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Needless to say, there is more work to be done and greater responsibilities to be carried out now. With
shifting consumer behaviours and business trends amidst the new normal, businesses must embrace
disruptive changes by harnessing the potential of technologies, digitalisation and e-commerce.
It warrants future strategic planning for MSME development that stresses the need for long-term
resilience; limiting the impact of future crises to develop competitively; and creating dynamic MSMEs
that are proactive, adept and sustainable. Ministries and agencies play a pivotal role in ensuring that
businesses take full advantage of the incentives and programmes available in relevant focus areas;
reskill employees; adopt new or recalibrated business models; and invest in product innovations
through cost-effective methods.
Thus, the need for the development of SME Corporation Malaysia Business Strategic Plan (BSP)
2022 - 2030. This crucial document is timely, and I am confident it will cast a clear and strategic
direction for the agency to implement its strategies and programmes effectively and efficiently, towards
optimally achieving its organisational goals in further accelerating MSME development nationwide.
It is my fervent hope that MSMEs will benefit extensively from the targeted initiatives and ultimately
rebound from the crisis stronger than ever.
Let’s strive together to empower and future-proof our MSMEs!
Dato’ Suriani binti Dato’ Ahmad
Secretary General
Ministry of Entrepreneur and Cooperatives Development (MECD)
147
MESSAGE FROM THE SCEHCIERFETEAXREYCUGTEINVEROAFLFICER
OF TSHMEE MCOINRIPSTORRYATOIOFNENMTARLEAPYRSEIAN(ESUMREDCEOVREPL.OMPMALEANYTSIAN) D COOPERATIVES
MESSAGE FROM THE
CHIEF EXECUTIVE OFFICER
OF SME CORPORATION MALAYSIA
(SME CORP. MALAYSIA)
SME Corporation Malaysia Business Strategic Plan (BSP) 2022 - 2030 is developed to set the
strategic direction for SME Corporation Malaysia to attain its overall corporate goals and
aspirations for a nine-year period. The new business framework in BSP 2022 - 2030 is aligned
with the National Entrepreneurship Policy 2030 (DKN 2030), Shared Prosperity Vision 2030 (SPV 2030)
and Rancangan Malaysia Kedua Belas (RMKe-12).
With the theme ‘Pioneering Business Transformation’, in keeping with SME Corp. Malaysia’s corporate
tagline, BSP 2022 - 2030 underlines SME Corp. Malaysia’s specific objectives and comprehensive measures
to promote the development of innovative, competitive and resilient MSMEs in Malaysia through business
transformation. In catalysing the transformation of MSMEs by enabling them to make fundamental
changes in their business operations, our aim is to help the MSMEs create additional value, optimise
potentials, enhance efficiency, increase competitiveness and accelerate growth towards achieving business
sustainability.
In mapping our priorities over the next nine (9) years, we were guided by our long-term strategy for
MSME development which focuses on balanced, inclusive and sustainable MSME growth through a
two-pronged approach. Hence, our strategic planning under the BSP is a ground plan of coordinated,
systematic and collective efforts designed to create more global MSMEs through targeted assistance in
digitalisation, automation and awareness of business sustainability. Identifying issues and challenges
faced by MSMEs under the RMKe-11 (2016 - 2020) was also a critical factor in our forward planning.
The strategic framework outlines the agency’s directions towards establishing a conducive and holistic
MSME ecosystem by enhancing the entrepreneurial capabilities of all business stages from startups to
matured MSMEs and strengthening the business landscape in order to create sustainable and globally
competitive players. The framework encapsulates five (5) focus areas, five (5) key success factors, 13
strategies and 35 initiatives that have been identified to generate the intended outcomes reinforced by
sound institutional support.
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An important element that the BSP provides is a foresight on MSME development within the next nine
(9) years, focusing on the future of MSMEs post-COVID-19, as well as new trends, future technologies
and best practices expected to influence the development of MSMEs. With the foresight elements,
programmes and activities implemented will be in line and fulfil the needs of MSMEs for the short,
middle and long terms. This will also optimise the utilisation of SME Corp. Malaysia’s human resources,
as well as allocation of funds and funding received from the Government.
As we embark on the recovery phase post-pandemic, the BSP will serve as a compass for us to mobilise
our efforts and resources in a proactive, productive, pragmatic and synergetic way to ensure that our
planned programmes and initiatives will significantly benefit the MSMEs in helping them to regain from
the impact of crisis and thrive sustainably in the future.
The BSP 2022 - 2030 is a testament of SME Corp. Malaysia’s unyielding commitment in advancing
MSME development to the next level, generating dynamic, future-proof MSMEs amidst a vibrant and
robust economy. With the implementation of the proposed new organisational structure, along with
deeper cooperation with MSME agencies and industry groups, and more importantly with the strong
support from the Government and MECD, SME Corp. Malaysia is poised to become a leading agency in
MSME development in Malaysia.
Rizal bin Nainy
Chief Executive Officer
SME Corporation Malaysia (SME Corp. Malaysia)
149
BPARBT1I::
PORVEERSVTAIESWI PMKS BAGI TEMPOH 2016 - 2020
PART I
OVERVIEW
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01
PERFORMANCE OF MSMEs
IN 2016 - 2020
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PROFILE OF MSMEs
BACKGROUND
The Department of Statistics, Malaysia (DOSM) as the national statistics compiler commenced a series
of censuses on Malaysian MSMEs in response to the directive from the National Entrepreneur and SME
Development Council (NESDC) (previously known as National SME Development Council, NSDC). The
three (3) censuses on MSMEs which have been conducted thus far were:
Baseline Economic Economic
Census of Census 2011: Census 2016:
Establishments Profile of SMEs Profile of SMEs
(reference year (reference year
and Enterprises
2005 (reference 2010) 2015)
year 2003)
DOSM now publishes annual statistical data on MSMEs on its Malaysia Statistical Business Register
platform. The platform provides list of establishments operating in Malaysia which covers Register of
Companies (ROC), Register of Businesses (ROB) and Limited Liability Partnership (LLP) that registered
with Companies Commission of Malaysia (SSM), local authorities and professional bodies. The database
is updated based on surveys and census done by DOSM and utilised administrative data sources from
key agencies such as SSM, Employees Provident Fund (EPF), Royal Malaysian Customs Department
(RMCD), the Inland Revenue Board of Malaysia (IRB), local authorities and other professional bodies.
MSMEs BY SIZE AND SECTOR
The landscape of MSMEs has grown considerably well under the Rancangan Malaysia Kesebelas
(RMKe-11) period (2016 - 2020) and until recently in 2021. Looking specifically for the period under
the RMKe-11, there were altogether 1,151,339 MSMEs operating in Malaysia in 2020 which represent
97.2% to overall establishments of 1,184,008 firms (refer to Chart 1.1). There has been an increment
of more than 65,000 MSMEs as compared to a total of 1,086,157 MSMEs in 2016, thus registering an
average growth rate of 4.9% per annum during the five-year period.
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Chart 1.1: MSME Profile from 2015 until 2021
1,500,000 98.5 97.9 97.6 97.4 97.3 97.2 97.4 100
1,250,000 907,065 1,086,157 1,154,809 1,149,629 1,181,631 1,151,339 1,226,494 90
1,000,000
80
750,000
500,000 70 % Share to Total
250,000 Establishments
2015 2016 2017 2018 2019 2020 2021 60 No. of MSMEs
0 50
Source: Department of Statistics, Malaysia
Zooming on to the business size, microenterprises are prominent as it accounted for the largest share
of MSMEs component (refer to Chart 1.2). From 2016 until 2020, almost 90,000 new microenterprises
were established, registering an average growth rate of 5.4% per annum. This has reflected
successful initiatives by the Government in instilling entrepreneurship culture among Malaysians and
continue to improve business formalisation. Furthermore, comparing the structure of these MSMEs,
small-sized firms also recorded a positive growth in terms of the number of establishments at 3.6%
per annum. Nevertheless, the medium-sized firms shrink by 2.4% throughout the period, partly due to
a potential graduation of MSMEs to become large players, thus signifying a fruitful outcome of MSME
development over the years. Focusing on the latest composition in 2021, microenterprises constituted
a total of 78.6% (964,495 firms) of the total MSME establishments, small-sized firms formed 19.8%
(242,540 firms) and the balance 1.6% (19,459 firms) were medium-sized MSMEs.
Chart 1.2: MSME Profile by Size
% Share to
Total MSMEs
80 76.5 75.0 76.5 78.3 78.3 78.4 78.6
60
40
20 21.2 23.3 21.9 20.2 20.1 20.0 19.8
2.3 1.7 1.5 1.5 1.6 1.6 1.6
0
2015 2016 2017 2018 2019 2020 2021
Micro Small Medium
Source: Department of Statistics, Malaysia
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In terms of key economic sectors, the services
sector (including wholesale & retail), has
consistently accounted for more than 80.0% of
all MSMEs and grew at an annual growth rate of
4.0% throughout the period. It is interesting to
note that from 2016 onwards, the construction
sector emerged as the second biggest sector
after services, managed to outnumber the players
in the manufacturing sector which used to be
the second highest in 2015 (refer to Chart 1.3).
Moreover, detailed findings across sector showed
a double-digit growth in the MSME participation in
agriculture, construction and mining & quarrying
sectors during 2016 - 2020 period at 13.4%, 16.9%
and 32.2% per annum respectively. For 2021
MSME profile, services sector remained to be
the largest sector constituting 83.8% (1,028,403
firms) and construction sector at 8.0% (98,274
firms). Meanwhile, about 5.8% of MSMEs (71,612
firms) were involved in the manufacturing sector,
followed by 1.9% (23,633 firms) in the agriculture
sector, while the balance 0.4% (4,572 firms) in
the mining & quarrying sector.
Chart 1.3: MSME Profile by Economic Sectors
% Share to 0.1 0.2 0.3 0.3 0.3 0.3 0.4
Total MSMEs 1.1 1.5 1.5 1.5 1.7 1.7 1.9 Mining &
5.3 5.1 5.0 5.0 4.9 5.1 5.8 Quarrying
100 5.9 6.6 6.9 7.3 7.4
4.3 Agriculture
95 87.3 86.6 86.3 85.8 85.5 8.0
90 2016 2017 2018 2019 2020 Manufacturing
85 83.8 Construction
89.2 2021 Services
80
75
2015
Source: Department of Statistics, Malaysia
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PERFORMANCE OF MSMEs DURING RANCANGAN
MALAYSIA KESEBELAS (RMKe-11)
The International Monetary Fund (IMF) World Economic Outlook released in October 2021 reported an
average annual rate of 2.1% in the global economy between 2016 and 2020. The global economy during
this period was characterised by the mixed performance of major economies amidst economic shocks
caused by inward-looking policies, Brexit, as well as volatility in commodity prices.
In 2020, the global economy contracted by 3.1%, its first recession since the Global Financial Crisis
of 2008 / 2009. This was largely due to the onset of the COVID-19 pandemic and the subsequent
disruption to economic activities and the global supply chain with the imposition of virus containment
measures. World trade volume, which grew on average marginally by 0.9% annually during the same
period, was lower than global economic growth as increasing trade tensions among major economies
and the subsequent tariff hikes together with the prolonged spell of low crude oil prices heightened
uncertainty. Amidst an already softening global economy, the COVID-19 outbreak unleashed further
shocks on world trade in 2020.
