Foreign regulation, competition deter local SMEs from going abroad

Malaysian small businesses are falling behind the global average when it comes to participating in international trade, says an ACCA report

By HABHAJAN SINGH

Establishing business networks ranked fourth when Malaysian small and medium enterprises (SMEs) were measured for their participation in international trade activities over the last three years by a global accounting outfit.

At this juncture, the top three areas for Malaysian SMEs are importing, exporting and international supply chains.

In the just-released Association of Chartered Certified Accountants (ACCA) report entitled “Growing Globally”, establishing business networks was the main preoccupation of SMEs in Nigeria. It took the second spot for Singapore and third for Ireland.

On the whole, the report found that the most significant barriers for Malaysian small businesses’ participation in international trade were foreign regulation (42%), competition (29%) and foreign exchange (25%).

“As a trading nation with a relatively small domestic market, Malaysia has to adopt an open trade and investment regime, to promote economic growth and help its small firms internationalise. Consequently, there is a clear incentive for policy-makers to address these barriers,” ACCA Malaysia country head Edward Ling said in a statement.

Overall, the report noted that Malaysian SMEs were falling behind the global average when it comes to participating in international trade, with 29% not participating in any relevant activities.

As a leading member of the Asean Economic Community, Ling said SMEs in Malaysia are hopeful of Asean governments eliminating trade barriers to enable freer trade among the countries.

“It is, therefore, positive to see that Malaysian SMEs appearing to have good access to government support for when they do seek international expansion: More than half (51%) access government advice or support to do so — a much higher proportion than the global average of 39%,” he said.

The report noted that 43% of Malaysian respondents supported a reduction in domestic regulation and licensing requirements as a way to enable more small businesses to participate in international trade, much higher than the global average of 31%.

“While Malaysia has made good strides in boosting its cross-border e-commerce activities, with the launch of its Digital Free Trade Zone in 2017, this data perhaps suggests that future government initiatives should look at a reduction in domestic red tape for small businesses,” he said.

The report also provided some recommendations for small businesses looking to expand their international capability, including embracing cloud technologies, developing the scalability of the finance function, creating a business strategy with global ambitions and identifying where external advice could support internationalisation.

Accountants, or small- to medium-sized practices (SMPs), are seen to play an important role in giving confidence for SMEs to grow globally, from ensuring their compliance with foreign regulatory frameworks, to fulfilment of international tax obligations.

“We leverage on our international networks to help SMEs in handling transfer pricing issues and cross-border tax duties,” said Baker Tilly Malaysia partner Datuk Lock Peng Kuan.

Lock, who chairs ACCA Malaysia’s SMP Focus Group, said SMEs also view SMPs as reliable external advisors in accessing capital markets and external finance in the major capital markets around the world.