Focus Malaysia: Biggest budget not a big win for SMEs

The Finance Minister tabled the biggest budget ever in Malaysia’s history on Nov 6, totaling RM 322.5bil.

BIZSPHERE Brand and Marketing Group (BIZSPHERE) – a SME branding and business consulting company applaud the Government’s commitment in protecting the livelihood of the people and economy.

Overall, there is a lot of allocation for SME financing, upskilling and reskilling as well as some for digitalization.

BIZSPHERE saw the budget as a survival budget to mitigate the present challenges and to balance the importance of life and livelihood.

However, it lacks focus on revitalizing the economy which allows business to be sustainable in the long term.

SMEs face many issues including cash flow and supply disruption. Yet, the greatest challenge for businesses especially SMEs is reduction in demand due to the various movement control orders. It has affected both domestic and foreign demand for goods and services.

Therefore, the Government must into the areas below to rejuvenate our SMEs:

 Increase Market Demand

Government Procurement for Malaysian Products / Services – The Government had proposed to allocate RM150 mil for Shop Malaysian Online Programme whilst RM25 mil to promote Buy Malaysian Products.

These are efforts to support local traders as well as promote ecommerce. It is a great move to promote domestic consumption but the Government may want to be careful on the allocation whereby it supports more of local ecommerce platforms selling products originated from Malaysia only.

The biggest spender in the country is the Government. Government and GLCs should buy products and subscribe from Malaysian SMEs instead of glorifying the quality of foreign products. A minimum of 50% procurement may be? Malaysia is an exporting country with products and services on par with international standards.

SME Vendor Development Programme

Vendor / supply chain development programmes are not a new concept. The programme does not only offer business but also consistent capacity and capability development which leads to greater competitiveness in the market.

The Bumiputera Vendor Development Programme has been able to nurture new and successful bumiputra entrepreneurs. It is timely in this challenging time for the Government to introduce the SME Vendor Development Programme.

For example, InvestKL has attracted over 100 investors to Malaysia over one year and Malaysia mid-tier companies which contribute about 1/3 of GDP will also need to strengthen their supply chain.

BIZSPHERE urges the Government to formulate certain incentives for these so-called “big boys” to support, nurture and develop SMEs to be global players.

Export Promotion and Marketing

It is rather disappointing to notice that the proposed budget only allocated RM35 mil to promote local products via trade and investment mission. Malaysian SMEs need greater market demand. Export is our only way out when the country continues to implement various movement control orders.

In addition, Malaysia just signed the Regional Comprehensive Economic Partnership (RCEP)  which opens up 30% of the global market. So, we need to start branding and marketing now.

It takes time to build a brand and gain market confidence. SMEs will need to be more aggressive in marketing and exploring new markets

 Capacity and Capability Building 

1) The Finance Ministry in the Economic Outlook 2021 Report acknowledged that with significant presence of SMEs in the economy, any crisis will inevitably affect various sectors and overall economic growth. Moving forward, government key initiatives will be to accelerate digitalization, adopt strategic financial planning and enhance brand capability of SMEs.

The Government has proposed a budget for various digitalization programmes including RM1 bil Industry Digitalization Transformation Scheme, RM 150 mil SME Ecommerce Campaign, RM 150 mil SME Digitalization Grant Scheme and Smart Automation Grant and RM 100 mil for Digital Upskilling under MDEC.

Due to pandemic, SMEs already have a number of loans on hand to service. RM1 bil Industry Digitalization Transformation Scheme may not be their choice or immediate need. They need subsidized investment which only totaling RM300 mil which is also extended to micro SMEs.

While the country aims to encourage mass digital economy, it is of great importance to support small and medium size SMEs to gain competitiveness through higher productivity.

Industry4wrd is a great framework but was only allocated with RM30 mil intervention grant this year with max of RM500,000 a company. We need a critical mass of advanced manufacturers. 60 manufacturers embarking into Industry 4.0 will surely not capable of advancing Malaysian manufacturing sector.

2)  Business, Finance and Brand Plan – In general, SMEs are poor in planning. Very few SMEs have a documented business plan. They have accounts but not so much of finance. They have advertising and promotion but not so much of branding and marketing. A lot of incentivized training by the Government are skill based.

There is a need to allocate budget for leadership development. It should not be limited to training but to include coaching and mentoring to be more effective. Malaysia need more SME business leaders.

Simplicity and Speed – Key Factor to Save SMEs 

SMEs hope the budget will be passed without much delay. There is an urgency for the budget to be dispersed and reach the hands of the needy. There is great fear among SMEs that they won’t be able to sustain their business waiting for the promised assistance to reach them.

It is not over exaggerating that it takes up to six months before any of the applications approved.  Very often the relevant government department or agencies will take a month or two to draft out the detail incentive programmes.

Another two months to allow businesses to apply and another two to six months to get it approved depending on the complexity of the programme.

In conclusion, SMEs can only win the battle in this economic crisis if the budget allocation is managed and delivered. On the other hand, SMEs should continue to voice out their concerns through proper channels e.g. surveys so that they can be heard and represented.

 

Covered by Focus Malaysia.