During the RMKe-11 period, the Malaysian economy grew at an average annual rate of 2.7%, lower
than the target of 5.0% to 6.0% due to the impact of the pandemic. In the first four (4) years of
RMKe-11, the country achieved a growth rate of 4.9% per annum, with domestic as well as external
demand being the drivers of this robust performance. On the supply side, growth was led by the services
and manufacturing sectors.
MSME GDP
Since the establishment of NESDC in 2004, MSME Gross Domestic Product (GDP) growth has been outpacing
both Non-MSMEs and the overall economic growth (refer to Chart 1.4). During the RMKe-11 period, the
average annual growth of MSME GDP was at 3.3% which outperformed the overall GDP growth of 2.7% and
Non-MSME growth of 2.4%. This performance was achieved against a backdrop of a challenging global and
domestic economic landscape in 2020, particularly with the outbreak of pandemic across the globe.
Chart 1.4: MSME, Non-MSME and Overall GDP Growth (%), 2001 - 2021
Annual Growth, % Partly due to the
redefinition of MSMEs
14.0 8.3 10.0 13.51 7.2 6.3 5.9
6.8 2005 2006 2007 2008 0.2 5.4
12.0 6.2 -1.5 7.92 4.4 4.4
10.0 6.0 5.8 3.1
2003 2004 -2.3 2.13 4.4 5.0 4.8 3.5
-8.0 3.9 4.0 1.0
6.0 2002 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -4.4
4.0 0.9 -5.5
2.0 0.5 -7.3
0 2020 2021
-2.0 -0.4
-4.0
-6.0
-8.0
2001
Overall GDP MSME GDP Non-MSME GDP
1 Growth of MSME GDP based on 2014 New SME Definition versus 2013 Old SME Definition
2 Growth of MSME GDP based on 2014 New SME Definition versus 2013 New SME Definition
3 Growth of Non-MSME GDP based on 2014 New SME Definition versus 2013 Old SME Definition
Source: Department of Statistics, Malaysia and SME Corp. Malaysia
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Throughout the five-year period, the MSME contribution to overall GDP increased by 0.8 percentage
points, from 37.3% in 2016 to 38.1% in 2020 while value-added of MSMEs at constant 2015 prices stood
at RM512.9 billion in 2020 compared with RM458.7 billion recorded in 2016 (refer to Table 1.1). In terms
of performance by key economic activities, all sectors recorded higher value-added, with growth driven
mainly by the mining & quarrying sector at 6.4% per annum. Meanwhile, the top contributor to total
MSME GDP namely services and manufacturing sectors expanded on average by 3.9% and 3.7% per
annum respectively during this period.
Table 1.1: Overall GDP by MSMEs and Non-MSMEs in 2016 and 2020
MSMEs Value (RM billion) 2016 2020 Increase / CAGR1
Non-MSMEs % Share to Overall GDP Decrease 2016 - 2020
Overall Value (RM billion) 458.7 512.9
% Share to Overall GDP 37.3 38.1 +54.2 3.3
Value (RM billion) 770.6 831.2 +0.8
% Share to Overall GDP 62.7 61.9 +61.6 2.4
1,229.3 1,345.1 -0.8
100.0 100.0 +115.8 2.7
0.0
1 CAGR refers to compounded annual growth rate
Note: Figures may not necessarily add up due to rounding
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
The unprecedented health crisis brought about by the COVID-19 pandemic has affected a wide spectrum of
businesses including MSMEs. Zooming on to the performance of MSMEs in 2020, MSME GDP contracted by
7.3%, which was the lowest growth ever recorded since statistics on MSME GDP were first compiled in 2000
(refer to Table 1.2). The decline was even steeper than the 5.6% contraction in overall GDP growth during
the year, thus reversing the consistent higher-than-the-overall-GDP trend for the past years since 2004.
The sharp contraction in MSME GDP in 2020 was largely due to the pandemic and the subsequent
nationwide implementation of the Movement Control Order (MCO) beginning in March 2020. The ban
on travel between districts and states, restrictions on social activities, as well as the temporary closure
of non-essential services caused severe disruptions to the domestic economy. The impact of the MCO
was reflected across all major economic sectors, particularly in the construction and services sectors,
which declined by 15.4% and 9.0% respectively.
Table 1.2: MSME GDP by Sector from 2016 - 2020
2016 2017 2018 2019 2020 CAGR1
2016 - 2020
Services 6.5 Annual Growth (%) -9.0
Manufacturing 4.9 7.3 8.1 7.5 -2.9 3.9
Agriculture -0.5 6.8 5.5 4.5 -0.7 3.7
Construction 6.7 6.2 0.4 2.3 -15.4 1.5
Mining & Quarrying 8.2 6.6 4.0 0.3 -8.1 0.1
8.9 5.2 19.5 -7.3 6.4
MSME GDP 5.4 7.2 6.3 5.9 3.3
1 CAGR refers to compounded annual growth rate
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
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The implementation of these measures were crucial for the livelihood of people, notwithstanding the
significant costs to the economy. Following the impact of the phase-by-phase MCOs, a total national
economic loss exceeding RM500 billion was estimated since the pandemic took place in March
2020. The economy was forced to face with two (2) concurrent shocks; namely supply and demand
shocks. Supply shock happened as supply chains become disrupted and operational restrictions on
manufacturers were imposed. Simultaneously, a severe demand shock came about as consumers’
access to the market was curbed. This has then translated into significant downfall in the MSME
performance indicators and severely hampered MSME development that primarily rely on domestic
consumption.
According to a survey amongst 4,094 companies by DOSM conducted in the first round of MCO (April-
May 2020), a total of 67.8% respondents generated no sales / revenue during the period under study as
the economy experienced a total shutdown amid initial uncertainty and fear of the virus. Moreover, only
4.7% respondents cited that the company could survive over six months if lockdowns were to continue.
As such, limited access to markets due to the implementation of lockdowns have left many MSMEs
without a strong revenue stream, hence affecting business survival. Official data by SSM showed that
about 31,190 firms have filed for cessation across all types of businesses during the period of March
until October 2020, reflecting the detrimental effect of the pandemic on business sustainability.
MSME EXPORTS
The final year of RMKe-11 was particularly more challenging for MSME exporters due to the prevailing
economic scenario, including a slowdown of the global economy, uncertainty as to the length and depth
of the impact caused by the COVID-19 pandemic, softening of commodity prices, as well as increasing
trade protectionism. The exports of MSMEs fell at a double-digit negative growth of 33.1% to reach
RM117.8 billion in 2020 (refer to Table 1.3). As a result, MSME exports recorded an average annual
growth rate of 5.0% in the first four years of RMKe-11, however contracted by 4.1% per annum between
2016 and 2020.
Table 1.3: Exports by MSMEs and Non-MSMEs in 2016 and 2020
MSMEs Value (RM billion) 2016 2020 Increase / CAGR1
Non-MSMEs % Share to Overall Exports Decrease 2016 - 2020
Overall Value (RM billion) 155.1 117.8
% Share to Overall Exports 18.6 13.5 -37.3 -4.1
Value (RM billion) 679.4 752.5 -5.0
% Share to Overall Exports 81.4 86.5 +73.1 2.3
834.5 870.3 +5.0
100.0 100.0 +35.8 1.3
0.0
1 CAGR refers to compounded annual growth rate
Note: Figures may not necessarily add up due to rounding
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
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A key factor to the daunting MSME export performance in 2020 was the sharp decline of 62.1% recorded
by MSMEs in the services sector (refer to Table 1.4). This was mainly caused by the fall in tourism and
transport activities due to the COVID-19 containment measures, including the entry ban on foreign
tourists and restrictions on interstate travel and social and entertainment activities. The tourism
industry, which prior to the pandemic contributed more than one-third of MSME exports, experienced a
steep drop of 84.6% at RM9.2 billion in 2020 (2019: RM59.9 billion). With bulk of 55.6% MSMEs involved
in the tourism industry in 2015, based on the Economic Census 2016, it has significantly impacted these
smaller players and subsequently led to the discouraging export landscape. Therefore, the significance
of MSME engagement in tourism-related activities has resulted in lower contribution of MSMEs to total
exports at 13.5% in 2020 (2019: 17.9%).
Table 1.4: MSME Exports by Sector from 2016 - 2020
2016 2017 2018 2019 2020 CAGR1
2016 - 2020
Services 8.5 Annual Growth (%) -62.1
Manufacturing 4.6 7.1 1.9 3.5 -3.6 -14.2
Agriculture 35.0 7.8 5.1 2.0 2.6 3.1
-6.3 -0.3 -10.1 -33.1 2.8
MSME Exports 7.0 7.2 3.4 2.6 -4.1
1 CAGR refers to compounded annual growth rate
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
In contrast to MSMEs, Non-MSMEs performed
relatively better in exports, with a decline of 7.2%
in 2020, indicating that a weak global economy and
unfavourable external conditions impact MSMEs
more than larger firms. Given the nature of the
health crisis, exports of goods such as electrical and
electronics and rubber products were more resilient
during the year, reflecting the higher demand for
work-from-home equipment and medical-related
products manufactured mainly by Non-MSMEs.
MSME EMPLOYMENT
During the RMKe-11 period, employment generated
by MSMEs grew at an average annual rate of 2.1% as
against 1.0% by Non-MSMEs and 1.5% in the overall
labour market (refer to Table 1.5). MSME contribution
to overall employment rose to 48.0% in 2020
(2016: 47.0%). The number of workers employed by
MSMEs had increased by 590,000 during this period,
from 6.66 million in 2016 to 7.25 million in 2020.
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Table 1.5: Employment by MSMEs and Non-MSMEs in 2016 and 2020
MSMEs Number of Workers (million) 2016 2020 Increase / CAGR1
Non-MSMEs % Share to Overall Employment Decrease 2016 - 2020
Overall Number of Workers (million) 6.66 7.25
% Share to Overall Employment 47.0 48.0 +0.59 2.1
Number of Workers (million) 7.52 7.84 +1.0
% Share to Overall Employment 53.0 52.0 +0.33 1.0
14.18 15.10 -1.0
100.0 100.0 +0.92 1.5
0.0
1 CAGR refers to compounded annual growth rate
Note: Figures may not necessarily add up due to rounding
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
Focusing on the 2020 MSME performance, the pandemic has had significant repercussions on the
labour market as seen in the MSME employment data for 2016 - 2019 period compared with that of
2020. A slight contraction of 0.9% or a reduction of around 65,000 MSME workers was recorded in 2020,
with jobs lost primarily in the construction and services sectors. With the exclusion of the agriculture
sector, key factors such as limited working hours, job rotation, reduction in income and subsequent
retrenchments has brought about negative employment growth across all economic sectors. This has
then reversed a trend of consistent MSME employment growth for the past years (refer to Table 1.6).
