Task force to address SMEs' woes

KUALA LUMPUR: A Task Force on Small and Medium Scale Enterprises (SMEs) proposed by the International Trade and Industry Ministry will be set up to address SMEs' problems.
National President of SMI Association of Malaysia Chua Tiam Wee said the task force, comprising government agencies, will look into major issues confronting SMEs today such as access to financing and overseas markets as well as labour shortage.

Chua also stressed on the need to revamp the SME Bank to increase its role in providing more financing for SMEs.

"SME Bank's contribution to SME financing is still negligible. As of the first half of this year, the bank's loan financing to SMEs only amounts to RM420 million as compared to RM135 billion by banks last year," he told a press conference on SME Financial Solution seminar 2010 and SME Recognition Award 2010 Roadshow.

Chua said SME entrepreneurs have to resort to what he termed as "underground bankers" owing to difficulties in securing financing.

"Many new start-ups less than three years track record and those with border-line performance faced problems in obtaining financing," he said.

Chua said there are some funds that need to be revised and revamped to increase utilisation by SMEs.

"The Green Technology Fund is under utilised due to stringent requirements. Similarly, the under-subscribed Industry Restructuring Financing Guarantee Scheme should be revamped for working capital usage," he suggested.

He also proposed to the government to bring back soft loans.

"Since December last year, the government has frozen grants such as start-up grants to replace them with soft loans," he said.

He said certain grants should not be removed, especially development grants like market development and commercialisation grants, as without these grants SMEs will not be able to take risks, particularly securing overseas markets and investing in research and development initiatives.

The other perennial problem is the labour shortage, especially in the furniture industry, he said.

Chua said the time has come for SMEs to transform from low-cost producers to move up the value chain, embrace ICT and venture into R&D.

"This is essential to achieve the national goal for SMEs to contribute 50 to 60 per cent to the gross domestic product (GDP) as compared to only 35 per cent now," he said.

In advanced countries like Japan, SMEs contibuted 50 to 60 per cent to the country's GDP, he said.

Chua said one of the major challenges for SMEs is to export their products overseas as they don't have the resources to do so.

"One of the ways to increase market access is to have a trading centre to consolidate SMEs' products for overseas markets," he said.

To further spur SMEs' contribution to the national economy, Chua suggested the government open up the oil and gas sector as SMEs participation in this sector was still negligible.

"We hope the government will liberalise this sector," he said.

Chua said the rising cost of doing business was another major hurdle faced by SMEs to survive in the highly competitive business world.

"One of the ways of lowering the cost of doing business is to support local software companies to encourage the use of local software and reduce licensing fee," he added.

On SME Financial Solution Seminar in Kuala Lumpur on Aug 20, Chua said the SMI Association of Malaysia was hosting the seminar in collaboration with MCA to enlighten entrepreneurs on opportunities and challenges for SMEs and to assess financing prospects for SMEs.

The association is also organising SME Recognition Award 2010, an annual award programme to recognise and honour outstanding achievements of SMEs in Malaysia, he added. - BERNAMA