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Six Challenges of SME

Ong Chee Tat: During this turbulent time, due to Ringgit, we wanted to invite FDI to come to Malaysia. However, little has been done effectively for the SMEs in Malaysia. 

The Malaysian Ringgit – Navigating Turbulent Times oval debate was successfully organized on 11th October 2015, by the PGRM Socio Economic Development Task Force (Chairman: Dato’ Dr. Cheah Soon Hai).

PGRM party president, YB Dato’ Mah Siew Keong officiated the event with the attendees from the member of PGRM, public and media.

From left to right: Mr. Ong Chee Tat, Prof Dr. Wong Kong Yew, Mr. Madhu Sudan Nair, Mr. Derek Wong, Tuan Syed Abdul Razak Alsagof
From left to right: Mr. Ong Chee Tat, Prof Dr. Wong Kong Yew, Mr. Madhu Sudan Nair, Mr. Derek Wong, Tuan Syed Abdul Razak Alsagof. (Photo provided by PGRM)
The moderator was Syed Abdul Razak Alsagoff and the panel of 4 speakers were:
  • Mr. Madhu Sudan Nair (National President,KLSICCI),
  • Mr. Ong Chee Tat (National Deputy President, SME Association of Malaysia),
  • Mr. Derek Wong (Executive Director, KAC Advisory Services Sdn. Bhd),
  • Prof Dr. Wong Kong Yew (Malaysia Hospitality College)
Mr.Ong Chee Tat_oval debates
Photo: Mr. Ong Chee Tat. (photo provided by PGRM)

Ong Chee Tat: SME got almost 640,000 enterprises. You will surprise that there are so many SME in Malaysia.  But then, a lot of them are micros. Medium are only about 8%, and the rest are actually small.  And you find that SMEs represented the back bone of Malaysia.

In further illustrating the SME contribution to the economy in Malaysia, Ong mentioned  the contribution of SME currently is only 32% to 35%.  “Our target for SME Masterplan by year 2020, is actually 41%. And export to (increase) from 19% to 21% or 25%. Currently, Malaysian SME only contributes 19% in exporting.  In other countries like Japan, Korea or western countries,  the contributions of GDP by SME has gone up to 60% or 70%. Especially during this difficult and turbulent time, due to Ringgit, you will find that, we wanted to invite a lot of FDI to come to Malaysia. However,  little has been done effectively for the SMEs in Malaysia.  If we survey around, majority of them are in the service industry.” Ong further emphasized.
Below is the highlighted excerpt base on the editors’ best acknowledgment on the presentation of Mr. Ong Chee Tat:
There are 6 Challenges of SME:

1. Regulations

Most of the SMEs didn’t registered. They may just start their businesses with a stall on roadside.  These people are not registered. But, as far as SME Corp is concerned, they have registered a lot of Micro businesses. The simple reason is then to have the regulation and licenses issue to these businesses.

2.Finance

Without business registration and licenses with accounting reports, there will be problem in seeking financial assistance from the banks.   There is a lot of micro financing from the banks as well as from the government agencies.  So, please register your own businesses. Some may afraid of the Income Tax and others. But, you have to give back from what is provided.

3.Human Resources

The SMEs are always lack of good human resources.  A lot of human resources are wasted because there is no proper training.

4.Infrastructures

A lot of SMEs do not have proper infrastructure.  Look at own business, maybe micro, small or the bigger one, where the infrastructure is. From very basic infrastructures to market access.   Market access is the most difficult to look for.  When there is market, the rest will fall into places. So, market access is the important thing.

5.Technology & Innovation

This is most important. Regardless of the size of the businesses, there are two very important resources;
  • Human resource which known as human value chain.
  • Innovation. In whatever way, you must be innovative.  Anything that improved productivity, sales that give you better life is already an innovation.

6.Productivity

In relation of productivity vs higher income, as per the 1-2-3 concept, where;

a. 1 means “One half” of the organization. Which mean to reduce manpower by 50%.
b. 2 means when 50% of manpower is reduced, everyone to take up double responsibilities.
c. 3 means “Triple production”
These are necessary as the margin is getting thinner and thinner.  As far as the productivity is concern, Singapore is 4 times the GDP, and USA 7 times compare to Malaysia.  In term of Japan and Taiwan, we are far (below).

 

CONCLUSION

The free trade agreements such as AFTA or TPPA are double edges sword. There are dangers as well as opportunities.  As far as for manufacturing sector, Ong mentioned about Sales & Market, and the back end process.  While the margin is getting thinner with stiff competition,  by then should look back at the processes.  It is not about the front end margin but the saving resulted from the back end processes.  The saving from it will then be part of the profit margin.
“Today economy is a Sharing Economy.  You share your resources, you also remember as an employer, to share your profit, by then only you retain your good employee.” said Ong as the ending remark.

 

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