Table 1.6: MSME Employment by Sector from 2016 - 2020
2016 2017 2018 2019 2020 CAGR1
2016 - 2020
Annual Growth (%) -0.6
-0.4 2.4
Services 2.7 1.2 4.1 4.4 0.5 2.1
Manufacturing 2.2 -4.9 3.6
Agriculture 0.5 4.0 2.3 2.2 -1.3 -0.6
Construction -0.3 -0.9 0.0
Mining & Quarrying 0.4 15.7 0.6 1.8
2.1
4.2 1.7 -3.4
2.1 -3.7 2.1
MSME Employment 2.1 3.4 3.2 3.0
1 CAGR refers to compounded annual growth rate
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
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MSME PRODUCTIVITY
MSME labour productivity as measured by real value-added per worker grew at 1.2% annually
during the RMKe-11 period, from RM68,840 per worker in 2016 to RM70,723 per worker in 2020
(refer to Chart 1.5). Despite its moderate pace, MSME productivity in Malaysia had charted a
steady upward trajectory between 2016 and 2019, with growth being driven by mining & quarrying,
manufacturing and services sectors.
Chart 1.5: Productivity by Size
RM Per Worker 99,380 102,518 106,896 109,210 111,492 106,110
200,000
180,000 66,656 68,840 71,358 73,513 75,625 70,723 Non-MSME
160,000 Productivity
140,000 MSME
120,000 Productivity
100,000
80,000
60,000
40,000
20,000
0
2015 2016 2017 2018 2019 2020
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
For the year 2020, the MSME productivity growth across all sectors was slower following the impact
of the COVID-19 pandemic both in terms of value-added and employment. MSME productivity remains
lower than that of Non-MSMEs which has been consistently 1.5 times higher in the RMKe-11 period.
This is partly attributed to the low adoption of technology and digitalisation, as well as limited diffusion
of innovation among MSMEs.
Table 1.7: MSME Productivity by Sector from 2016 - 2020
2016 2017 2018 2019 2020 CAGR1
2016 - 2020
3.7 Annual Growth (%) -8.5
2.7 -2.5 1.5
Services -1.1 6.1 3.8 3.0 -1.2 1.6
Manufacturing 7.0 -11.1 -2.1
Agriculture 7.8 2.7 3.1 2.2 -7.0 0.7
Construction 3.3 -6.5 6.5
Mining & Quarrying -8.2 -0.2 0.5
1.2
MSME Productivity 2.3 2.3 3.9
6.6 9.3 17.0
3.7 3.0 2.9
1 CAGR refers to compounded annual growth rate
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
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MSME PERFORMANCE IN 2021
According to the latest data released by DOSM in July 2022, MSMEs are in the path of gradual
recovery with key indicators, namely GDP, exports and employment rebounding to positive growth
in 2021, despite challenging domestic and global environment brought about by the COVID-19
pandemic.
MSMEs recovered in 2021 growth in GDP and exports were driven by
with lower contribution to MSMEs in agriculture and manufacturing
the Malaysian economy sectors
non-MSMEs recovered at a faster pace
MSME GDP MSME EXPORTS
RM billion GROWTH SHARE RM billion GROWTH SHARE
2021 518.1 1.0% 37.4% 2021 124.3 5.4% 11.7%
2020 38.1%
512.9 -7.3% 2020 117.8 -33.1% 13.5%
MSME EMPLOYMENT MSME PRODUCTIVITY
Million GROWTH SHARE RM per GROWTH
workers worker
2021 7.32 0.9% 47.8% 2021 70,827 0.1%
2020 7.25 -0.9% 48.0% 2020 70,723 -6.5%
Source: National Accounts - Small and Medium Enterprises 2021, Department of Statistics, Malaysia
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STRATEGIC DIRECTION FOR MSME DEVELOPMENT
UNDER RANCANGAN MALAYSIA KEDUA BELAS
(RMKe-12)
The MSME-centric measures under the RMKe-12 are prominently highlighted in Theme 1, Game
Changer III: Transforming Micro, Small and Medium Enterprises as the New Driver of Growth.
The RMKe-12 prioritises productivity improvement, expansion of market access, enhancement of
financial intermediation, promotion of balanced industrial development, as well as improvement in
policy and governance. The implementation of the various strategies will restore the growth trajectory
of MSMEs in line with attaining the performance targets as set under the RMKe-12 (refer to Chart 1.6).
A key goal is to equip MSMEs with the skills to enable them to digitalise their business processes by
2025. Prioritising MSME digitalisation as a national agenda serves as a powerful game changer for the
economy. Digitalisation not only enables transformation that will spur greater penetration of global
markets, but also enhances the competitiveness of domestic MSMEs.
A conducive and holistic ecosystem will be created to support MSMEs, including assistance to produce
goods and services that are on par with international standards. A commissioner will be appointed
to assist small businesses in securing prompt payments and in resolving payment disputes. The
cooperative movement will also be leveraged in developing entrepreneurs, while a second-chance
approach would be adopted whereby entrepreneurs who failed at their first attempt in business will be
provided assistance to try again.
Chart 1.6: Targets for MSME Performance by 2025 in RMKe-12
45% 25% 3.5%
Contribution of Contribution of Average Annual
MSMEs to GDP MSMEs to Exports Labour Productivity
Growth of MSMEs
90% 15%
Digitalisation of Contribution
MSMEs' Operations of Bumiputera
Enterprises to GDP
Source: RMKe-12, Economic Planning Unit
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OUTCOME EVALUATION ON MSME DEVELOPMENT
PROGRAMMES BY SME CORP. MALAYSIA UNDER
RANCANGAN MALAYSIA KESEBELAS (RMKe-11)
SME Corp. Malaysia has conducted an outcome evaluation exercise to assess the effectiveness of
development expenditure (DE) programmes implemented by SME Corp. Malaysia under RMKe-11
(2016 - 2020) in supporting the development of MSMEs in Malaysia by:
Evaluating whether the Evaluating the economic Identifying issues and
output and outcome of each impact of those programmes challenges faced by MSMEs
towards MSMEs' performance from the aspects of financing,
programme have been
achieved in terms of sales turnover, skills, market access,
employment, exports and technology and digitalisation
productivity
The outcome evaluation covers selected DE programmes under RMKe-11 with financing component
that have been implemented by SME Corp. Malaysia, including High Impact Programmes (HIPs) under
the SME Masterplan from 2016 to 2020. Thus, an online survey was conducted from 6 May 2021 to 12
July 2021 on MSMEs that had received financial assistance under the following 10 DE programmes and
completed their cycle of participation:
¢ HIP 2: Technology Commercialisation Platform (TCP)
¢ HIP 3: SME Investment Partner (SIP)
¢ HIP 4: Going Export (GoEx)
¢ HIP 5: Catalyst Programme
¢ HIP 6: Inclusive Innovation
¢ Business Accelerator Programme 2.0 (BAP 2.0)
¢ Bumiputera Enterprise Enhancement Programme (BEEP)
¢ Tunas Usahawan Belia Bumiputera (TUBE)
¢ Galakan Eksport Bumiputera (GEB)
¢ Micro Connector
The survey was also extended to MSMEs that did not participate in SME Corp. Malaysia’s programmes.
The data received was analysed and interpreted from multiple perspectives to obtain a holistic view of
MSMEs' performance, including identification of issues and challenges and the direction forward to
improve the development programmes of SME Corp. Malaysia.
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PROFILE OF RESPONDENTS
A total of 1,200 MSMEs responded to the survey whereby 83.1% (997) were beneficiaries and 16.9%
(203) were non-beneficiaries of development programmes by SME Corp. Malaysia. Microenterprises
made up 58.4% (701) of the total respondents while 32.0% (384) were small-sized and 9.6% (115) were
medium-sized firms. In terms of sectors, a total of 579 MSMEs in the services sector (48.3% of total
respondents) provided the most feedback, largely from the food and beverage (F&B) industry. The
other respondents were from the manufacturing (44.7%), agriculture (5.8%) and construction (1.3%)
sectors. About one-third had been operating between two and five years. More than 60.0% of the
respondents were sole proprietorships. Meanwhile, about 43.8% were women-owned businesses;
49.3% youth-owned; and 84.2% Bumiputera-owned (refer to Chart 1.7).
Chart 1.7: Profile of Respondents
Size of MSMEs Sector Women-owned
Medium Micro Services 579 43.8%
115 701
(58.4%) (48.3%) Youth-owned
(9.6%)
536 49.3%
Manufacturing
(44.7%)
69 Agriculture
(5.8%)
Small 16 Construction
384
(32.0%) (1.3%)
Years in Operations Ownership Ethnicity
402 61.1% Sole Malay 74.2%
33.3% Proprietorship
(33.5%) Private Limited
Company
270 222 263 Chinese 12.2%
(22.5%) (18.5%) (21.9%) Indian 2.3%
5.2% Partnership Bumiputera - Sabah 6.2%
43 Bumiputera- Sarawak 3.8%
(3.6%) Others 1.4%
<6 months 6 months - >25 years - >150yyeeaarrss- >10 years 0.5% Limited Liability
2 years years Partnership
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PERFORMANCE BEFORE AND AFTER COVID-19
Overview
The COVID-19 pandemic exacted a heavy toll on businesses across all sectors. Before the pandemic,
sales had grown by 27.8%, but after the onset of the pandemic, growth moderated to only 11.8% with
microenterprises being the most affected (refer to Chart 1.8).
In terms of employment, the hiring of local and foreign workers was also markedly affected. Employment
growth softened from 24.4% pre-pandemic to 19.1% after the outbreak. This was partly due to MSMEs
switching to online business, thus businesses restructured their workflow. There was, however, an
increase in hiring by small-sized firms after COVID-19, from 15.9% to 25.4% with increases in the
numbers of both local and foreign workers.
Meanwhile, a declining productivity growth was observed after COVID-19 at -6.1%, particularly among
the microenterprises and small-sized firms, following movement restriction of goods and people, as
well as the lockdown being imposed.
Looking at the operational cost, a slight decrease was reported after the pandemic, from 11.8% to
10.8%, of which majority of firms have reduced their cost to cope with cash flow shortages. In response,
the Government has stepped in to provide assistance through several economic stimulus packages to
help mitigate the cash flow problem faced by businesses.
Chart 1.8: Impact of COVID-19 on MSME Performance
Before COVID-19 After COVID-19
Overall Medium Small Micro Micro Small Medium Overall
27.8% 18.5% 45.3% 62.7% Sales 20.9% 9.8% 12.8% 11.8%
24.4% 28.2% 15.9% 46.0% Employees 25.0% 25.4% 9.3% 19.1%
2.7% -7.5% 25.4% 11.4% Productivty -3.3% -12.4% 2.7% -6.1%
11.8% 7.8% 25.1% 21.8% Cost 0.4% 7.8% 22.0% 10.8%
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Sales Performance
In contrast to non-beneficiaries, respondents who were beneficiaries of MSME development
programmes experienced better sales and job creation performance. Both non-beneficiaries and
beneficiaries reported an upward trend in sales before the pandemic, but this plummeted thereafter in
2020 with the implementation of MCO (refer to Chart 1.9).
