FMM proposes RM2b fund to assist SMEs in ESG journey

by S BIRRUNTHA / pic MUHD AMIN NAHARUL

THE Federation of Malaysian Manufacturers (FMM) is proposing the establishment of a one-stop agency, as well as an environmental, social and governance (ESG) fund of up to RM2 billion to assist small and medium enterprises (SMEs) in terms of affordable financing and resource reference.

Its president Tan Sri Soh Thian Lai said the association recognises the government’s efforts and commitment to create an enabling business environment to develop SMEs into dynamic global players through the implementation and promotion of various programmes.

However, he noted that the fund would be useful for SMEs to kick-start their ESG journey and thus, specific focus to address their needs and build their capacity must continue.

He added that there is also a need for greater adoption of ESG practices among micro, small and medium enterprises as well.

“This is because sustainability and ESG are the latest trending buzzwords.

“From a trade perspective, we are witnessing more and more of our export destinations adopting sustainability practices, with a specific emphasis on ESG compliance, for example, EU’s Carbon Border Adjustment Mechanism, which is expected to kick in gradually from 2023. 

“In addition, investors and financial institutions are also increasingly placing greater importance on ESG elements before deciding where to invest and provide access to financing,” he said during the FMM Entrepreneurship Conference 2022 in Kuala Lumpur today.

Meanwhile, Soh pointed out that the ESG fund should not just cater to certain industries but include all industries that need financing and some government assistance to start implementing their ESG practices right now.

He also noted that the proposed one-stop agency should fall under the purview of the Ministry of Natural Resources, Environment and Climate Change.

“We submitted our proposal to the previous government to establish the ESG Fund for the recent Budget 2023 presentation, but it was not picked up. 

“We will resubmit our proposal and we hope that the new government will consider it,” he said.

According to the data by SME Corp Malaysia, MSMEs are the backbone of the economy, representing 97.4% of overall business establishments in Malaysia.

They contribute over 37% or more than RM500 billion to the country’s GDP and employ close to 7.32 million workforces in 2021.

Commenting further, Soh said the global economy continues to face steep challenges, shaped by the effects of geopolitical tensions, the cost-of-living crisis caused by inflationary pressures, trade flow changes and market uncertainties. 

He also highlighted that the Covid-19 pandemic has changed how we do business with the acceleration of technology adoption being one of the main changes.

“Those that embrace new technology will gain an advantage in terms of business sustainability and resilience, arming them well, as they seize new market opportunities with Malaysia’s ratification of the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership free trade agreements. 

“Business is truly borderless if companies equip themselves ahead with the right tools, regardless of size,” he added.

Soh also stressed that as the RCEP has come into force this year, companies, regardless of size, should take full advantage of the market access offered by 15 countries with a total population of more than 2.3 billion. 

He noted that based on World Bank data in 2020, the RCEP participating countries account for a total of 29.46% of the global population with a combined GDP of US$25.9 trillion (RM114.22 trillion) or 30.64% of the world’s GDP. 

He said it is estimated that the Free Trade Agreements (FTAs) will benefit RCEP members by as much as US$174 billion in real income by 2030.

“Sadly, most SMEs are not aware of the benefits of the FTAs. But we hope that with the increased discussion on export facilities and programmes that could assist SMEs, they will become more export-oriented and innovative,” he said.

Soh added that continued investment in strengthening the awareness and education of Malaysian SMEs will contribute to the development of innovative and productive SMEs in Malaysia.