The measures announced in the Malaysia Budget 2015 to boost small and medium enterprises (SMEs) are encouraging, but the industry wants to see more foreign direct investment (FDI) to propel its growth, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) says.
ACCCIM SME and Human Resource development committee chairman Koong Lin Loong said Budget 2015 has been a fair one to highlight the needs of various pockets of SMEs, including petty traders.
“But what SMEs really want is more measures to attract FDI into the country,” he said in a phone interview.
“These funding and soft loans are good to help SMEs and encourage entrepreneurship here but to really grow the SME industry, we need more established foreign companies to come in,” he said, explaining that “When these big companies are here, they will need the local services and raw materials, which will create satellite industries and help local SMEs.”
He said while it is crucial to create a friendly business environment for local businessmen, it was equally important to position Malaysia as a strategic hub for foreign companies.
“Many of our SMEs are very small businesses that cannot compete internationally,” he added.
During the Budget announcement, the prime minister also noted that the country’s FDI in 2013 has been, by far, the highest realised investment to date at MYR38.7 billion ($11.9 billion)
To that, Koong said the Malaysian SME industry has the room to grow to cater to more foreign investment.
He added that with China coming in as a business partners in Asean markets, Malaysian must take the opportunity to increase FDI.
Malaysia currently has a joint-venture projects with China including the China-Malaysia Qingzhou Industrial Park in Qingzhou, China and its sister park Malaysia-China Kuantan Industrial Park in Gebeng, Pahang, as well as the Xiamen University’s Malaysia Campus in Sepang.
As for facilitating business processes, Koong said he hoped the government would consider reducing the number of business licenses required and ease the process of hiring labour.
Currently, SMEs contribute 33% to Malaysia’s gross domestic product and the share is targeted to increase to 41% by 2020.
Koong also urged the government to provide guidelines for the implementation of the goods and services tax (GST) in April next year.
“This is urgent as it will help SMEs prepare ahead,” he said, adding that SMEs were especially keen to know about for the double deductions on GST cost.
As for tax matters, Koong emphasised that the government should provide a timetable for SMEs to refer to for better tax planning.
“The tax reduction is the same as last year, therefore we think the government should at least prepare a timetable for until 2017 or 2020 so that SMEs can foresee how much tax will be incurred,” he said.
Among the measures the Malaysian prime minister Najib Razak announced for the SME industry are:
The implementation of SME Investment Partner programme, giving financing assistance in the form of loans, equity or both, particularly at the startup stage. An initial fund totalling MYR375 million ($115.14 million) will be provided for a period of five years, of which MYR250 million ($76.76 million) is from SME Bank and MYR125 million ($38.38 million) from private investors. In addition, MYR10 million ($3.07 million) will be allocated for the Business Accelerator Programme under SME Corp.
To enhance use of new technology, automation and innovation in the development of SMEs, MYR80 million ($24.56 million) is allocated for a Soft Loan Scheme for Automation and Modernisation of SMEs.
Government entrepreneur financing agency, TEKUN has channelled loans totalling MYR3.1 billion ($952 million) to nearly 300,000 borrowers with loan limits of between MYR1,000 and MYR100,000 ($3070 and $307,030). In 2015, TEKUN will provide additional funds of MYR500 million ($153.52 million) which will be distributed as follows: MYR350 million ($107.46 million) is allocated for Bumiputera entrepreneurs to provide financing to nearly 33,000 new borrowers; MYR50 million ($15.35 million) will be allocated to Indian Entrepreneurs Financing Scheme that will benefit 5,000 Indian entrepreneurs; MYR50 million ($15.35 million) will be allocated to the Young Professional Women Entrepreneurs Development Programme that will benefit 5,000 professional women; and MYR50 million ($15.35 million) will be allocated to the Armed Forces Veteran Entrepreneur Development Programme that will benefit 5,000 veterans
To assist SME entrepreneurs from the Chinese community, the government will provide soft loans totalling MYR50 million ($15.35 million), and MYR30 ($9.21 million) million for hawkers and petty traders.
For SMEs in the services sector, the government will also implement the following:
Setting up a Services Sector Guarantee Scheme amounting to MYR5 billion ($1.53 billion) for SMEs in the services sector, with a maximum financing of RM5 million ($1.53 million) together with 70% government guarantee. This is expected to benefit 4,000 SMEs.
Establishing a Research Incentive Scheme for Enterprises (RISE) with an allocation of MYR10 million ($3.07 million) to encourage companies to set up research centres in high technology, ICT and knowledge-based industries.
Reintroducing the Services Export Fund (SEF) totalling MYR300 million ($92.11 million) to encourage SMEs to conduct market feasibility studies and undertake export promotion to penetrate new markets.