Chart 1.9: MSME Sales Performance
Sales pre-pandemic was trending upward for beneficiaries and non-beneficiaries of MSME programmes
before plunging in 2020 after COVID-19
Sales (%) 13.1 8.9 Sales (%) 10.3 9.4
100 17.2 53.8 100 33.5 53.2
80 80
60 60
40 57.6 40
46.3
20 33.3 31.5
20
12.1 4.0 0 9.9 5.9
0 Beneficiaries Non-beneficiaries Non-beneficiaries
Beneficiaries 2020 2019 2020
2019 No Changes
Decreased
Not in Operations Increased
Zooming on to the performance of beneficiaries, below are some of the key findings being observed
across some programmes in terms of their sales performance:
¢ Before Pandemic: Triple-digit sales growth of 125.8% was recorded by HIP 2 beneficiaries,
specifically in the information & communication services and production of agricultural crops
sectors, while sales of HIP 6 beneficiaries soared significantly by 422.7% mainly driven by firms in
the manufacturing of furniture and E&E products
¢ After Pandemic: Higher growth of 247.1% was seen among TUBE beneficiaries as they gradually
moved towards online business, with one-third generating more than 40.0% of online sales to their
total sales, such as through social media, websites and e-commerce platforms. Similarly, GEB
beneficiaries that experienced high sales growth, were mainly firms in the manufacturing of food &
beverages, textiles & apparel, non-metallic mineral products, as well as wholesale & retail industry
(refer to Chart 1.10)
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Growth (%) Chart 1.10: Sales Growth Before and After COVID-19
450
422.7
400
247.1
350
300 32.1 65.5 23.7 48.1 49.7 15.1 19.6 39.6 77.8 Before
0 17.4 -7.4 HIP 6 24.0 BAP -4.9 TUBE COVID-19
250 HIP 3 After
200 HIP 4 HIP 5 GEB BEEP COVID-19
150 125.8
100
50 17.0
0
HIP 2
Labour Market Performance Chart 1.11: Growth in Skilled Workforce
(2016 - 2020)
The beneficiaries of MSME development
programmes also reported a higher increase MSME programme beneficiaries reported higher
in the hiring of skilled workers compared with increase in hiring of skilled workers
non-beneficiaries, with a double-digit growth of
44.0% recorded for the former and 14.5% for the Growth (%)
latter (refer to Chart 1.11). Meanwhile, hiring of 50
semi-skilled workers by beneficiaries increased
by 39.0% while non-beneficiaries employed only 40
4.7%.
30
Comparing the performance across all
programmes, detailed findings showed that 44.0% 40.1%
seven (7) out of nine (9) programme beneficiaries 20
experienced growth of more than 20.0% in the
hiring of local skilled workers after participating 39.0%
in the programmes. On the downside, HIP 5 and
BEEP had a growth increase of more than 50.0% 10
in foreign skilled workers, mainly in machine & 14.5%
engineering equipment including components
manufacturing sector, F&B manufacturing and 0 4.7% -2.4%
wholesale & retail sector. Skilled Semi-skilled Low-skilled
The hiring of semi-skilled and low-skilled Beneficiaries Non-beneficiaries
workers comprising operators & assemblers of
machines in factories; workers for craft & related Notes:
trade, agriculture, forestry, fisheries; service & Skilled: Managers, professionals, technicians, associate
sales workers; clerical support staff; and general professionals
workers in the 3D (dirty, dangerous and difficult) Semi-skilled: Operators & assemblers of machines in factories;
sector remained largely unchanged for most of workers for craft & related trade, agricultural, forestry, fisheries;
the programme beneficiaries. service & sales workers and clerical support workers
Low-skilled: Basic jobs often in work environments that are
considered dirty, dangerous and difficult (3D jobs)
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Chart 1.12: Employment Growth Before and After COVID-19
Growth (%) 68.6
70 63.3
60 60.3
46.4 49.7
50
29.1 33.6
40 22.8
23.7 Before
30 COVID-19
23.1 16.2 14.9 16.0 After
6.1 COVID-19
20 2.2 4.1 4.6
0
10 HIP 3 HIP 4 HIP 5 HIP 6 GEB BAP BEEP TUBE
0
HIP 2
Focusing on the productivity level of MSME respondents, several programme beneficiaries experienced
growth in productivity after the pandemic outbreak, while majority experienced an adverse effect.
The decline was inevitable as it is a global pattern brought by the impact of the pandemic. This was
observed among HIP 2, HIP 3 and HIP 6 beneficiaries that recorded lower productivity after COVID-19,
further reflecting on the objectives of the programmes that focus more on innovation rather than
productivity improvement (refer to Chart 1.13). Meanwhile, HIP 5 recorded negative productivity
growth due to production disruptions in the global supply chain which weighed on the manufacturing
sector. Subsequent extension of the MCO had dampened economic activity following the suspension
of operations by non-essential service providers and lower operating capacity of manufacturing firms.
On a positive note, beneficiaries of BAP, GEB and TUBE programmes reported higher productivity
growth after the pandemic. This was partly due to the digital transformation and adoption of automation
& mechanisation by MSME respondents, which is timely and a crucial strategy for businesses to survive
and thrive in the post-pandemic economy.
Chart 1.13: Productivity Growth Before and After COVID-19
Growth (%) 257.0
300
131.9
250
34.8 44.9 43.8 Before
200 7.9 -0.8 14.4 4.5 -23.1 8.9 COVID-19
0 -21.7 -9.0 6.4 -12.7 After
150 HIP 5 COVID-19
100 HIP 3 HIP 4 HIP 6 GEB BAP BEEP TUBE
50 40.8
0 -5.0
HIP 2
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ISSUES AND CHALLENGES FACED BY MSMEs
With the continued challenging business environment, MSMEs faced various issues, challenges and
hindrances, thus preventing the growth of their operations. Many MSMEs also have problems to ensure
their sustainability, as well as to remain competitive in the market and changing environment.
Insufficient Cash Flow and High Cost of Doing Business
Based on the outcome evaluation exercise, insufficient cash flow was the top concern among MSMEs,
mainly due to the higher price of raw materials & packaging, rental & utility charges and lower
demand for goods & services. Meanwhile, as observed in the previous quarterly surveys conducted by
SME Corp. Malaysia, high cost of doing business remained to be one of the key challenges faced by
MSMEs.
Chart 1.14: Key Issues Faced by MSMEs
2021 67.4% 51.3% 43.1% 34.4%
Insufficient cash
flow High cost of doing Competitive Government
business market regulations
2019 42.3% 39.9% 38.0% 36.8%
High cost of doing
business Competitive High labour cost Reduced demand
market for goods &
services
2016 64.1% 48.2% 41.2% 36.5%
High cost of doing
business Depreciation of Reduced domestic Low sales volume
the Ringgit demand for goods due to GST
& services introduction
Source: SME Corp. Malaysia Quarterly Surveys and Outcome Evaluation on Development Programmes of SME Corp. Malaysia in RMKe- 11
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Late Payment Issue
Late payment by debtors remains a major hurdle for MSMEs. Detailed findings showed that about
39.0% of the respondents, particularly those from manufacturing and construction, reported facing
late payment issues. The composition of late payment debtors was as follows:
78.2% 20.9% 14.5%
(2019: 84.1%) (2019: 27.2%) (2019: 9.1%)
MSMEs Multinationals Government-linked
and Other Companies (GLCs)
Large Firms
13.2% 2.8%
(2019: 7.5%) (2019: 7.5%)
Government Cooperatives
Ministries
Labour Issue
Employers are anticipating increasingly tougher times ahead amidst the softening domestic and
world economy. Aside from the rising cost of doing business, consumers are increasingly more
price-conscious and turning to online shopping for better bargains, the result of which is a fiercely
competitive marketplace. As a matter of survival, MSMEs have to resort to cost-cutting measures,
including reducing their workforce. In-depth assessment revealed that a total of 27.8% respondents,
primarily from the services and manufacturing sectors had retrenched their workers due the pandemic
for the following reasons:
81.4%
Cost
Reduction
80.2%
Downturn in
Business
23.7%
Border
Closure
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Lack of ICT, Digitalisation and E-Commerce Adoption
MSME online presence had doubled from 35.3% in 2019 to 75.8% in 2021, particularly among those in
manufacturing and services (specifically the F&B industry). E-commerce adoption had also increased
from 27.8% in 2019 to 37.9% in 2021, which had partly contributed to higher online sales intensity
during the year. Nevertheless, there were still some MSMEs who had low adoption of technology and
continued to opt for physical stores only, largely due to these reasons:
No need for online sales in their business Unfamiliar with online business and
(65.5% of respondents) e-commerce platforms (17.2% of respondents)
Comprising mainly MSMEs in the F&B industry Comprising mainly MSMEs in the F&B industry
(manufacturing); wholesale & retail trade, (manufacturing) and wholesale & retail trade
repair of motor vehicles & motorcycles and
other services sub-sectors; and agriculture
Lack of qualified employees to develop, Prefer traditional way of doing business
maintain and manage online systems (12.4% of respondents)
(16.6% of respondents) Comprising mainly MSMEs in the F&B industry
(manufacturing & services)
Comprising mainly MSMEs in the F&B industry
(manufacturing & services)
Exports Issues
Majority 82.3% of total respondents did not exports their products and services overseas, particularly
the microenterprises. Among key issues faced in exporting (for non-exporters and exporters) were:
63.9% 58.5% 58.0%
Inadequate information Expect to incur higher Inadequate source of
on the targeted market operating costs financing for exports
54.1% 51.1%
Inadequate information on global Inadequate knowledge on competitors &
demand for products & services distribution channels
Nevertheless, of the current non-exporters, more than half (57.1%) are optimistic of becoming
exporters in the near future. Currently, a total of 17.7% total respondents have exported their products
and services to foreign markets, primarily ASEAN, China and the United States. These exporters
are mainly small and medium-sized MSMEs and those in the manufacturing sector. Respondents
are ramping up efforts to increase exports volume, including diversifying into new exports markets
(65.6%); strengthening networking in the targeted markets (58.0%); and participating in international
trade promotion activities (53.3%).
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BENEFITS OF MSME DEVELOPMENT PROGRAMMES
Overall, beneficiaries of SME Corp. Malaysia’s programmes had cited that the programmes were
beneficial for their business operations. The top five (5) benefits of the MSME development programmes,
as indicated by the respondents were:
61.7%
Increase in sales revenue
and profit
58.4% 48.5%
Increase in efficiency & productivity Spur development of new products
through mechanisation and use of & services
social media & e-commerce
31.6%
36.2%
The programmes were catalysts
Enhanced capability to produce for innovation, digitalisation &
high quality products & technology adoption
greater competitiveness in the
international market
In terms of feedback that respondents provided pertaining to the development programmes, almost all
beneficiaries said the programmes should continue because of the benefits they offer; 97.1% said the
programmes provided clear and consistent information; and 96.4% said the programme owners were
helpful (refer to Chart 1.15). The terms and conditions for the programmes were said to be reasonable
by 96.1% of the respondents, while 95.5% indicated the contents were easily understood. The funding
received was reported as adequate by 87.9% of the respondents, while 71.7% said the approval process
was fast, and 65.4% informed that the time taken to disburse funds was satisfactory.
