Policy focus
Improve the productivity of SMEs
The Malaysian Census Report on SMEs 2011 recorded a total of 645 136 small and medium-sized enterprises operating in Malaysia. They accounted for 97.3% of all business establishments. Census findings also showed that 90.1% of SMEs were in the services sector, 5.9% in manufacturing and 3% in construction. The remainder operated in agriculture (1%) and mining and quarrying (0.1%).
SMEs contributed nearly one-third (32.5%) of GDP in 2011, compared to slightly more than large firms’ two-thirds (67.5%). In the same year, the output of SMEs expanded at a faster pace (6.8% year-on-year) than that of the overall economy (5.1%). Employment in SMEs also grew faster than total employment growth – 3.9% against 3.7%
By far most Malaysian SMEs do business in the services, generating a total of value added in 2011 that accounted for 20% of national output (Table 2.5.2). Manufacturing sector SMEs come a distant second, contributing just 7.9%.
Table 2.5.2 Contribution of SMEs to GDP in Malaysia, by key economic activity, 2007-11
2007 2008 2009 2010 2011
Agriculture 3.4 3.3 3.4 3.4 3.4
Mining 0.1 0.1 0.1 0.1 0.1
Construction 0.7 0.7 0.8 0.8 0.8
Manufacturing 8.2 7.8 7.4 7.7 7.9
Services 18.2 19.1 19.9 19.8 20.0
Plus: import duties 0.1 0.2 0.2 0.2 0.3
Total SME value-added 30.7 31.2 31.7 32.0 32.5
Malaysian SMEs face a number of constraints:
1. Lower productivity than their counterparts in the more developed nations
2. Lower business formation rates than in high-income nations
3. Output and employment is concentrated in a relatively small number of firms
4. Many operate in the informal sector.
In July 2012 Malaysia launched its SME Masterplan which seeks to boost the contribution of SMEs to GDP from 32% to 42%. The masterplan’s objectives include:
1. Raising the productivity of SMEs
2. Increasing the SME business formation rate
3. Expanding the number of high-growth, innovative companies
4. Intensifying entry of SMEs into the formal sector.