SMIs boost country's economy

By MOHD. KHUZAIRI ISMAIL
rencana@utusan.com.my
Oct 22 2009

Stepping out from the global economic crisis in early 2008, the Budget 2010 , to be tabled soon, will definitely be directed to efforts by the government to boost the country's economy.

The injection of new economy is crucial when the country is showing signs of positive economic growth and encouraging recovery.

That is the reason too, the 2010 Budget is anticipated by most economic analysts as a deficit budget where the government's expenditure will exceed revenue. In another words, the government still has to play an important role in efforts to stimulate the country's economic growth.

Unlike giant companies, especially those which are directly link with the economic climate in Europe, the small and medium industries (SMIs) , are said not to be greatly affected by the impact of the 2008 global economic recession.

However, the growth of the sector also suffers contraction because consumers choose not to spend for fear of the economic crisis getting worse.

The increasing cost of production and raw material also resulted in SMI manufacturers being forced to downsize their operation. The effects have to be absorbed by workers, either by reducng their working hours or, worst still, to be laid off. That is why the sector requires to be given special attention in the country's budget. Among the things which need to be enhanced is incentives which will encourage SMIs, especially in the rural areas, to shift from traditional ways to use of modern technology, including use of machine.

SMI operators in rural areas should also be exposed to modern technology so that their enterprises could be expanded and enlarged and their products be marketed abroad.

Towards this end, the government should provide a more conducive environment for SMI entrepreneurs to develop their own brands. Unlike capital incentive or business aid, the aspects on branding is given less attention.This situation results in many local entrepreneurs not keen to promote or commercialise their brands,

Therefore, the coming Budget is hoped to recommend policies and offers of incentives, in terms of product branding among local SMIs.

Other matters which can be given attention to is on establishing a business network with foreign companies, especially with neighbouring countries like Indonesia and Thailand. This cooperation will enable local SMIs to work with foreign companies and venture into new markets in countries in the region.

Economic analyst Haim Hilman feels that the government, through the Budget 2010, should classify the SMIs according to certain criteria, like very competitive, competitive, medium, not competitive and not competitive at all.

Haim, a lecturer at College of Business, Universiti Utara Malaysia (UUM), clarified that such a move would enable the government to come up with a more effective stimulus and recovery package. For example, the government could form a Research and Development Centre (R&D) in areas occupied by the SMIs and they could use the available facilities to develop their products, as well as to seek advice. The reason being that to have a recovery package which is based on one for all will not be effective in the cuirrent economic environment.

Haim also said that the categorisation, in principle, was capable of assisting the government in moulding a strategic and more comprehensive plan for SMIs.

"Such a move is capable of motivating the SMIs to be more competitive," he added.

Other incentives which can be enhanced through 2010 Budget if by providing financial assistance. Capital, in the form of grants or loans, can be channeled more effectively because this category will be the main indicator for SMIs with potential.

Therefore, it is approrpiate that this budget will be business-friendly, especially for the SMIs because this sector will be the main contributor to the recovery and gtrowth of the country's economy.


The closing of these companies also resulted in thousands of people to lose their jobs, and if this happens, the process of economic recovery will be more difficult and slower.

Besides the SMIs, the manufacturing sector, which is the backbone of the country's economy, should be given particular attention in the Budget 2010. There should be negotiations between the government and investors to find ways of ensuring they remain in operation in Malaysia.

Letting them go to other countries, on grounds that Malaysia is no longer competitive will be a big mistake because there are still many companies which still want to remain in the country if there is support from the government.

Therefore, the government has to embark on proactive efforts to maintain investor confidence. He said it was necessary that the government encouraged the private sector to participate actively in the country's economic development. The government's ability to attract and encourage the private sector to make early injection of capital into the sector or markets is also important.

Therefore, offering them attractive investment packages, besides a competitive corporate tax, is capable of providing a positive contribution in efforts for an economic revovery.

In a wider scope, Haim also opined that the 2010 Budget should have a mechanism for mega infrastructure development where their implemenmtation would require thorough monitoring because the success of the mega projects is capable of giving a huge impact to the economic network and the people's socio-economy.

Apart from that, medium and small projects which have been approved and being carried out should also be monitored to avoid delay in their implementation. Failure at this level will hamper efforts for an economic recovery.

The service sector should also be given certain incentives so that it can play a more effective role in accelerating the country's economic growth.

The policy to liberalise 27 subsector in the service sector recently should be supported with activities capable of placing Malaysia as a competitive country.

Packages, in the form of strategic cooperation, should be introduced in an effort to attract foreign investors to invest in the country.