Chart 1.15: Feedback on Programmes
01 99.0% 02 97.1% 03 96.4% 04 96.1%
Programmes Clear and Helpful Reasonable
should be consistent programme terms &
continued information owners conditions
05 95.5% 06 87.9% 07 71.7% 08 65.4%
Easy to Appropriate Fast Short
understand fund amounts approval disbursement
forms process time
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EXPORTS ASSISTANCE
In terms of exports programmes, most of the beneficiaries of HIP 4 (89.5%) and GEB (85.7%) have
successfully ventured into the exports market, an outstanding achievement compared against the
average of 17.7% of overall exporters. Comparing the performance in the early and final parts of
RMKe-11, detailed findings showed that there was a significant increase in terms of export penetration
and sales performance of HIP 4 and GEB beneficiaries.
The significance of the two (2) exports programmes is very much evident in the intensity of exports
sales as compared to beneficiaries of other programmes. While the overall exports sales recorded by
all programmes were in the range of 1.0% to 10.0%, majority of HIP 4 beneficiaries (64.7%), particularly
those from medium-sized firms generated between 11.0% to 30.0% of exports sales to total sales. In fact,
there was higher percentage of HIP 4 beneficiaries generating more than RM1 million in sales in 2020,
which was at 47.1%, as compared to only 29.4% recorded in 2016. Moreover, more HIP 4 beneficiaries
managed to penetrate export market, from 35.3% yet to export in 2016, it reduced significantly to only
5.9% in 2020. This is prominent particularly among the small-sized MSMEs.
Zooming on to GEB, more than half of the remained respondents (55.6%) recorded exports sales
of between 1.0% to 10.0%, a slightly better performance than that achieved by beneficiaries of all
programmes. Moreover, though market penetration remained stagnant over the years, export sales
performance of GEB beneficiaries had substantially improved. No GEB beneficiaries had achieved
export sales of more than RM5 million in 2016, but by 2020 that volume was achieved by 11.1% of the
beneficiaries that were primarily the medium-sized firms.
Looking at the existence of export business plan, findings revealed that a large number of HIP 4
and GEB beneficiaries had developed their own exports business plans, reflecting the importance of
proper planning when venturing into market overseas. Beneficiaries of these two programmes also
cited that trade missions; market research or surveys; existing customers and exhibitions were key
channels in identifying their export markets. In terms of assistance, while the overall respondents
required export assistance in financing; exports-related training; and marketing & branding, HIP 4
and GEB beneficiaries prioritised more on tax-related incentives and market linkers to boost export
competitiveness.
Chart 1.16: Exports Performance of HIP 4 and GEB Beneficiaries
Sales (%) 5.9 5.9 11.1 > RM5 mil
100 > RM1 mil to RM5 mil
90 23.5 33.3 22.2 > RM500,000 to RM1 mil
80 41.2 > RM300,000 to RM500,000
5.6 5.6 RM300,000 and below
70 11.8 11.1 5.6 Yet to exports
5.9
60 33.3
50 17.6 27.8
40 35.3
30
20 35.3 11.8 22.2 22.2
10
5.9
0
2016 2020 2016 2020
HIP 4 GEB
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BOX ARTICLE 1 HIP 2: TECHNOLOGY
COMMERCIALISATION PLATFORM
High Impact Programme 2 (HIP 2), also known as the Technology Commercialisation Platform
(TCP), is an initiative under the SME Masterplan 2012 - 2020 that provides end-to-end facilitation
to commercialise innovative ideas and products. The programme not only serves as a platform to
link innovative MSMEs to the national innovation infrastructure and ecosystem, but also provides
technical and financing support that is not available in the current system or the private sector.
Although there are many initiatives to promote innovation, they are fragmented and not
interlinked, thus leaving gaps between the different phases involved. HIP 2 aims at consolidating
the fragmented system, as well as addressing information asymmetries among MSMEs or
innovators by enabling access to expertise and finance for commercialisation.
Based on the Outcome Evaluation Survey on HIP 2: TCP conducted among 107 respondents by
SME Corp. Malaysia in February 2019, a total of 89.9% reported benefiting from the financial
and technical aid, which was largely in the forms of proof of concept, productisation and testing.
Another 8.4% said the business advisory provided was beneficial.
HIP 2 recorded a high rate of return on investment, with beneficiaries generating RM47 million in
value-added and RM57.3 million in commercialisation value, a result which led to an increase of
30.0% in average salary per employee.
Among other HIP 2 benefits cited by the respondents were that the programme helped them to
achieve their business goals; helped in the commercialisation of their innovations along with the
transfer of intellectual property rights; and provided them with new business opportunities, all of
which are in line with the objectives of the innovation programmes.
22.3% Chart 1.17: Benefits of HIP 2 18.9%
Helped in achieving 20.0% Created new
business goals business
Helped to opportunities
commercialise
innovation & transfer
of intellectual property
rights
14.8% 9.3%
Created new Commercialisation
products & services of spin-off
innovations
7.7% 7.0%
Enhanced Received other
international Government benefits
technology & for same or other
knowledge transfer projects
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Findings from the recent Outcome Almost 80.0% of the respondents had
Evaluation showed that there has been an conducted market research before
improvement in innovation activities among participating in HIP 2. MSMEs need to be
the beneficiaries of HIP 2, with 87.0% of the aware of market developments, trends and
respondents, that are primarily in agriculture emerging technologies, as failure to recognise
and services, have commercialised their consumer needs, preferences and trends
innovations. All respondents reported that would likely lead to commercial failure.
HIP 2 had expedited the commercialisation of
innovations. HIP 2 had also facilitated market Chart 1.19: New Products or Services
expansion outside of Malaysia and enhanced Innovated within Six (6) Months to
the exports capability of the beneficiaries. One (1) Year
As to the type of innovation activities, 91.3%
of the respondents undertook product 73.9% 8.7%
innovation, which is defined as the introduction
of goods or services that is new or which has 1-2 Products or 3-4 Products or
been significantly improved upon with regard Services Services
to its characteristics or intended uses. These
firms have innovated at least one (1) product 8.7% 8.7%
or service within a period of six (6) months to
a year after participating in HIP 2. > 5 Products or None
Services
Chart 1.18: Types of Innovation by Sector
% of Respondent Chart 1.20: Intellectual Properties Applied
91.3 43.5 For and Granted
Overall 17.4 8.7
Agriculture 100.0 50.0 Applied Granted
Services 91.7 41.7 25.0 8.3
85.7 42.9 14.3 14.3 115 80
Manufacturing
Trademark
Product Innovation Process Innovation 33 18
Marketing Innovation Organisational Innovation
Patent
HIP 2 had enhanced strategic collaboration 4 4
between MSMEs and other organisations,
especially with other firms, universities and Copyright
research institutions, as well as brought
about the development and licensing of 75 Industrial 1 1
innovations. However, one-fifth of these Design
innovations were discontinued due to
financial constraints, knowledge limitation The most common method applied for and
and technological barriers. granted, in order to protect intellectual
properties under HIP 2, is the trademark,
followed by patents, copyright and industrial
design.
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BOX ARTICLE 2 HIP 5: CATALYST PROGRAMME
HIP 5: Catalyst Programme is a component of the SME Masterplan 2012 - 2020, which aims to develop
high growth MSMEs in strategic sectors such as medical devices, biotechnology, aerospace, rail
and oil & gas. The two strategic goals of HIP 5 are to raise the number of high growth MSMEs in
order to generate high income employment opportunities, as well as to boost the productivity of
these MSMEs. A total of 67 MSMEs have benefited from HIP 5 since its inception under RMKe-11.
Findings from the Outcome Evaluation showed that the main assistance received through the
programme was in enabling market access (96.8%) and purchase of machinery & equipment
(71.0%). The main benefits obtained were increases in sales value, efficiency and productivity.
Chart 1.21: Sales Revenue by Sector
2016 AEROSPACE MEDICAL RAIL LED BIONEXT
2017 DEVICES
2018 0.00 142,492,557.64 81,950,000.00 125,100,540.00 37,101,996.00
18,270,676.33 147,085,161.56 67,550,000.00 137,512,210.00 23,220,160.00
24,988,834.05 150,271,310.43 58,050,000.00 169,111,578.27 50,269,503.00
Source: SME Corp. Malaysia
Chart 1.21 shows increase in sales revenue by all HIP 5 beneficiaries, except for those from the
rail sector, as the initiative for the latter was only introduced in 2019. Beneficiaries of the BioNext
Initiative and Aerospace Manufacturing Initiative under HIP 5 reported significant results from the
programme. Seven (7) out of ten MSMEs that had participated in the BioNext Initiative recorded an
average sales growth of more than 20.0% from 2016 to 2018, while 27 out of the 30 participants of
the Aerospace Manufacturing Initiative had obtained AS9100 certification that enabled them to be
part of the global supply chain in manufacturing aerospace components.
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Chart 1.22: Revenue from International Sales
2016 MEDICAL DEVICES LED BIONEXT
2017 24,177,546.00 13,415,667.00 7,420,399.20
2018 24,105,597.45 12,567,555.00 4,644,032.00
30,902,800.64 13,183,880.96 10,053,900.60
Source : SME Corp. Malaysia
All the other initiatives under HIP 5 also helped to increase international sales revenue, as well
as enabling expansion into the global market (refer to Chart 1.22). Of all the respondents, 80.6%
reported exporting their products and services, while 80.0% have export business plans for their
companies.
Chart 1.23: Growth in Workforce Before and After COVID-19
Growth (%) Before COVID-19 Growth (%) After COVID-19
40 350
35 20.0 11.1 323.5
30 18.4 300
25 11.5 1.0
20 Skilled 24.1 250 Skilled 15.0 19.3
15 14.6 200 -51.7
10 -41.4 Low-Skilled
5 150 Semi-Skilled
0
100
50
0
-50
Semi-Skilled Low-Skilled
Local
Foreign
Beneficiaries of HIP 5 also reported significant growth in their skilled workforce before and after
COVID-19 (refer to Chart 1.23). However, the increase is largely in their foreign skilled workforce,
which rose 323.5% after the onset of the pandemic. The respondents concerned were mostly
from the manufacturing sector where there is a sizeable presence of foreign skilled workers in
the machinery & engineering equipment and components sub-sector. In contrast, the hiring of
foreign semi-skilled and low-skilled workers declined by 41.4% and 51.7% respectively.
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PRESTASI PMKS BAGI TEMPOH 2016 - 2020 (TUBE)
BOX ARTICLE 3
Tunas Usahawan Belia Bumiputera (TUBE) Programme, first mooted during the Young Bumiputera
Entrepreneurs Congress held in March 2014, is a Government initiative to encourage youths to
venture into business. The programme supports the National Malaysian Youth Policy which aims
at empowering youths to fulfil their potential through entrepreneurship, education and skills
training, as well as sports and volunteerism. It is designed to spur entrepreneurship among
youths, particularly Bumiputera youths between the age of 18 and 30 who are keen to venture into
business and have basic skills certificates from local training institutions or skills centres, as well
as to generate a paradigm shift among youths to become providers of employment rather than
being job seekers. The programme also includes people with disability, Orang Asli and Asnaf. A
total of 3,443 youths benefited under the TUBE programme from 2016 to 2019.
