Challenges Faced by SME in Malaysia


Challenges Faced by SME in Malaysia

By Lawrence Lee |1 August 2016

Under TPPA, 12 countries together has agreed that to widen the horizon of trades between countries, which means helping each other on promote economic growth, enhance innovation and productivity as well as lower the trade barriers among the nations.

Countries that are involved in TPPA included Malaysia, Japan, New Zealand, US, Canada, Singapore, Brunei, Chile, Australia, Peru, Vietnam and Mexico. By signing this agreement, Malaysia will able to have 4 extra trading partners which included US, Chile, Mexico and Canada.

Sounds like a good plan?

But does it really means for your business?

Facts #1

Amendment of Labor Law. Under TPPA, all the member countries agreed that they respect human right for foreign workers whereby they can form their own union easily and negotiate with the employers (If we know Malaysia local business environment, does such thing exist?) and respecting human right means that employers must NOT keep the passport of foreign workers as that is a form of imprisonment. But this creates a contrast to our local employers as foreign workers may run away with their passport on their hand. On top of it, foreign workers are entitled to have minimum wages just like local workers, so the cost effectiveness of hiring a foreign workers is no longer valid in TPPA.

Besides, foreign workers are entitled to EPF, SOCSO, and annual leave which makes them no difference from hiring a local workers. This creates a huge potential impacts on labor intensive industry in Malaysia such as construction, logging, retails and etc whereby businesses margin are forced to cut down, and result in a lot of business are forced to close down due to cut loss.

Facts #2

More competition for government project whereby all the government projects are open for bidding by overseas contractors as well. How do the local able to stand out from oversea competition?

Government Contract Type Previous amount Amended amount
Product Base RM 7.5 mil RM 650k
Service Base RM 10 mil RM 650k
Construction RM 315 mil RM 70 mil

Based on the table above, it illustrate that the previous minimum amount that open for bidding in public. By them lowering down the entry level to open for bidding, local contractor faced even more challenges to secure contact. So, the question is how do they stand out among their neighbor country?

Facts #3

Transformation of local SME. With such environment with higher cost involved and potential cut down on margin in order to secure a deal, local SME have to utilize current technology to be as labor-less as possible to reduce their cost, so they can able to secure the margin that they initially desired. Technology such as automation, payment gateway are available for SME to use. However, are SME ready to spend such amount of money to learn from scratch? Or work with an IT partner whereby they can help you to adapt your business in a new environment?

Facts #4

The rise of e-commerce. As disintermediation happen, a lot of retailers who merely buy and sell slowly lose out from competition as the trend of getting used to purchase from an online store is there. So, what SME should do? To go against the trend? Or to go along with the trend? What is the solution to aids SME? We will reveal it in the next article.