Economic Report 2013/2014: Micro-enterprises unable to move up value chain

by **Cals** Sat 26 Oct 2013, 21:09

Published: Saturday October 26, 2013 MYT 12:00:00 AM
Updated: Saturday October 26, 2013 MYT 9:30:49 AM
Economic Report 2013/2014: Micro-enterprises unable to move up value chain
THERE are 496,458 micro-enterprises (MEs), defined as establishments with less than RM250,000 of annual sales or employing fewer than five workers.
The 2011 Economic Census collected by the Statistics Department showed MEs consist of 75% of business establishments. The majority are in the services sector, consisting of 93.1% or 462,420 establishments.
However, they are unable to move up the value chain due to low productivity and growth. Their gross domestic product (GDP) contribution is only 8%, while their productivity gap, compared with large companies, is 4.1 times lower.
In the SME Masterplan, via the High-Impact Programme 6 entitled Inclusive Innovation, it plans to empower the bottom 40% of SMEs in the income pyramid. MEs will experience hand-holding and technical, financial and management support programmes are provided.
The Government also formed Tabung Kumpulan Ekonomi Usaha Niaga (TEKUN Nasional) in 1998 to increase their access to financing and business development. This initiative was further boosted in last year’s budget with a RM180mil allocation for micro-financing. Since its formation, RM2.86bil has been given to 272,104 MEs.

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Despite this, MEs continue to face four key issues.
First, MEs lacked the information on the relevant agencies to go to for assistance. This is due to an inefficient infrastructure and policy execution. Some agencies have overlapping roles and responsibilites which leads to further challenge in execution and monitoring of activities.
Second, MEs lack the capacity and capability to effectively compete due to lack of awareness of the ways to improve their business operations. For those that do, they may lack the resources to improve.
Third, the lack of entrepreneurial mindset, where more efforts are needed to shift the general employment-driven and self-employed mindset to a true entrepreneurial mindset. This includes the shift of the general population’s mindset from looking for job security to entrepreneurs who are passionate of producing their own products and services.
Lastly, lacking a long-term coordinated support, as shown in an analysis where market distortions and oversupply of products and services were created due to past focus of creating MEs instead of creating demand for MEs’ products and services. More effort is needed to create demand effectively.
The National SME Development Council is currently studying a Breakout Strategy for Micro-enterprises. Planning to finalise this in the near term, the proposed strategies are expected to enable MEs to tap into the entire supply chain of the economy.