Wednesday, 29 July 2015

SMEs – How can we help the Ant-Man of our Economy?


We have big expectations for small and medium enterprises (SMEs) in Malaysia.  SMEs are estimated to contribute the following to the economy by 2020, if the implementation of the SME Masterplan 2012-2020 is successful:
  • Share of GDP will increase to 41%
  • Share of employment will increase to 62%; and
  • Share of exports will increase to 25%.
Just because we’re small doesn’t mean that we don’t pack a punch.
Image Credit: www.geeksofdoom.com


However, a recent statement made by SME Corporation Malaysia chief executive Datuk Hafsah Hashim on SMEs not registering due to fear of high registration costs and attracting higher tax rates[1] highlights the need for extra aid for these smaller businesses. As such, this article attempts to shed some light on some of the bodies/organisations that are involved in development of SMEs in Malaysia.

Bursa Malaysia

Bursa Malaysia recently clarified the listing requirements on the ACE Market, an alternative sponsor-driven market designed for companies of all business sectors. Some of the more noteworthy clarifications are:
  • The listing of companies on the ACE Market will be based on meritocracy. Loss-making or low-profit companies are allowed to list if they can demonstrate certain qualitative factors (i.e. a plan to improve their financial situation, a strategy to revive the business, etc).
  •  The role of independent advisers is extended to corporate finance professionals. Prior to this, only licensed investment banks were allowed to be independent advisers.
  • Bursa Malaysia will also provide free pre-initial public offering (IPO) consultation for companies that are planning to list on the ACE Market.
  • The obligations regarding sponsorship have been relaxed, by removing the requirement for sponsors to approve public documents and allowing a change in sponsors without the Exchange’s approval.

Securities Commission Malaysia

The Securities Commission Malaysia (SC) announced on June 11 that six equity crowdfunding platforms have been allowed to operate in the country. On February 11, the SC released guidelines that regulate ECF in Malaysia, which was discussed previously. Equity crowdfunding is based on the concept where an unlisted company seeks equity investments from many individual investors, usually via the Internet. It provides an alternative for SMEs as it is less restrictive and time-consuming compared to the usual methods of angel investment and venture capital.

ASEAN

Having Malaysia as a member of ASEAN may prove to be advantageous for SMEs. In the inaugural ASEAN SME conference held on 28 May 2015, the Governor of Central Bank of Malaysia, Dr Zeti Akhtar Aziz highlighted the benefits:

  •  Lower regulatory barriers when trading within ASEAN – Measures such as standardisation of trade procedures and removal of trade and non-trade tariffs may reduce the barrier of entry to foreign markets. By leveraging on each country’s competitive advantage, it may also promote the creation of regional supply chains. It is hoped that this will promote greater economic and financial linkages between ASEAN countries.
  •  The implementation of SME-specific policies – The implementation of the regional internship programme had assisted SMEs in seven ASEAN countries to enhance the skills of their employees through structured staff exchanges and workshops. Another example would be the launch of ASEAN Marketplace which aims to be a one-stop centre for SMEs that plan to establish regional presence. It aims to facilitate access to the ASEAN markets and potential collaboration between SMEs across the region.
  • Opportunity to tap into ASEAN strategic linkages – ASEAN as a whole has entered into trade agreements with other developed and emerging countries. As such, by taking advantage of these agreements, ASEAN SMEs have a wider range of business opportunities.
MaGIC

SMEs can collaborate with the Malaysian Global Innovation and Creativity Centre (MaGIC). Launched in April 2014, the organisation is designed to be a one-stop centre for entrepreneurs. It aims to kickstart the entrepreneurial ecosystem in Malaysia by connecting those with resources (from the community and partners) and those who need it, and develop quality entrepreneurs that are able to forge a strong presence regionally or globally. Some of its programmes include MaGIC Accelerator Program (aims to grow a community of regionally focused start-ups) and e@Stanford (where selected entrepreneurs are sent to US to learn from industry experts Stanford University and network with peers in Silicon Valley).

Many hands make work light

In short, the importance of nurturing these small businesses is blindingly obvious, given its potential to contribute to the country’s economy. The SME Act, which is currently being formulated, proves that the industry is becoming important enough for regulation. With the rise of awareness on the importance of SMEs and with help from varied interested bodies and organisations, the SME scene in Malaysia should continue to flourish.


[1] The Star Online. (2015). SMEs refuse to register business over tax worries, says SME Corp. 20 July.

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