TUBE programme, which is conducted in boot-camp style, prepares aspiring entrepreneurs
via the mental perseverance and physical endurance approach in facing the reality of the
business world. The programme consists of three (3) phases of training encompassing:
PHASE Perseverance of Mind & PHASE Increase Knowledge - Effective
Physical Endurance Test Business Management
1 2
PHASE Guidance & Monitoring via
Buddy System
3
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The survey findings showed that majority (94.7%) of the respondents cited that their businesses
were still in operations, whereby 83.2% maintained their business operations as in their
business plans presented during Phase 2 of the programme, and the balance of 16.8% have
changed their business activities. Among the reasons to change business activities include
better business opportunities; less demand on current products or services; insufficient
funding to sustain their initial business plan; stiff competition and lack of knowledge. A total of
44.4% of the respondents are operating on licensed premises, while 39.2% are operating from
home. About 10.7% that are operating on unlicensed premises need to be assisted to relocate
their operations to legal sites or premises. Majority of the respondents also stated that they still
operate manually and have minimal element of automation in their business.
Through this programme, the beneficiaries obtained higher sales revenue and benefited from
higher growth in workforce whereby they recorded a growth of 152.6% and 56.9% respectively.
Hence, to further increase business sales, they still require assistance in terms of promotion
& advertising; followed by training in financial management; and marketing, sales & customer
data management. Mentoring & coaching, including training on online business or e-commerce,
was also reported as improvement required to improve their skills and enhance their business.
No. Programme Country Target Type of Support Impact Estimate
1. Tunas Usahawan Malaysia Youths aged Training, 4,910 new businesses were registered
Belia Bumiputera 18 – 30 finance, and 10,769 jobs were created from
advisory &
(TUBE) mentoring 2014 to 2019. > 95.0% survival rate in
first 2 years
2. .garage Hamburg Germany Unemployed Training, 83.0% of participants in 2000 – 2002
(ongoing) youths under finance, carried on in self-employment
the age of 35 incubator & 10.0% were in employment or
apprenticeship
First business Youths under Vouchers
year baskets the age of 29 for Business Improved survival rates:
3. for youth Lithuania Development 98.9% for 1 year vs. 63.3% (2012)
(2011 – 2013) Services (BDS)
4. Not in Education, Slovenia Unemployed Grants, training Improved survival rates:
Employment, or youths under 85.0% for first 2 years
Training (NEET) the age of 25
programme
5. The Prince’s United Unbankable Finance, Generated 155 additional startups
Trust Youth Kingdom youths aged coaching & in 2004 / 05 & 416 startups started
Business mentoring, sooner on a larger scale or higher
18 – 25
Scotland training quality
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BOX ARTICLE 4 MICROENTERPRISE PROGRAMMES
SME Corp. Malaysia has over the years conducted many
microenterprise-centric programmes and collaborated
with various stakeholders to ensure the development of
microenterprises in the country. Under the RMKe-11, key
performance indicators (KPIs) were established to enhance
awareness and capacity of microenterprises by providing
information via the print and electronic media, as well as
through workshops and training. Parallel with the KPIs,
SME Corp. Malaysia also developed programmes based on
an integrated approach, as well as in providing hand-holding
assistance by focusing on three (3) key areas:
Developing an Providing access to Mentoring and enhancing
entrepreneurial mindset resources to improve networking for greater
business operations market access
through education &
training
From 2016 until 2020, SME Corp. Malaysia conducted an array of successful programmes which
have proven beneficial to microenterprises in the country, among which are the Micro Connector
Programme; publication of a StartMEUP Toolkit; YouTube mini drama on entrepreneurship
entitled 'Chor & Chah'; Microenterprise Digital Transformer Starter Pack; and Women
Netpreneur Programme.
Awareness and Capacity Development through Printed and Electronic Media
StartMEUP: Business Toolkit for Startups YouTube Mini Drama on Entrepreneurship:
'Chor & Chah'
¢ Provides a 101 step-by-step guide for new
entrepreneurs to start business ¢ A story-telling approach to serve as a
comprehensive guide on doing business
¢ Assists existing businesses, especially
microenterprises, on efficient management ¢ Creating greater awareness of the assistance
available for microenterprises from various
¢ Highlights basic elements involved in venturing agencies
into business, including finance, marketing,
advertising & human resources ¢ In order to attract viewers especially youths to
inspire them to become entrepreneurs, celebrities
¢ A total of 38,524 copies of the Toolkit have been such as Saharul Ridzuan, Ummi Nazeera and
distributed to key stakeholders. The Toolkit is Hafreez Adam were cast for the video
also being used as an official training material by
INSKEN and TEKUN ¢ The video successfully garnered a total of 6.3
million viewers
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Awareness and Capacity Development through Workshops and Training
Microenterprise Digital Transformer Starter Pack Women Netpreneur Programme
¢ Collaborated with Microsoft Malaysia in providing
¢ In collaboration with MDEC, Gorgeous Geek and
exposure on ICT usage and basic Microsoft Office six (6) e-commerce platforms – Shopee, 11Street,
applications to microenterprises, including youths Lelong.my, Facebook, Buy Malaysia and Global
and women Halal Data Pool
¢ Aimed to boost productivity, daily operations and
online sites ¢ A series of digital training including:
¢ Attracted 739 participants (exceeding the target of − Introduction to e-commerce technologies
700), which resulted in the activation of 700 licenses − Setting up an e-commerce platform for online
and 23 training sessions held across all states
business
Workshop on Creative Skills − Digital business through the Business Model
¢ Provided greater exposure to training in fashion
Canvas
jewelleries, accessories and decorative craft skills ¢ A total of 609 participants were involved in the
for the B40 group, people with disabilities, Orang
Asli and single mothers programme. Feedback from the participants was
¢ Improved participants’ standard of living, inculcate as follows:
entrepreneurship and boost business registration − 87.0% had better awareness and understanding
¢ Benefited 30 participants and resulted in the
registration of eight (8) businesses of online and e-commerce technologies
− 80.0% subscribed to e-commerce platforms –
mainly Facebook, Shopee and 11Street
− 98.0% indicated willingness to invest in online
business
Creative Sewing Other seminars
¢ Collaborated with Sewing World Malaysia ¢ Training of 200 blind participants in collaboration
¢ Instilled competitive skills among 100 participants, with Malaysia Association for the Blind
not only limited to stitching but also included ¢ Training in collaboration with the Institute of
fashion decorations, fashion accessories, home Marketing Malaysia for 50 microenterprises:
décor and handicrafts 'Seminar on New Era of Marketing' and 'Seminar
¢ Provided ability for B40 to generate income even at on Developing Leadership in Your Organisation'
home
MICRO CONNECTOR PROGRAMME
The programme was introduced in 2019 as a structured programme
to provide technical assistance to help microenterprises set up and
manage their businesses, as well as to train B40 group in acquiring
new skill sets for income generation through entrepreneurship. The
skills taught to the B40 group enable them to become entrepreneurs,
thereby helping them to increase household income. The skills taught
included creative craft work (such as sewing and precious stone craft
products); cottage industry F&B (such as local delicacies); health &
lifestyle services (such as hairdressing, make-up and spa); childcare
and maintenance & repairs.
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Under the programme, technical assistance is provided in the forms of:
Online, mobile Rental of business Assistance in Assistance in
e-commerce and premises advertising & promotion productivity
e-payment & ICT improvement
applications
SME Corp. Malaysia has conducted a survey specifically for recipients of the programme, of which
the following results were reported by the beneficiaries:
¢ The top new skills acquired were in advertising and promotion (47.8%); mobile e-commerce;
e-payment and ICT applications (34.8%); and creative crafts (17.4%)
¢ Household income increased with an average of RM2,800 per household compared with only
RM2,000 per household before participation in the programme
¢ Increased utilisation of technology and tools, such as internet services; computers, smartphone
or tablets; as well as automatic or semi-automatic machines & equipment, in their daily
business operations
A close look at the survey findings highlighted the degree of online business among the
respondents. A total of 43.5% of them indicated that they conducted business fully online,
while another 41.3% combined both online and physical stores in their business operations.
As low as 15.2% cited that they ran physical stores only, but all had intention to move towards
online business in the future. Zooming on to the incentives that they had received from the
Government, these respondents have benefited mainly from the Geran Khas Prihatin; i-Sinar
or i-Lestari; Bantuan Sara Hidup (BSH) or Bantuan Prihatin Rakyat (BPR); moratorium and
discounts in electricity bills.
Moving forward, in order to develop better programmes in the future, a more dynamic evaluation
process is needed as opposed to the current passive evaluation approach. What is needed is an active
evaluation and real time monitoring feature to be embedded in the design of the programmes, so
as to better gauge their effectiveness, as well as perform corrective measures, in order to ensure
that the objectives and goals of the programmes are attained. The approval process and the speed of
disbursement of financial assistance also have to be improved since maintaining adequate cash flow in
daily business operations is a matter of urgency for MSMEs.
In addition, a conducive and holistic ecosystem that supports entrepreneurs is crucial to enable MSMEs
to become global players. Aligning to the initiatives under the RMKe-12, future direction for MSMEs
should be reviewed by taking into consideration the whole value chain of business development, from
startups to matured MSMEs, in order to further boost their entrepreneurial capabilities, as well as
strengthen the business landscape aimed at creating sustainable and globally competitive players.
Detailed strategic measures for future MSME agenda will be deliberated in the next section.
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02
FUTURE OF MSME
DEVELOPMENT IN MALAYSIA
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MSME DEVELOPMENT AND THE PANDEMIC’S
IMPACT
Prior to 2020, MSMEs in Malaysia recorded a steady growth and contribution to the economy. However,
this increasing trend in MSME contribution to Malaysia's economy had demonstrated a steep decline
in 2020, mainly due to the implementation of various containment measures following the outbreak of
COVID-19.
MSME GDP recorded a strong average annual growth of 7.1% from 2010 – 2019, higher compared to
5.1% of the overall GDP. However, in 2020, MSMEs GDP growth declined by 7.3%. The first time that its
growth rate had been lower than the overall GDP growth (-5.6%) in two decades.
In terms of MSME exports, from 2010 – 2019 the average annual growth rate of MSMEs was at 4.7%.
In 2020, MSME exports plunged by 33.1% to RM117.8 billion, primarily contributed by the sharp
decrease in tourism-related exports. The tourism sector was badly affected during the pandemic as
state borders were closed and international travel was restricted.
Meanwhile, MSME employment decreased by 65,000 people (-0.9% y-o-y growth) in 2020 and the
Non-MSMEs saw an increase of 35,000 (0.5% y-o-y growth) in employment numbers. The labour
productivity gap between MSMEs and Non-MSMEs remained relatively stagnant at 1: 1.5 from 2015
until 2020.
