THE government should look into long-term sustainability measures and take steps to address urgent issues as it prepares to unveil Budget 2023, the Small and Medium Enterprises Association of Malaysia (Samenta) said. 

Chairman William Ng said that, while cost pressures and labour shortage remain the most urgent issues, there are other matters that are impacting the recovery of SMEs. 

“Long term challenges such as low productivity; digital displacement; regional competition; and environmental, social and governance (ESG) compliance must be addressed soonest possible. 

“We are hopeful that the government will take both an immediate and long-term view at ensuring our SMEs remain competitive,” he said in a statement. 

This, he said, in turn will support the national aspiration to once again become an Asian Tiger.

“This requires more than financial intervention, and would need major reform of our economy.

“Let’s start with Budget 2023. 

“In the short term, we need to move government intervention from outright grants to tax rebates, to encourage better financial discipline among SMEs. 

“The wisdom of teaching our SMEs to fish rather than giving them fish holds true here.”

He said that for a start, the association is asking for a double tax deduction of up to RM1 million per company for the coming financial year.

Ng said this could provide for capital expenditure to automate businesses, adopt digitalisation and Industrial Revolution 4.0, and to comply with ESG standards. 

“This will be on top of expanding the scope of low carbon transition facility to include consulting and training as well as any upgrading of facilities and processes that could lead to higher productivity. 

“We have also included in the wish list a lower tax bracket of 15% for the first RM500,000 taxable income for SMEs, to encourage businesses to reinvest the savings into expansion.”

Longer term, Ng said the government needs to help SMEs raise their productivity rapidly to remain competitive in the face of digital displacement and regional competition. 

“With the signing of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), there will be more opportunities for our SMEs, but there will also be increased competition. 

“Hence, we need a focused push, not just ‘encouragement’ to get our SMEs to move up the value chain”, he said.

In detail, Samenta wants the government to:

1. To address the labour crunch, allow double tax deduction for consulting, training, certification and software to help SMEs adopt productivity-linked wage systems.

2. To reduce the scourge of unscrupulous migrant worker agents, to immediately ban and prosecute such agents through available laws such as the Private Employment Agencies Act 1986.

3. To allow the use of the Human Resources and Development Council levy for the hiring of interns and apprentices, capped at a maximum of RM1,000 per month for up to six months, with no limit to the number of such interns and apprentices.

4. To allow foreign students in Malaysia to work a maximum of 20 hours a week in professional services and retail sectors.

5. To lower the cost pressures to SMEs, to announce and ensure that there is no hike of electricity tariffs for all commercial and industrial users up to the first 1,000KWh, and for all water, sewerage and telecommunication bills for the rest of 2023.

6. To provide a 50% rebate on internet bills for 2023 to all SMEs in rural areas (by postal code) to encourage telcos to extend services to low coverage areas and for rural SMEs to be digitally-connected. 

7. To set-up a register of SME grants under SME Corp to limit any outright or matching grant from all government agencies to a lifetime cap of RM500,000 per business and director to discourage so-called grant-prenuers and allow any financial assistance to benefit more SMEs.

8. To reduce direct competition from (government linked companies (GLCs) in non-strategic sectors and to encourage support for SMEs working with GLCs. This includes a mandated annual “GLC for SMEs” report to detail total expenditure made to SME vendors, the number of such vendors, the average expenditure per SME vendor, and programmes and activities to support the capacity and capability building of SME vendors. 

Ng added that as the country’s first and largest association for SMEs, Samenta remains committed to supporting more than 1 million businesses in this sector. – February 20, 2023.