TURNING to automation, improving productivity and swiftly recovering lost ground to regional peers must be the main target of small and medium enterprises (SMEs) in the aftermath of surviving the Covid-19 pandemic, said the Small and Medium Enterprises Association (Samenta) today.

According to Samenta chairman William Ng, SMEs have been crippled by the pandemic, with many enterprises throwing in the towel after suffering from the lockdowns.

Samenta central chairman William Ng said a recent mid-term survey from June 19 to 23 provided alarming results: two out of three SMEs do not see any hope for a recovery in 2021, with 16% expecting their businesses to only recover in 2023.

“The movement control order (MCO) currently in force is particularly devastating to a majority of our SMEs.

“During the first MCO, many SMEs had cash buffers to keep their businesses afloat. However, after over a year of disrupted business, they are no longer in a position to survive on their own.

“Indeed, 30% of SMEs would have run out of cash during this MCO, and if it is extended, many of these would simply close down,” he said in a statement in conjunction with World SME Day today.

In Malaysia, June 26 to July 4 is SME Week.

Looking ahead for SMEs to survive the post-pandemic era, Ng said that a major concern was their low technology adoption.

He added that the digital adoption index in Malaysia was 69% versus 87% and 86% for Singapore and South Korea respectively.

“Even more worrying, our business sub-index for digital adoption was 55%, lower than our regional neighbours such as Singapore (86%), Brunei (66%), Vietnam (59%), Philippines (57%) and Thailand (57%).”

He said it was important to wean Malaysian SMEs off cheap labour, speed up automation and reliance on manpower, and improve the educational level of the next generation of entrepreneurs.

He also noted that as a result of the pandemic, many local SMEs have adopted rapidly to digitalisation, and those who were not able or were reluctant to, were part of the problem.

“Yet, even as we grow our tech-savviness, our regional neighbours and competitors are also growing theirs – and perhaps at a rate faster than ours.

“We can always blame our SMEs for not being ready, but the reality is that our patronage economy has grown an entire generation of businesses that do not feel the need to compete.

“The better integrated our SMEs are to the global market, the quicker the drive will be for us to digitalise.”

Going global with local brands

He also urged the government to build up local brands globally and to prioritise marketplaces that support local businesses, not merely pushing products from lower cost countries to Malaysian consumers.

“We should be building indigenous brands and local heroes, rather than training Malaysians to become mere middlemen and resellers of foreign, low value-added products.

“Indeed, in our fervour to globalise, we are allowing low-cost products with questionable qualities to flood our market, to the detriment of our SMEs.”

Ng also said that Malaysian SMEs, while accounting for half of Malaysia’s employment, accounted for only a mere 31% of output.

“This translates into low margin, and hence why many of our SMEs are collapsing amid the pandemic, as well as our continued reliance on government handouts and patronage through government-linked corporations.

“The government is fully aware of these challenges. There is an urgent need to improve the productivity of our SMEs as a mean to protect our competitiveness.”

He also said that another key challenge for SMEs post-pandemic would be less of financing and more of the ability, or inability, to access world-class talent.

“Ask any SME and they will tell you two things: our universities are not producing talent that is industry-ready, and those that are do not want to work for SMEs.

“Malaysians naturally would prefer to work for larger companies that can afford higher salaries and better benefits.

“This is where we are hopeful that the government can provide short-term intervention in the form of financial incentive either directly to SME employers or to employees.

“This could be in the form of matching contributions for EPF, subsidies on HRDF contribution, and tax cuts for employee benefits and employer branding.” – June 27, 2021.