SMALL and medium enterprises (SMEs) play a significant role in the growth of the economy due to their vital contributions towards the GDP, employment and exports.
Last year, SMEs in Malaysia contributed 37.4% to the country’s GDP, accounting for 98.5% of business establishments in Malaysia with a high share of employment at 48%, and an 18% contribution to total exports. It is no wonder that SMEs are considered as the backbone of the economy.
However, important as they are, SMEs are financially more fragile than larger firms — they own fewer assets and cash reserves, and score lower on productivity levels.
Running a business is not easy in any normal circumstances, but in the last few years, the Covid-19 pandemic has made things unbearable for business owners.
It was a time of uncertainty for SMEs who were caught in the eye of the storm fighting for survival. Those who passed the test during the lockdown continues to face the same or new challenges, dampening every little bit of spirit they have left.
The SME sector in the country is facing problems such as labour shortage, rising cost of raw materials, supply disruptions, difficulty in getting loans and lately, higher borrowing costs. Besides, many SMEs are still operating under tight cashflow conditions, which was exacerbated by the long-drawn pandemic. To make things worse, SMEs are facing various headwinds such as the war in Ukraine, lockdowns in China and rising global inflation.
They must also deal with a 25% rise in minimum wage, the increase in electricity tariff earlier this year and the falling ringgit.
The rise in the Overnight Policy Rate (OPR) also dampens growth and expansion, with many SMEs holding back on their expansion plans for 2022 and 2023. This was despite the economy showing signs of recovery in the first half of this year (1H22).
A survey by The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) showed business sentiment has waned with the business community generally taking a neutral view of both economic and business conditions for the 2H22.
Its Business and Economic Conditions Survey (M-BECS) noted that lingering worries about global stagflation, rising recession risks in the US economy and Europe, faster global monetary tightening, as well as domestic issues, have dampened business sentiment.
Already, economic experts are warning of a major global recession around the corner. This is giving business owners cold sweats, wondering how will they weather the upcoming storm when it lands on our shores.
The struggle never ends, but business owners are praying for some miracle to get things back to normal. Or is there such a thing?
Businesses are living in very uncertain times; it seems almost impossible to predict what will come next. Meanwhile, fundamental changes in consumer behaviour and supply chain disruptions have forced businesses to evolve and adapt to a new normal.
But in these uncertain times, business owners seek some semblance of certainty.
Hence, for business owners, the economy ranks as one of the top issues influencing who they will vote for in the upcoming 15th General Election (GE15).
The pandemic has had an uneven economic impact on industries and workers, many of whom are small business owners. It is no wonder their driving issue for GE15 is the economy.
To SMEs, stability is important and that includes political stability. Whilst politicians are jostling for power in the run-up to elections, SMEs are hoping for a stable government. For there can be no stability without a stable government.
Months before GE15 was called, speculation was rife as to when Prime Minister Datuk Seri Ismail Sabri Yaakob would dissolve Parliament. This period of uncertainty caused much anxiety to small business owners as the economy was just picking up and the fear that a snap election would derail any hopes of an economic rebound.
In fact, back in August, former SME Association national president Datuk Michael Kang Hua Keong even urged politicians to call a truce and continue their fight in an election in 2023.
“What businesses want is the stability in government, so that we can focus on overcoming the pandemic and the recovery of the economy. So, if politicians can work hand-in-hand and focus on the recovery, that will really help businesses,” said Kang.
A change in government also means a change in ideological orientation that will lead to uncertainty over the laws and policies which were created by the present government. A new government may amend current laws and change existing policies, which would mean that some of the laws and policies previously initiated may not be implemented by the new government.
The country has been rocked with political instability since 2020 after two PMs and their respective coalitions resigned.
SMEs, as well as foreign investors, are resorting to a wait-and-see approach, eager to see how the new government tackles the many issues that hinder businesses.
Many small businesses face severe long-term challenges. They need their elected leaders to come together and provide targeted relief to the industries and small businesses who have been most deeply impacted.
Leaving SMEs in the lurch, no matter what size they are, is simply unacceptable. — pic TMR
Rupinder Singh is the assistant corporate editor at The Malaysian Reserve.
- This article first appeared in The Malaysian Reserve weekly print edition