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NATIONAL TARGETS SET ON MSME
DEVELOPMENT
Recognising the importance of MSMEs, various national policies have set a clear target for MSME
indicators to spur the nation’s economic growth. The following are the identified targets for 2025 from
selected national policy documents:
MSME GDP MSME EXPORTS
CONTRIBUTION CONTRIBUTION
TARGET 2021 TARGET 2021
45.0% 37.4% 25.0% 11.7%
Source: RMKe-12, DKN2030, DOSM Source: RMKe-12, DKN2030, DOSM
BUMIPUTERA MSME MSME LABOUR
GDP CONTRIBUTION PRODUCTIVITY
GROWTH
TARGET 2015 TARGET 2021
15.0% 9.0% 3.5% 0.1%
Source: RMKe-12, TPB2030, DOSM Source: RMKe-12, DOSM
DIGITALISATION
RATE OF MSME
TARGET 2021
90.0% 75.8%
Source: RMKe-12, SME Corp. Malaysia Survey 2021
Based on the current performance of MSMEs post-pandemic, there are various areas that need to be
strengthened within the MSME development initiatives to achieve the set targets. Some of these targets
might also need to be stretched beyond 2025 to take into consideration the recovery period amid the
pandemic. Thus, these ambitious goals set by the Government, combined with uncertain domestic and
global economic conditions, create a need for the Government as a whole to carefully design support
policies and strategies to ensure that MSMEs regain their momentum.
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GLOBAL MEGATRENDS IMPACTING
MSME DEVELOPMENT
MSME development in Malaysia is guided by foresight in business dynamism and evolution in a
10-year horizon. SME Corp. Malaysia has identified key strategies to shape the strategic planning for
the organisation in delivering programmes and services that will contribute towards achieving MSME
long-term development targets set by the Government.
10 megatrends of tomorrow have been identified based on three broad lenses namely consumer,
market and technology trends to dissect how the megatrends impact various stakeholders in a general
manner. Based on these findings, key takeaways were identified for MSMEs on how they should respond
to changing megatrends (refer to Chart 2.1).
Chart 2.1: 10 Megatrends and 3 Broad Lenses
POLITICS SOCIETY TECHNOLOGY Empowerment
MEGATRENDS The growth & reinvigoration of ideas &
self-worth
ECONOMICS ENVIRONMENT
Polarisation
The Megatrends will be analysed through The rise of divisiveness & divergence
three (3) broad lenses:
Hyperconnectivity
Consumer Trends The collective & interconnectedness
How businesses should respond to behavior
changing consumer trends
Disengagement
Market Disruptions The evolution of ways we communicate &
How changes in market present new interact
threat & opportunities
Aging
Technology Trends The changes in values, cultures, priorities
How technology could close the gap across generations
between small & large business
Dematerialisation
The shift in value structure towards
intellectual
Scarcity
The unsustainable consumption of natural
resources
Blurring Boundaries
Emergence of ecosystems across
traditional silos
Erosion of Governance
Decline of traditional order / democracy
Displacement
Movement of people, ideas & challenges
across the globe
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MEGATRENDS OF TOMORROW
EMPOWERMENT AND EROSION OF GOVERNANCE
Individual empowerment and erosion of governance essentially precipitate the global decline of
traditional order. This owes itself primarily to the eradication of poverty and the increasing middle
class, particularly within Asia as it emerges as a global production hub, attributed to the region’s
significant advancement in education, technology and healthcare.
MEGATREND 1 EMPOWERMENT
The World Bank defines empowerment as the increasing capacity of individuals or groups to make
their own choices and to transform these choices into desired actions and outcomes. Empowerment
has led to an increasing significance in individual values and opinions. As more people are empowered
to take individual ownership of their lives precipitated by education, they find ways to obtain work or
start businesses to generate income to support their livelihoods. Empowerment is further driven by
significant advancements in technology, health care and the growing global middle class.
Due to the growing middle class, most of the world’s population will be uplifted from poverty, giving
rise to individual empowerment. The global middle class recorded a 48.5% increase from 899 to 1,335
million people (refer to Chart 2.2). The trend of empowerment is fast emerging in various developing
economies in Asia, mainly due to the growing manufacturing sector to cater to global demand.1
Chart 2.2: Number of People in Middle-Income Tier (million people), 2011 to 2019
899 48.5% 1,335 2011
2019
Source: Pew Research Centre, 2020
MEGATREND 2 EROSION OF GOVERNANCE
The erosion of governance captures the shift in governance practices from strict regulations to
advocating for 'good practices'. This trend not only restricts national governance, but likewise extends
to organisational-level governance. Individual and social empowerment is believed to be the main
driver for the erosion of governance, as people become increasingly empowered to claim ownership
of their individual voices. With the erosion of governance, the market becomes increasingly free to
compete and may operate based on its own invinsible hand, i.e. demand and supply.
In the context of organisational governance, trends predict a dismantling of hierarchical culture that
is often highly bureaucratic, towards a more horizontal culture that encourages teamwork and a
collaboration of ideas.
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CONSUMER TRENDS
Increasing Customisation Demand from Consumers
In the early 1900s, the renowned Henry Ford’s Model T’s mass production strategy has brought great
success to Ford, where 'customers may pick any colour, as long as it is black'. This strategy was a
major success during that era, as mass consumption was the trend among consumer behaviour. From
1908 to 1927, more than 15 million Model Ts were built and sold.
As time evolved, consumers today are empowered to have ideas and preferences of their own, where
personalised marketing strategies that include product differentiation and customisation are the right
combinations to provide unique product offerings to your target audience.
Today, businesses gain their competitive advantage through product differentiation; this can be achieved
through actively listening to the needs and wants of the consumers. The following is an example of a
successful startup known as Wiivv, which operates by customising products using 3D printers to cater
for individual choices and designs.
Founded in 2014, Wiivv the Canadian-American startup featured in the
Forbes 30 Under 30 List 2016, operates with 100 3D-printers at its production
plant in Tennessee, delivering hundreds of pairs of personalised insoles and
sandals daily.
At the forefront with the latest technology, Wiivv gathers customer orders
through an app that scans customers’ feet. The images and choices of
designs are then sent via the app. Datapoints extracted from the provided
images are then sent to the mainframe where unique insoles will be
produced. To enhance customer experience, products also come with
individual names.
Power Shift to Consumers
Empowerment and the erosion of governance have precipitated a rise in the power shift to individual
consumers, where consumers today make decisions based on ethical and conscientious considerations
from trusted brands. Purchasing decisions are now made beyond the consideration of price, they also
consider the processes involved, such as in sourcing of raw materials, manufacturing, packaging,
waste disposal, as well as CSR activities. Hence, it is becoming crucial for firms to ensure ethical
production and fair employment within the organisation. The example below refers to a recent incident
experienced by Top Glove Corporation Berhad.
The failure to produce ethically or mistreatment of employees may invite
severe consequences. The incident at Top Glove Sdn. Bhd. includes
it being accused of forced labour of migrant workers which caused a
Withhold Release Order (WRO) by the United States (US) Customs and
Border Protection on imported rubber gloves causing Top Glove to suffer
a 14.0% loss in value.
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Information Overload and Risk of Misinformation
The availability of information that comes with easy access to the internet has enabled consumers to
make informed decisions when making purchases. While this is empowering for consumers to have
endless choices of goods and services, it also comes with the risk of misinformation. An example
worth citing is 'Dr. Google', where people seek online health advice or diagnosis based on certain
symptoms they may be experiencing. Some of the information available on the internet may not come
from legitimate doctors or medical practitioners and subsequently cause further complications to
the patients.
MARKET TRENDS
Emergence of a Consumer-Driven Economy
The combination of both trends results in a consumer-driven market that encourages greater
competition among businesses in prioritising the needs and wants of consumers, allowing market
forces to run the economy. The result of this laissez-faire relationship is that businesses must begin
developing innovative strategies to gain competitive advantages over other market players.
Switching Traditional Employment to Entrepreneurship
The change in the traditional world order gives rise to the departure of employees from conventional
types of employment to an exploration of entrepreneurship. Paired with a free market economy,
entrepreneurs have become significant drivers of global economic and social development. Following
the trend of entrepreneurship, the gig economy has gained popularity as an alternative career option,
especially among young millennials and unemployed graduates. The COVID-19 pandemic has also
influenced a change in the perspective of consumers towards their own lifestyle, where work-life
balance becomes more valued than before (refer to Chart 2.3).
Chart 2.3: Projected Gross Value of the Gig Economy, 2018 to 2023
RM billion CAGR:
2,500 11.3%
2,000
1,500 1,700.7 1,928.7
1,000
500 1,257.1 1,472.6
0
864.3 1,052.0
2018
2019 2020* 2021* 2022* 2023*
Source: Mastercard,2019
*forecast
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Increasing Initiatives and Support on Women Empowerment
In line with United Nations’ Sustainable Development Goal (SDG) 5: Gender Equality, policies and
resources have been designed and allocated to focus on female empowerment with the purpose of
achieving gender equality that offers equal pay and fair job opportunities for both women and men.
Examples of both the global and Malaysian programmes and initiatives driven for female empowerment
are shown in Table 2.1.
Table 2.1: Global and Malaysian Programmes and Initiatives Driven for Female Empowerment
Global Malaysia
¢ IFundWomen Universal Grant Application ¢ Women Exporters Development Programme
¢ Global Fund for Women (WEDP) by MATRADE
¢ Women’s Entrepreneurship Development ¢ MySMELady by SME Bank
¢ Women Netpreneur Programme by SME Corp.
Programme
Malaysia
Potential Shadow Market Caused by a Diffusion of Governance
On the opposite end of a well-governed and transparent market is that a shadow market may emerge
that is less regulated and governed than formal markets. Shadow markets avoid the compliance of
legal obligations, i.e. registration of businesses, audit requirement and tax declaration. Some of the
examples of businesses operating in the shadow include counterfeit goods, lenders’ market, and
informal businesses.
According to the IMF’s Economic Issue No. 30 titled 'The Growth of Underground Economy', the shadow
economy may potentially dampen the growth of national GDP.2 However, tax revenues may increase
when parts of shadow economy formalise and start declaring taxes. This, in turn, increases public
spending which ultimately boosts the growth of overall economy.
TECHNOLOGY TRENDS
Social Media has Provided an Outlet for Consumers to Share Their Voices
Since the advent of social media, consumers are now empowered to openly communicate with brands
and share their honest opinions with peers on certain products and services on social media platforms
such as TikTok, Instagram and Facebook.
Marketing trends are now focused on peer-to-peer influence which has increased authenticity, relevancy,
and believability, as compared to a decade ago where advertisements were led by unapproachable and
famous artists. The power of peer reviews should not be underestimated as massive tech giants, such
as Amazon, Grab and Agoda have already embarked on this marketing strategy using the rating and
review system that builds confidence and trust among existing and new consumers.
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Adoption of Blockchain in Dealing with Different Governance Layers
Blockchain technology is an enabler for the erosion of governance where it encourages a cryptography-
based decentralised system that oversees a constellation of digital records shared amongst individuals.
The decentralisation of governance and the rise of blockchain technology enable collaboration from
multiple stakeholders, such as the Government, corporations, NGOs and the general public, to promote
transparency, accountability and public trust.
POTENTIAL CONSIDERATIONS FOR MSMEs
¢ Improvements in the overall standard of living grants consumers a wider range of choices. This shift
drives greater social empowerment and demand for autonomy, ultimately impacting consumer demands
and decision making.
