their growth objectives and potentialities.
The issues that some SMEs are experiencing are rising raw materials and input costs, increasing overhead costs and cashflow restraints, according to a performance monitoring survey by SME Corp Malaysia in 2010 and 2011. “Based on the survey, it showed that 61% of the total 2,582 respondents indicated that the increase of raw materials and input costs are the main constraints in doing business. Their feedback is consistently reported in the three economic sectors that belong to manufacturing, services and agriculture,” explained SME Corp chief executive officer (CEO) Datuk Hafsah Hashim.
In addition, the other problem often encountered by SMEs is to find access to financing and working capital. Hafsah says that because research and development (R&D) usually requires a substantially hefty amount of investments, entrepreneurs do not place much importance to this effort. “The utilisation of technology which is still relatively low poses another problem or constraints faced by the entrepreneurs to move forward,” she adds.
To add to these business trials and tribulations, SMEs also find it difficult to penetrate into the market. “This may be caused by their products that are still weak in terms of packaging and branding which would reflect on the quality of the product itself,” said Hafsah. While it is somewhat satiating to dream of becoming a successful entrepreneur, the reality paints a different picture as it is increasingly difficult to stay competitive in the ever-changing economy.
“Therefore, it is important for an entrepreneur to have sufficient knowledge in the field of their business,” explains Hafsah. In addition, she suggests that to ensure success, entrepreneurs need to possess some of these interpersonal characteristics: Prudent communication skills, the ability to consult wisely and connect with others, efficiency, honesty and sincerity, competitive and innovative, able to take risks yet discerning in certain situations. SMEs also need integrated support from other stakeholders in order to function and thrive to promote a more competitive and sustainable economy.
This reflects the crucial role of SME Corp, which is to progressively facilitate the creation of national champions or home-grown companies that can be regionally and globally competitive to spearhead the economic landscape of Malaysia.
“Going forward, SMEs are expected to play an increasingly important role for Malaysia to make the quantum leap in growth and to achieve a developed nation status by 2020. Growth is expected to be private sector-led and this will require more participation from the business sector, particularly SMEs,” says Hasfah.
At the same time, she explains that SMEs’ role as providing direct and indirect linkage in the value chain will be strengthened, while microenterprises (which form almost 80% of SMEs), will be assisted so that they can participate in the main stream more actively.
The Malaysian SME industry has to keep up with other developing and developed countries as its contribution to the country’s growth domestic product (GDP) has been at a stagnant 32% since 2010, in comparison to some other countries such as China (60%), Thailand (38.9%) and Germany (57%).
In line with the new economic model, that’s to boost the SME’s share in the GDP to develop Malaysia into a high income nation, the SME Masterplan (2012-2020) was introduced to chart the direction and progression of SMEs through six high impact programmes (HIPs).
“It aims to have SMEs contribute 41% in the country’s GDP by 2020,” says Hafsah. The six programmes will also set the pace to increase employment share from 59% to 62% and export share from 19% to 25%.
The plan, that was introduced in November 2011, is divided into two phases to create globally competitive SMEs using four strategic goals: increase business formation (to facilitate business dynamisim through a constant stream of new entrants into the market; intensify formalisation (to promote and incentivise innovation, growth and fair competition; raise productivity of SMEs and expand the number of high growth and innovative firms as they generate a substantial share of employment in the country).
So far, so good, as these kinds of initiatives and incentives show that SMEs in Malaysia seem to have the advantage and support to fruitfully grow their businesses. “We’ve introduced the National Mark of the Malaysian Brand, which is a certification process audited and monitored by Sirim Bhd.
Through this initiative, it is hoped that Malaysian brands are developed not just for the local market, but more importantly, that they are able to penetrate international markets as well. “Some time this year, we will introduce the GoEx Programme under the SME Masterplan which is a programme to offer customised assistance to new exporters and provide support for SMEs venturing into new markets,” explained Hafsah.
While not all local SMEs may be aware of such initiatives, SME Corp hopes to ensure that these businesses are able to receive such information. The organisation had implemented special programmes to promote SME development through various domestic and international conventions, seminars, workshops and technical briefings throughout Malaysia.
In addition, the One Referral Centre was created to provide Business Advisory Services at the SME Corp’s headquarters. Just two years ago, the government successfully implemented 226 SME development programmes worth RM7.1 billion which benefitted 614,242 SMEs.