PETALING JAYA: Small to medium-sized enterprises (SMEs) have urged the government to focus on domestic direct investments (DDI) and more business-friendly policies following Muhyiddin Yassin’s announcement of his new Cabinet earlier this week.
SME Association of Malaysia president Michael Kang said new entrepreneur development and cooperatives minister Wan Junaidi Tuanku Jaafar should focus on these areas to encourage the development of SMEs.
“The government needs to do more to attract DDIs,” he told FMT.
Neighbouring countries such as Thailand, Vietnam and Cambodia offer competitive costs, low wages and tax incentives to attract foreign direct investments, and levelling the playing field has long been a priority for local SME owners.
Kang said local businesses need more incentives to invest in Malaysia as there has been a lot of capital outflow over the past two years.
The Small and Medium Enterprises Association (Samenta) meanwhile voiced hope that the Cabinet would help alleviate concerns within the business community, exacerbated by the Covid-19 outbreak and recent political turmoil.
While SMEs in general have seen a decline in business due to the US-China trade war, the Covid-19 outbreak has significantly worsened business confidence, leading to a RM20 billion economic stimulus package announced by the previous Pakatan Harapan government late last month.
Samenta policy and government relations chairman William Ng said the new government should emphasise transparency and the continuation of policy.
“Needless to say, Covid-19 has made the situation critical for our SMEs which are already operating in an uncertain political climate amid razor-thin margins,” he added.
Economist Nazari Ismail from Universiti Malaya’s Department of Business Strategy and Policy agreed that the virus outbreak coupled with the slowing economy would create problems for many highly indebted firms.
However, he warned that relying on government assistance or bank loans would be risky in the long run.
“Any increase in financial assistance would cause more problems for the government in the form of increased government debts,” he told FMT.
Despite the efforts of the previous government, he said, the financial system which he described as “inherently stacked against SMEs” makes it difficult for them to survive.
“Banks want to earn a lot of profit, so they like to give big loans to big corporations.
“As long as the banking system exists and continues growing, the pressure on small firms will always be to grow in order to be competitive.”
SMEs make up almost 99% of the local economy, contributing around 38% of gross domestic product and 66% of the country’s employment.