Counterclockwise starting from top left: Tan Sri Dato’ Dr. Munir Majid, Chairman of ASEAN-BAC Malaysia; Mr. Rizal Nainy, CEO of SME Corporation Malaysia; Mr. Raja Singham, Managing Director of BAC Education Group & Council Member of ASEAN-BAC Malaysia; Datuk Ir. Chong Hon Len, President of Federation of Sabah Industries; Ms. Jukhee Hong, Deputy Executive Director of ASEAN-BAC; Mr. James Ha Haw Yew, Chairman of Federation of Malaysian Manufacturers Sabah.
Sabah MSMEs must explore new markets and technologies to not only survive the COVID-19 pandemic but also thrive in the future.
Kuala Lumpur, 23 October 2020 — ASEAN Business Advisory Council (ASEAN-BAC) Malaysia hosted the first Virtual Dialogue with Sabah Micro, Small and Medium Enterprises (MSMEs), titled “Unlocking Sabah’s Potential in the Post-COVID-19 World”.
The session featured insights from industry leaders Dr Ir Chong Hon Len, President of Federation of Sabah Industries (FSI), Mr James Ha Haw Yew, Chairman of Federation of Malaysian Manufacturers (FMM) Sabah, Mr Rizal Nainy, CEO of SME Corporation Malaysia, and Mr Raja Singham, ASEAN-BAC Malaysia Council Member, and Founder and Managing Director of Brickfields Asia College (BAC) Education Group.
Moderated by Tan Sri Dr. Munir Majid, Chairman of ASEAN-BAC Malaysia, the discussion centered on the challenges faced by MSMEs in Sabah against the backdrop of the COVID-19 pandemic, how the government can help limit the adverse impact of the pandemic on Sabah MSMEs, initiatives to help revitalise small businesses, as well as where Sabah stands within the larger ASEAN market.
1. Sabah is strategically located to serve ASEAN markets but MSMEs struggle to integrate themselves along the value chain
Datuk Ir Chong Hon Len, President of the Federation of Sabah Industries (FSI), noted that the majority of manufacturers in Sabah are MSMEs and their limited capability hampers their ability to make full use of the richness of Sabah’s natural resources. This is compounded by other challenges such as a small home market within the state, inefficient logistics infrastructure, and high production costs in comparison with competing ASEAN markets.
According to FSI, while the ten-member ASEAN bloc represents a market of 650 million people, ASEAN member states tend to produce similar products that compete rather than complement each other. This is especially true when it comes to agricultural products in the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) in which Sabah is located.
“Sabah holds a lot of potential especially in the food and beverage sector, and it is imperative that we work on improving our supply-side quality and our logistics capabilities in parallel. This is especially important as we look at containment measures to curb the economic impact of the COVID-19 pandemic since small and medium-sized manufacturers contribute to about 90% of employment in Sabah’s manufacturing industry,” he said.
Indeed, according to the Sabah Economic Action Plan, the state’s manufacturing industry would have to expand by seven times in order to attain Sabah’s projected growth rate. While initiatives such as the Pan Borneo Highway and the Sepanggar Container Hub are likely to boost Sabah’s growth as a commercial hub in ASEAN, much remains to be done.
2. Continued government support is needed to help Sabah MSMEs recover from the effects of the COVID-19 pandemic
ASEAN-BAC Malaysia’s virtual dialogue also featured insights from the Federation of Malaysian Manufacturers (FMM) Sabah’s recent survey of 45 manufacturing companies in the state, titled “Gaps and Opportunities for Government’s Initiatives and Support in Mitigating the Effects of COVID-19”.
The survey, which was conducted in June and July this year, found that most respondents have experienced a 25% to 50% drop in revenue and production volume, and that 77% of them are battling cash flow issues. Furthermore, while over 60% of those surveyed intend to maintain their current workforce in the next three to six months, 20% of them say they expect to shrink their workforce during the same period.
When asked what business development services were most needed, 83% of those surveyed said that they most needed advice on government incentives, assistance and grants.
“FMM believes that the government should continue to support and assist the industry to recover which is most needed to boost the economic activity and recovery in Sabah,” said Mr James Ha Haw Yew, Chairman of the Federation of Malaysian Manufacturers (FMM) Sabah.
Mr Rizal Nainy, CEO of SME Corporation Malaysia, agreed noting that “with 98.5% of businesses in Malaysia being SMEs, the government is constantly looking into various policies and measures to mitigate the impact of COVID-19 on this sector. This is in addition to the series of economic stimulus packages, namely PRIHATIN, PENJANA and KITA PRIHATIN, announced in a bid to soften the adverse impact of COVID-19.”
3. Adaptability is key to survive and thrive in a competitive and fluid business environment
Mr Rizal Nainy also stressed that SMEs need to have access to adequate information to thrive in a competitive and fluid business environment, and that they should constantly seek information on initiatives provided for SME development. “The SMEInfo Portal (https://smeinfo.com.my/) provides convenient access to information on all government programmes for SMEs, including the various financing schemes and business support services,” he said.
Fellow panelist Mr Raja Singham, ASEAN-BAC Malaysia Council Member, and Founder and Managing Director of the Brickfields Asia College (BAC) Education Group, echoed this sentiment, adding that “entrepreneurs will need to adapt to stay relevant if they want to sustain and grow their businesses whilst combating COVID-19.”
Conclusion: Sabah MSMEs must explore new markets and technologies to not only survive the COVID-19 pandemic but also thrive in the future environment
In summing up the session, Tan Sri Dr Munir Majid, Chairman of ASEAN-BAC Malaysia, stressed the need for businesses to adapt to the new normal. He opines that unless Sabah MSMEs learn to manage their businesses better and adopt technologies such as e-commerce to improve production and sales, they will not survive and there will be no future.
“Sabah MSMEs are facing a once-in-a-lifetime challenge from the COVID-19 pandemic which is in full flood in the state. It may seem insensitive to ask them to look to the future when their very survival is at stake — but survival now and in the future are linked,” he said.
“Sabah MSMEs must also look at markets beyond the state, such as in neighbouring Indonesia and the Philippines. What kind of prospects do those markets offer? What kind of obstacles do they face to reach those markets? These are some of the areas that ASEAN-BAC Malaysia can try to be of help. We can also try to assist by mentoring entrepreneurs through the ASEAN Mentorship for Entrepreneurship Network (AMEN),” said Tan Sri Munir.