Enabling exports for SMEs
Businesses urged to make use of various aids and digital technology to expand into other markets
THE business landscape has changed drastically in recent years as markets become more globalised and digitalised. Competition has intensified as companies find that they are no longer limited to just the market in which they are based in.
As such, the government has been encouraging local SMEs to increase the export of their goods and services to expand their markets beyond Malaysia to grow their businesses.
Matrade CEO Dr Mohd Shahreen Zainooreen Madros says small businesses cannot afford to remain local. More and more foreign companies are making their way into Malaysia and are quickly crowding out the local market.
“There is a bigger market out there,” he says.
However, industry observers note that the majority of SMEs are too complacent in the local market to look abroad.
Shahreen says this is a global problem. The fact is, most SMEs in other countries are also not going out.
“Those that are going out are the young startups, not the established brick-and-mortar companies. On the other hand, you have the multinational companies coming into our market. So our companies need to also go out,” he says.
Notably, there are various challenges hindering small businesses from looking at greener pastures in other markets. These include the lack of financial strength and market savviness to explore new markets. Small companies also usually lack an understanding of the business culture in other countries, making it difficult for them to manoeuvre their way around a new market.
This is where the government plays a role to enable ecosystems and build infrastructure to help SMEs expand abroad, adds Shahreen.
Matrade has various programmes and grants to assist SMEs in their export efforts including the New Exporters Development Programme, eTRADE Programme, Go-Ex Programme and Market Development Grant.
The agency also has worldwide representation at 40 locations in major commercial cities, which can provide SMEs with on-the-ground information and assistance, facilitate networking as well as enable access to new markets.
Additionally, the Government has pumped in funds to help SMEs export their products. Under Budget 2018, the Government allocated RM1bil for insurance coverage credit facility for SME exporters, RM150mil to expand export market and promotion and RM100mil for loans to enhance automation of local furniture production for export.
“The supply of money is not the issue here. The problem is not many are risk takers,” says Shahreen.
There needs to be a change in mindset among SMEs. They need to move out of their comfort zone, which is the local market, he adds.
Matrade has also been putting in effort to educate local SMEs to go global via an easier route, which is to go digital as it reduces the cost of entry for companies that want to sell their products outside Malaysia.
Shahreen notes that the region is going through a digital upheaval. And Malaysia’s advantage at this point is that the infrastructure is more developed compared to most other Asean countries. This makes it easier for local companies to reach out to the wider regional market before others do.
In the digital world, speed is everything. Likewise, Shahreen urges SMEs to take advantage of this lead time to improve and expand their market beyond Malaysia before the other countries in the region catches up.
“We can ride this tide for now. But there is still a limited time to compete before the other countries make full use of the available infrastructure to grow. And our neighbours are also growing fast. Once they do that, if our local companies are still not ready, they will drown in Asean,” he says.
Shahreen advises local SMEs to focus on their competitive advantages as they move abroad, to look into usage of technology and to move into high-value products.
“So there are layers of challenges for different types of companies and industries that want to export. They can range from awareness level to technology barrier, logistics, economic factor, government support and infrastructure.
“The reality is, trade does not jump overnight. So we need to keep building and we have to understand their barriers and help reduce these barriers. This is something that the Government is constantly doing to pave the way to make it easier for SMEs to do it. The aim is to make it less painful for them to go out so that we do not disincentivise them to go abroad,” he says.
There are, no doubt, benefits to pushing SMEs to export.
At the end of the day, not only will exports help local businesses grow, this would also grow SMEs’ contribution to the country’s overall export and gross domestic product (GDP).
By 2020, Malaysia aims to push SMEs’ contribution to GDP to 41% and its share of exports to 23% from the current 37% and 18.6% respectively.