Local SMEs contribution to 2020 GDP is low, says deputy finance minister

The SME segment is a significant growth engine for Malaysia, making up 98.5% of total registered businesses

by HARIZAH KAMEL/ pic by RAZAK GHAZALI

NEXT year’s expected GDP contribution from small and medium enterprises (SMEs) is lower compared to other developed economies, Deputy Finance Minister Datuk Amiruddin Hamzah (picture) said.

SMEs’ contribution to Malaysia’s GDP increased to RM521.7 billion, accounting for 38.3% last year compared to RM491.2 billion or 37.8% the year before.

“At 38.3%, it is not good enough because if we look at developed nations and economies, the contributions to this sector are much higher, we are talking about 60%, 70% and even 80%,” Amiruddin said in his speech at the SME Financing Seminar and Financial Clinics hosted by Bank Negara Malaysia (BNM) in Shah Alam, Selangor yesterday.

The government has since targeted SMEs’ contribution to GDP to rise to 41% next year.

Amiruddin also said it is imperative to ensure that SME contribution to the country continues to grow.

“While the contribution of SMEs has shown good growth, there is still a lot to be done for our entrepreneurs to be comparable to those in developed countries.

“We hope that SMEs will maintain their role in growing the country’s economy and providing employment to the people,” he added.

The developed nations that Amiruddin mentioned are Japan and the European Union, where SMEs are prevalent in both economies with a similar percentage in terms of employment creation, around 70% to 80%.

The SME segment is a significant growth engine for Malaysia, making up 98.5% of total registered businesses. This is the highest achievement since the SME Masterplan was introduced in 2012.

The masterplan’s framework includes increasing business formation, expanding the number of high-growth firms, raising productivity and intensifying formalisation.

Although the GDP grew at a slower pace last year, it still performed well at 6.2% compared to 7.1% the previous year.

This outpaced the country’s overall GDP growth of 4.7%, and SME exports registered a growth of 3.4% in 2018 with contributions to total national exports at 17.3%.

Meanwhile, BNM assistant governor Adnan Zaylani Mohamad Zahid said at the same event that the Malaysian economy remains resilient with a strong financing ecosystem.

“As of October this year, total financing amounted to RM314 billion or 813,000 SME accounts, with funding approval for the first 10 months of this year amounted to RM59 billion to 98,000 SME accounts,” he said.

Various holistic measures and initiatives have been taken to further enhance the financing ecosystem and support SME growth, including encouraging more innovation from financial institutions, improving the efficiency of the financing process, strengthening SMEs’ finances and improving credit guarantee products.

However, some SMEs may have difficulty accessing financing which BNM and other banking institutions are working hard to mitigate.