Source from (The Sun Daily): http://www.thesundaily.my/news/743749
Published: Jun 17, 2013
"There is stiff competition for FDIs. Every country is pushing hard to get more FDIs into their economy. When foreign investments come to Malaysia, they will see how strong and capable our SMEs are. If SMEs are not ready, competing for FDIs would be a big challenge," he told SunBiz in an interview.
He said most Malaysian SMEs are mainly involved in the supporting industries such as manufacturing components, being a contract manufacturer or original equipment manufacturer (OEM).
"As a result, their contribution towards the country's gross domestic product (GDP) is relatively not so high compared with some of the developed countries like Hong Kong, Japan, Taiwan, South Korea and Singapore where contribution from SMEs can be as high as 60%."
Malaysia's SME contribution to the economy is only 32%, Teh noted, adding that this is because few SMEs are involved in high value-added activities.
The government is targeting to increase the SME contribution in terms of GDP to 41% and it is hoped that exports from SMEs can reach 25% by 2020 from 19% currently.
"Only 19% of SMEs are able to venture abroad and one of the reasons could be that most don't have a brand (recognition) as well as (conduct) research and development. Most of the things that SMEs do are subcontracting jobs or OEM."
He said when SMEs want to supply their products or services to businesses abroad, these businesses would rather buy from their local SMEs rather than from Malaysian SMEs.
"Market access is still a big issue for SMEs. Many SMEs' mindset is still fixed on the local market," he added.
With the Asean Economic Community realising the goal of regional economic integration by 2015, envisaging a single market and production base, a highly competitive economic region, a region of equitable economic development and fully integrated into the global economy, Teh said this can be a good opportunity for the business community.
"However, if SMEs are not ready, it's going to be a threat to us. In terms of management, we're still so much behind. We may lack behind in times to come, especially when global business competition is greater. I'm worried that SMEs may be losing out, if they cannot pick up on good management skills."
Teh believes that the biggest challenge facing SMEs is obtaining financing.
"You may blame the SMEs for not supplying enough documents or not showing good (financial) performance but at the same time we're also annoyed by the kind of requirements by financial institutions. It's insatiable.
"Some SMEs are unable to express themselves clearly to the financial institutions and hence the banks don't understand their potential and are reluctant to offer loans to them," he said.
With 17 branches in Malaysia and over 5,000 members, the SMI Association of Malaysia's main purpose is to provide the link between government bodies and relevant agencies to the SME community. On its part, it conducts regular dialogues and meetings with many government agencies.
"Most SMEs are not aware of the government's latest ruling, policy or incentive given to the community so they may come to us. We encourage SMEs to attend our courses and workshops, which are aimed at developing them into better SMEs," said Teh.
He pointed that being a Malaysian SME does have its advantages compared with the other Asean countries.
"Although we're number two to Singapore (in terms of standards), we have bigger land, cheaper cost and we're a multi-lingual society. And if we capitalise on all these, we still stand a good chance.
"But we cannot rest on our laurels. We must keep moving and continue to develop ourselves so that we can be above others in the region. Singapore can be good but in terms of rental, land, cost of manufacturing, they can't compete with us."
SMEs are also faced with the problems of human capital, labour shortage and human resources issues such as the minimum wage policy and new retirement age for the private sector.
He said most SMEs think of human capital development as an expense and something that is short term, forgetting that if they do not invest in human capital, they do not have the efficiency to carry out their day-to-day duties.
"Labour cost has been increasing, so the cost of manufacturing is also getting higher. We need to train our people to be more capable and to opt for automation. This human capital development is important to defray the increasing costs of manufacturing.
"SMEs have to be prepared for the rising cost of labour and they need to factor in that. If they absorb the costs, some SMEs will be running losses as most are in the supporting line. If they don't handle the minimum wage policy well, some SMEs may even go bust."
On the new retirement age for workers from 55 to 60 in the private sector that will take effect on July 1, Teh said this will also translate to higher cost for SMEs.
No comments:
Post a Comment