Monday, February 22, 2010

Buoyed By Government Aid, SMEs To Perform Better This Year

Spurred by the government’s pump-printing initiatives and special incentives, small and medium enterprises (SMEs) are set to perform better this year, says MALAYSIA SMEs chief executive officer Wayne Lim.

He said the government’s whopping RM67 billion stimulus packages and financial incentives schemes to jump-start ailing SMEs have helped them recoup losses and get on their feet.

He added there were more prospects for SMEs to grow this year following positive pointers of global economic recovery and with the domestic economy expected to do fairly better than last year.

“The domestic economy is indirectly the backbone of Malaysia’s economy to cushion the stifling impact of the global economic downturn,” Lim said after delivering a talk on Opportunities Within Small and Medium Enterprises.

As a growth engine, Lim said the government had rendered SMEs adequate assistance and incentive to help them tide over with the adverse effects of the global economic crisis.

“The scheme, with 80 per cent loan guaranteed by the government and only 20 per cent risk taken by banks, it makes it much easier to obtain loans. This is very good move by the government. In fact, the scheme introduced under the Rm7 billion first stimulus package was snapped up in six months,” he said.

Lim said SMEs needed government backing to empower them to significantly contribute to the Gross Domestic Product (GDP), “In order for SMEs to make meaningful contribution to GDP, they need to expand from a small-scale enterprise into a large corporation.

“As of 2005, SMEs only contributed a paltry 32 per cent to the GDP which is relatively small as compared to 99 per cent SME businesses in the country. As such, SMEs need to be innovative to be successful. They also needs to rebrand. With many SME consultants around, it has become easier to rebrand.

On challenges faced by SMEs to tide over with the world economic crisis, Lim said lack of funds was the biggest hurdle. SMEs, which run business on a small scale, find it difficult to obtain loan particularly micro-financing.

“Some SMEs are not really getting help though many loan schemes and grants are available. They use their personal savings or seek financial aid from their families, relatives and friends to start or develop their business,” he said.

With the establishment of SME Corp, it had made the channel easier to a certain extent to secure loans as all aspects of financial aid are now available under one platform.

Asked whether a third stimulus package was needed to help ailing SMEs, Lim said micro-financing was more pressing than a third stimulus package though many SMEs had benefited from the two stimulus packages.

“There are 600,000 SMEs of which 80 per cent are micro-business. Therefore, it will be better to channel more funds to micro-financing, perhaps RM10,000 to RM50,000,” he said.

On the government’s decision not to lift the ban on the Bangladeshi workers intake to Malaysia, Lim said SMEs should not be too dependent on foreign labour as it would lead to substantial currency outflow.

“The best option is to do away with foreign workers and increase wages to employ locals. This will be a good formula. By adopting this formula, the government can effectively check outflow of billions of ringgit being sent by foreign workers to their families back home,” he added.

- Bernama

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