Biggest budget might not be biggest win for SMEs

BIZSPHERE Brand and Marketing Group (BIZSPHERE), a SME branding and business consulting company applauds 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 digitalisation.

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 revitalising the economy which allows businesses to be sustainable in the long term. 

Small and Medium-size Enterprises (SMEs) face many issues including cash flow and supply disruption. Yet, the greatest challenge for businesses especially SMEs is the 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

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

These are efforts to support local traders as well as promote e-commerce. It is a great move to promote domestic consumption but the government may want to be careful on the allocation whereby it supports more local e-commerce 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, with at least a minimum of 50 percent procurement. 

2. 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 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 million 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 percent of the global market. 

“The national macro targets under DKN 2030 is to increase SME contribution to total export value to 30.0 percent from today’s 17.3 percent. 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.” said Yap Keng Teck, Managing Consultant of BIZSPHERE. “MATRADE should be allocated with a higher budget to support SME Go Global,” he added.

Capacity and Capability Building  

The Ministry of Finance in the Economic Outlook 2021 Report acknowledged that with the 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 digitalisation, adopt strategic financial planning, and enhance the brand capability of SMEs.

1. Towards IR 4.0 – The government has proposed a budget for various digitalisation programmes including RM1 billion Industry Digitalisation Transformation Scheme, RM150 million SME Ecommerce Campaign, RM150 million SME Digitalisation Grant Scheme and Smart Automation Grant, and RM100 million for Digital Upskilling under MDEC. 

“Due to pandemic, SMEs already have a number of loans on hand to service. RM1 billion Industry Digitalisation Transformation Scheme may not be their choice or immediate need. They need subsidised investment which only totals RM300 million, which is also extended to micro SMEs. 

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

Industry4wrd is a great framework but was only allocated with a RM30 million intervention grant in 2020 with a maximum of RM 500,000 per company. We need a critical mass of advanced manufacturers. 60 manufacturers embarking on Industry 4.0 will surely not be capable of advancing the 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 incentivised training by the Government are skill-based. There is a need to allocate a budget for leadership development. It should not be limited to training but to include coaching and mentoring to be more effective. Malaysia needs 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 a 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 are approved. Very often the relevant government department or agencies will take a month or two to draft out the detailed 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 the process,” said 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.

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