¢ Consumers today are more conscientious on the sustainability and ethical practices of a business / firm
before making a purchase. MSMEs that can appeal to such consumer concerns can gain a competitive
advantage and develop a loyal customer base.
¢ Businesses need to rethink on how to cater to shifting consumer preference, from mass-produced
products / services to offering customisations and unique customer experiences.
¢ Social media platforms have become vital communication channels for businesses and consumers
alike to make their presence and voices heard. The emergence of 'key opinion leaders' is an example of
how 'peer-to-peer' opinions can influence the decision making of consumers.
¢ The emergence of new technologies, such as blockchain, enables consumers to shift from traditional
business practices to decentralised systems that move beyond the traditional umbrella of institutional
governance.
HYPERCONNECTIVITY AND DISENGAGEMENT
Staying connected while physically apart has been made possible by many factors, such as the
significant advancement of internet connectivity and communication technology, as well as the
decreasing need for in-person engagement. Hyperconnectivity and disengagement refer to two
polar-ends of connection, but remain well-integrated together.
MEGATREND 3 HYPERCONNECTIVITY
Hyperconnectivity describes the interconnectedness and collective behaviour among people, enabled
by increasing communication and interaction. Hyperconnectivity does not limit itself only to the
connection between people, but likewise the impact on organisational behaviour. Enabled by significant
advancements in communication technology and the development of the Internet of Things (IoT),
communication exchanges and information sharing can happen instantly from any location.
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While technology can function as enablers, this could also create a wider digital divide for MSMEs that
are not digital-ready. Based on the Internet Users Survey 2018 by MCMC, 87.4% of Malaysians are
regular internet users while the remaining 12.6% are mainly dominated by people aged 60 and above3
(refer to Chart 2.4).
Chart 2.4: Internet Users Survey 2018
Non-users
12.6%
Users
87.4%
Source: MCMC,2019
MEGATREND 4 DISENGAGEMENT
As society becomes more interconnected and enabled by technological advancements, physical
engagement become less important in helping organisations achieve their objectives. The evolution
in the way society communicates and interacts has led to the phenomenon of disengagement. Further
advanced by the movement restrictions of people during the COVID-19 pandemic, disengagement has
become more prominent to the general social behaviour of people and organisations.
The direct impact of disengagement is best observed among students and employees, where education
is now virtual, and work is performed at home. According to the World Economic Forum, it is estimated
that the global percentage of permanent remote workers will double from to 16.4% to 34.4% by the end
of 2021. Working from home disengages and subverts the traditional work order and has increased the
productivity of workers in sectors that don’t require physical presence.
CONSUMER TRENDS
Demand for 24/7 Services
Hyperconnectivity has led consumers to demand real-time customer support. At the same time, given
the simultaneous rising trend of disengagement, consumers expect high responsiveness, accessibility
and interactive services from businesses.
The two trends confront us with both societal benefits and challenges, where businesses can grow
their market access across borders and from different time zones. However, at the same time, smaller
businesses with limited digital capabilities may experience a digital divide and lose potential gains.
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Short Attention Span and Quick Fading of Interest
This has directly impacted the way businesses approach marketing and advertising strategies and
how to capture their customers’ attention. To capture longer attention, video content is preferred
over written content, as studies have shown that viewers are able to capture 95.0% of an audio-visual
message as compared to 10.0% from text-based messaging.
Considering screen fatigue, short vibrant videos with quality content on various social media platforms
such as Instagram, Facebook, YouTube, and TikTok have proven to be highly effective in attracting
consumers. Studies have also shown that videos contribute 34.0% to sales, 51.0% to internet traffic,
70.0% to brand awareness, and 31.0% to digital conversion4 (refer to Chart 2.5).
Chart 2.5: Microsoft Study on Human Attention Span and E-Commerce Survey 2018 on
E-Commerce Usage by Malaysians
8 A Microsoft study has shown 51% Based on the E-Commerce
that the average human Consumers Survey 2018
secs attention span has reduced by MCMC, over 51.0%
by nearly 25.0% from 12 of Malaysians uses
seconds in the year 2000 to 8 e-commerce.
seconds, owing to the digital The primary reasons for
lifestyle that has produced consumers to shop online are
an impulse generation that is for convenience, accessibility,
dependent on quick and easy pricing, selection, product
access to information, information and the ease of
payment.
Shifting from Physical Shopping towards E-Commerce
As people become increasingly disengaged, e-commerce has been the main connector for businesses
and consumers to continue with their interactions. From 2015 to 2020, the e-commerce industry in
Malaysia recorded a compounded annual growth rate (CAGR) of 12.9% from RM89.1 billion to RM163.3
billion in 2020 (refer to Chart 2.6). This has provided MSMEs an opportunity to not only stay afloat, but
to venture into global markets.
Chart 2.6: E-Commerce Gross Value-Added to Malaysian GDP (RM Billion), 2015 to 2020
200 26.5%
150
100 89.1 163.3
129.2
117.4
95.6 107.3
50
0 2015 2016 2017 2018 2019 2020
Source: DOSM, 2021
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BAB 2:
PEMBANGUNAN PMKS MASA DEPAN DI MALAYSIA
MARKET TRENDS
Telecommuting and Rise of Remote Work
The result of restricted interactions from the COVID-19 pandemic is that virtual meetings are now the
new norm for many major organisations. People can now add value to the economy from the comfort of
their homes, reducing costs and time for both employees (e.g. commute fares and duration spent) and
businesses (e.g. office space rental and utilities) that contribute to increased productivity and efficiency
(refer to Chart 2.7).
Chart 2.7: Job Search for Remote Working
460% Both employees and employers are exploring remote working as the future mode
of employment. According to Glassdoor, job searches for remote work have spiked
460.0% over the past two years ending June 2021. This has encouraged employment
opportunities for businesses to hire foreign talents that are equipped with the skill sets
and knowledge for their work
Source: Glassdoor, 2021
A Stanford study over the course of nine (9) months had found that working from home increased
employee productivity by 13.0% (refer to Chart 2.8).
Chart 2.8: Stanford Study on Employment Productivity Working from Home
13% Potential Reasons: Beneficial Parties:
¢ Reduction of breaks ¢ Housewife or househusband
Employment ¢ Increasing well-being ¢ E mployees residing in distanced locations
Productivity ¢ Less applications of sick leave ¢ Employees with physical disabilities
¢ I mproves convenience & ¢ Startups without office spaces
accessibility of necessities Source: Stanford, 2021
Hypersensitive Market
Uncertainty and volatility are among the primary consequences of the COVID-19 pandemic. Additionally,
the mercurial nature of the US-China trade war adds further destabilisation to the global economy as
markets are highly sensitive to such political changes.
In the manufacturing sector, person-to-person connectivity ensures that workplace accidents can be
promptly addressed. Meanwhile, service sector businesses increasingly rely on data analytics in their
decision-making.
194
PELAN STRATEGIK PERNIAGAAN 2022 - 2030
SME CORP. MALAYSIA
Recent Isolated Global Events that have Impacted Global Supply Chains / Markets
Blockage of containerised vessel at Suez Canal – The Suez Canal incident caused disruptions
across regions and industries creating a domino effect of global supply chain disruptions,
exacerbating port, railyard, and distribution centre congestions; straining container ship
shortages; and delaying shipments, including the delivery of raw materials, which also impact
other downstream production chains and the manufacturing of various consumer goods.
Shortage in global microchip supply – The oft-touted shortage stems from a confluence
of factors, as carmakers, whose plants shut down during the COVID-19 pandemic, competed
aggressively with the sprawling consumer electronics industry for microchip supplies. Sanctions
against Chinese tech firms had further exacerbated the crisis.
Shortage in shipping containers – The shortage that stemmed from the COVID-19 pandemic
had led to fewer empty containers being picked up, leaving many containers in inland depots and
stuck at ports for long periods.
TECHNOLOGY TRENDS
Technology Enablers that Serve
Hyperconnectivity and Disengagement
Technology has enabled people to stay connected
while living in a highly physically disengaged
world, giving rise to the importance of digital
competitiveness. Based on the IMD World Digital
Competitiveness Report 2021, Malaysia is ranked
27th in digital competitiveness worldwide.
However, digital adoption among MSMEs
is relatively low, as only 1 in 3 MSMEs have
implemented digital transformation. Other
indicators include, web presence (37.8%), the
use of back-end business processors (14.0%)
and fulfilment software at 11.0%. Meanwhile,
the pervasiveness of technology has allowed
MSMEs to leverage on technologies that have
the same global outreach as some MNCs;
whereas Maxis Digital Readiness Index (DRI)
found that 58.0% of 2,000 Malaysian small and
medium enterprises that used the service,
are categorised as 'Not Ready' in reaching full
potential in embracing digital technologies to a
greater extent, to reap the benefits in efficiency,
productivity, customer experience and employee
satisfaction. Additionally, internet speeds are
vital in facilitating business efficiency (refer to
Chart 2.9).
195
BAB 2:
PEMBANGUNAN PMKS MASA DEPAN DI MALAYSIA
Chart 2.9: Broadband Speed, Smartphone and Business Digital Adoption
Fixed Broadband Global Smartphone Market Digital Adoption of SMEs
Performance, 2021 in Malaysia, 2021 in Malaysia
Ranking by Countries Speeds Number of Smartphone Users Ratio of SME Implementing Digital
1st Singapore (mbps) Transformation Strategies
2nd Thailand 188.11 28.36 million
3rd Hong Kong 173.44 1:3 businesses
170.48 Smartphone Penetration
40th Malaysia SME Establishments with Web Presence
43rd Vietnam 72.97 87.5%
50th United Kingdom 64.67 37.8% (2017)
70th India 56.70 % of Internet Users on
46.16 Mobile Phones SME Utilisation of Back-end Business
Processes
99.6%
140.0% (2017)
SME Utilisation of Fulfilment Software
11.0% (2017)
Source: SpeedTest Global, 2021 Source: Statista, 2021 Source: World Bank, 2021
POTENTIAL CONSIDERATIONS FOR MSMEs
¢ MSMEs must recognise the importance of data analytics in business decision-making to spot the latest
trends and keep up with the rapidly changing consumer trends, needs and wants.
¢ To capture consumers’ attention and convert interest into purchase, MSMEs must pay attention to their
marketing strategies and ensure attractive advertising content.
¢ The increasing adoption of e-commerce has pushed businesses to go digital and level the playing field.
It offers efficiency, convenience, and most importantly, accessibility for consumers in every part of the
world. This has opened opportunities for unrestricted market access for not only local consumers, but
for global audiences as well.
¢ MSMEs should also take note of their supply chain sustainability; it is advisable for businesses to diversify
their sources of raw materials should future unforeseen events cause further market disruptions.
BLURRING BOUNDARIES AND DISPLACEMENT
People, ideas and challenges are diffusing swiftly on a global scale and business ecosystems are
beginning to take on many different forms. It is imperative to view and assess these two megatrends
along with their associated impact, as the highly interconnected state of current society will only
enforce their relevance further in the impending future.
196
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SMECorp Malaysia Business Strategic Plan 2022-2030
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