The Malaysian Insight

BUDGET 2020 sets a clear direction for the digitisation and global expansion of small and medium enterprises and is generous considering Putrajaya’s financial constraints, said SME groups.

SME Association of Malaysia president Michael Kang called it a pragmatic budget and one of the clearest road maps for SMEs compared with previous budgets, where funding was handed out but without clear expectations or direction.

“Prior to this, SMEs had been at a loss. But the budget for next year has a variety of incentives for SMEs and is clearly on the path to developing digital enterprises and for international expansion,” Kang told The Malaysian Insight.

SMEs collectively contributed 38.3% to gross domestic product (GDP) and Budget 2020 for the sector would boost its contribution in line with goals under the Shared Prosperity Vision (SPV) 2030, Kang said.

Under SPV2030, Putrajaya wants to increase SME contribution to GDP to 50%.

Budget 2020 offers clear incentives for SMEs to improve digitisation and automation, he said. Digitisation and automation are considered a “priority segment” for SMEs under the budget, along with Bumiputera SMEs and export-oriented SMEs.

All these can get better access to financing through a business loan scheme, where the government guarantee on financing is increased from 70% to 80%, while the fee reduced to 0.75%.

“Presently, only 23% to 25% of SMEs use automation in their operating systems. The government’s allocation of RM75 million to promote computerisation and automation will help domestic SMEs to move towards the country’s Industry 4.0 goals,” Kang said.

Another local SME association, Samenta, said Budget 2020 directly addressed SME concerns about transitioning into digitisation.

This was helped with the 50% matching grant of up to RM5,000 per company for subscription to digital services, such as e-POS and e-payroll, as well as matching grants for SMEs in manufacturing and services to automate.

“This would help cushion the costs of digital migration and we encourage all SMEs to take up this grant,” said Samenta’s chairman on policy and government relations, William Ng.

Kang also commended the incentive to reduce reliance on foreign labour by granting SMEs RM300 for every local hired to replace a foreign worker.

This is under the larger “Malaysians @Work” initiative which focuses on women returning to the workforce, spurring employment for jobless graduates and replacing foreign labour with locals.

On helping SMEs gain global market exposure and increase exports, both Kang and Ng welcomed the increase in the market development grant (MDG) where the ceiling per company is increased from RM200,000 to RM300,000, annually.

Each company also gets a higher funding ceiling to participate in export fairs, from RM15,000 to RM25,000, per fair.

There is also a separate allocation of RM50 million to engage in more export promotional activities.

“These are good news for SMEs, who don’t have the funds to gain themselves market exposure,” Kang said.

The budget also focuses on women entrepreneurs with a new allocation of RM500 million in guarantee facilities, and a new RM200 million fund by the SME Bank.

Other incentives include those for Bumiputera SMEs, such as a RM300 million fund by the SME Bank, and another RM445 million to access financing, provision of business premises and training for entrepreneurs through various agencies.

Kang is also impressed with the move increase the amount of micro-loans, for the first time ever, to Chinese SMEs from RM50 million to RM100 million at 4% interest available via Bank Simpanan Nasional.

He said the government’s proposal to increase the minimum wage in urban areas from RM1,100 to RM1,200, adding that this would burden employers, but could perhaps be offset through other incentives. – October 12, 2019.