Biggest Budget Might Not Be Biggest Win For SMEs
BIGGEST BUDGET MIGHT NOT BE BIGGEST WIN FOR SMEs
Government need to simplify and speed up incentive programmes approval process
The Finance Minister tabled the biggest budget ever in Malaysia history on 6 Nov 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. 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.
Increasing Market Demand
- Government Procurement for Malaysian Products / Services – Government had proposed to allocate RM 150 mil for Shop Malaysian Online Programme whilst RM 25 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. Yet, 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. Bumiputera Vendor Development Programme has been able to nurture new and successful bumi 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 1 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 RM 35 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 RCEP which opens up 30% of the global market. “The national macro targets under DKN 2030 is to increase SME contribution to total export value to 30.0% from today’s 17.3%. 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.” say Yap Keng Teck – Managing Consultant of BIZSPHERE. “MATRADE should be allocated with a higher budget to support SME Go Global” he continues.
Capacity and Capability Building
The Ministry of Finance 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.
- Towards IR 4.0 – Government has proposed a budget for various digitalization programmes including RM 1 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. RM 1 bil Industry Digitalization Transformation Scheme may not be their choice or immediate need. They need subsidized investment which only totaling RM 300 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 RM 30 mil intervention grant in year 2020 with max of RM 500,000 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.
- 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 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 6 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 2 months to allow businesses to apply and another 2 to 6 months to get it approved depending on the complexity of the programme.
“SME just can’t wait that long anymore. Many will not be there anymore to receive government assistance in 6 months’ time. In addition, there are a number of programmes which require application processes with different forms and formats. Many SMEs highlighted that they struggle to put in an application not to mention some with no clarity in process.” Say Keng Teck who is also the National Vice President of SME Association of Malaysia.
Our government has been constantly engaging with industry to better understand real SMEs challenges. Yet, SME 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.