Saturday, December 31, 2005

Even SME's aren't spared the racial profiling

In a country whose entire psyche is couched in racial terms, how can we possibly avoid discussing the issue of Malaysian SME’s in a racial context?

An essay in the academic Kyoto Review of SouthEast Asia by researchers Drs Lee Kam Hing and Lee Poh Ping puts the figure of SME ownership by Chinese Malaysians at as much as 57% (quoting Economic Planning Unit sources).

Chinese-owned businesses weathered reasonably well through the 1998 financial crisis largely because they were less exposed to foreign borrowings and used retained earnings to tide them through the tough times.

However, faced with rising interest rates from commercial banks during that period, these non-bumi SME’s had no choice but to turn to the government for help. Apparently, only after a seminar was organized by the ACCCIM (Associated Chinese Chambers of Commerce in Malaysia) & the MCA, to present the impact of the Jan 1998 crisis on SME’s, were non-bumi SME’s able to tap off the RM1.5billion Rehabilitation Fund for Small and Medium-Scale Industries. Incidentally this was presented to Anwar Ibrahim in his position as Finance Minister before he was sacked later that year.

Edmund Gomez, one of my favourite local writers and researchers, puts the situation of Chinese Malaysian businesses as such: “Chinese capital remains very subservient to the UMNO-led government, and to remain productive, dynamic and to develop their corporate base, [the Chinese] have no choice other than to link up with the Malay political elite.” (Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation, Edmund Terence Gomez) This statement might apply more to the larger Chinese-owned conglomerates but there would certainly be some spillover to SME’s as well.

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On a macro level, in the name of social and economic restructuring, the government is aiming to increase bumiputera participation in these sectors of the economy: wholesale and retail, ICT, biotechnology, oil & gas and property - all mainly through the establishment of SME’s.

The most concrete of these efforts are through its PROSPER (Projek Usahawan Bumiputera Dalam Bidang Peruncitan or Bumiputera Entrepreneurs in Retail Trade Project) programs where generous amounts of funding are provided by the PUNB (Perbadanan Usahawan Nasional Berhad or National Entrepreneurs Coporation) for budding bumi entrepreneurs to set up a business in selected retail or wholesale trades.

For example, under its Business Joint Venture package (for a project value not exceeding RM1 million), the entrepreneur need only come up with 10% with the rest in the form of loans; PUNB providing 30% & the remainder 60% from an appointed financial institution (guaranteed by the Credit Guarantee Corporation).

Will all this contribute to a stronger BCIC (government lingo for the bumiputera commercial and industrial community)? Time will tell, though I am sure many non-bumi wish their bumi counterparts success so that the country can just move forward with nation building and put aside the racial cloak that masks the country’s true potential.

Positive words to end an altogether not very exciting 2005! Happy 2006!
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Thursday, December 29, 2005

Malaysia's definition of an SME

So what constitutes an SME in Malaysia? SMIDEC (Small Medium Industries Development Corporation) breaks them down into Micro, Small& Medium Enterprises. They are further divided into Manufacturing & Services based businesses. A hefty 81% of Malaysian SME's fall into the micro enterprises category (i.e. less than 5 employees).

Malaysia's manufacturing sector has contributed on average 27% value-added to its national GDP (10-year average from 1990 to 1999)- second only in comparison to Thailand which averaged 28% (source: World Bank. A study published in the Asia Pacific Development Journal indicates however that there is a strong correlation between both the manufacturing and services sectors in ASEAN economies - i.e. investment in both sectors is essential for the expansion of both sectors. Full report here if you like academic stuff:

Malaysia has chosen to focus on the automotive and food sectors to spearhead further growth for its SME's. Automotive in this country usually means Proton and Perodua and food would likely be focused on the halal sectors. Right strategy? Maybe - worth digging deeper to see if we execute it correctly. More in upcoming posts .. watch this space!

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Wednesday, December 28, 2005

We want to help you.. but then again maybe not

The government recently announced a package of RM3.8 billion ringgit for Malaysian SME's in 2006 "aimed at strengthening and enabling infrastructure to support SME development, building capacity and capability of SMEs as well as enhancing further the sector’s access to financing." (The Star, Dec 17, 2005).

A week later, the NST carries a story headlined "Malaysia ranked low on ease of doing business" citing a World Bank report that it takes 25 steps and a staggering average period of 225 days to set up a business in this country!

The NST then goes on to comment "It’s easier in the strife-torn West Bank and Gaza Strip, where an applicant goes through only 18 procedures and the waiting period is 144 days."

Go figure - this is another classic case of the government offering a cure before diagnosing the illness. We should be making our infrastructure more business-friendly before deciding to throw some more money at it (apparently especially in the issuing of business licenses).

The NST tries to mollify this state of affairs by adding this comment: "Malaysia also came out tops [in the area of 'ease of doing business'] among Muslim countries. Mauritius was second at 23rd place, followed by Maldives in 32nd place and Saudi Arabia at 38th".

Let's sound the trumpets - we're better than tiny Maldives! Sounds like the UM ranking fiasco all over again.

Small and Medium Beginnings

Many people I know have gotten onto the blogging bandwagon and have sworn by its therapeutic properties. I remain unconvinced. How many people seriously want to read about how much lint I can find in my navel today? Well, I thought then if I should start blogging, I could write about something I do everyday - my work. Which in a nutshell is in a company that markets business solutions to small and medium enterprises. But don't that let that deter you - I promise not to make this some propaganda tool for the company - it will largely be an armchair pundit's observations of events related to the SME environment in Malaysia.

The Malaysian government seems keen to grow this large base of businesses to be the torchbearers for the country in the years to come. How succesful they will be remains to be seen and I hope to catalogue their attempts in this little.. er small and medium blog of mine. I hope it finds an audience. Even if it doesn't I might just find it therapeutic..?

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