By NG MIN SHEN / Pic by ISMAIL CHE RUS

Local small and medium enterprises (SMEs) within the manufacturing sector require a change in mindset, as well as public-private funding, to aid them in adopting new technologies to boost production capabilities.

SME Association of Malaysia national deputy president Ong Chee Tat said where SMEs are concerned, very few are ready for the Fourth Industrial Revolution, or Industry 4.0 — the digital transformation of the manufacturing sector which involves automating manufacturing processes, among others.

“A survey by the Federation of Malaysian Manufacturers found that around 55% and more of SMEs are not ready for Industry 4.0.

“A big part of it is changing the mindset, because many SMEs think foreign workers are cheaper than automation,” he said at the launch of the Industry 4.0 and Digitalisation Conference in Kuala Lumpur recently.

Ong said the SME Association of Malaysia has been in discussion with the government, particularly the Ministry of International Trade and Industry (MITI), for the provision of automation funding for SMEs.

He added that most government ministries do not understand SMEs’ train of thought, where SMEs require economies of scale in order to invest capital in upgrading to automated machinery and subsequently upskilling their workers.

“SMEs cannot afford to spend a few million on machinery first, they must spend as they earn. A big concern for them is the return on capital investment.

“So, we are working to encourage them to produce their own brands and export overseas, to give them economies of scale (for higher returns),” Ong said.

Based on feedback received by MITI from various focus groups, Ong said there are several sectors that require more attention for funding purposes.

“MITI is eyeing the electrical and electronics, medical, biotech, agriculture and forestry sectors at present for funding. We’re looking into how to increase awareness and create a funding ecosystem for SMEs. There must be a public-private partnership for prosperity,” he said.

He said a special allocation has already been created for companies adopting Industry 4.0, but the definition requires some tweaking in order to accommodate the needs of SMEs.

“The definition cannot be so rigid that you only get funding if you have adopted 4.0. Many SMEs cannot achieve that because they are not fully at 4.0 yet, maybe they have just started, or are at 2.0 or 3.0. The funding should be given to those moving towards 4.0.”

Ong added that the funding could come in the form of grants, double deduction on capital investment, or facilities and special privileges.

He said within the SMEs segment, the estimated 20% that are considered small are the ones most dependent on foreign labour and who need funding aid the most.

Meanwhile, Malaysian Institute of Management CEO Sivanganam Rajaretnam said the local sector is currently in the Industry 2.0 stage.

“Some industry leaders are at 1.5, some at 2.0, some 2.5 and some 3.0. I think we are somewhere in the region of 2.0, but it differs for each party so the opportunity is there for us to bridge the gap. It will take a while, but we are definitely in the right direction.”

Talent Development (M) Sdn Bhd COO Prasanna Sailanathan concurred, not- ing that although there is much work to be done, the emphasis on Industry 4.0 has already begun at the education level, with some poly- technics implementing 4.0 in their syllabuses.

“We need to invest in state- of-the-art facilities for education purposes to upskill and reskill people.

Data analytics is one of the important areas as the nation will require some 20,000 data scientists.

“We’re trying to meet those needs, so we’re looking at different types of certification for different sectors,” she said.