A discussion summary

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 Manufacture

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.

Tan Sri Munir underlined the fact that Sabah is currently the epicentre of the nation’s COVID-19 pandemic due to the surge of positive cases and mentioned that Sabah has potentials that were not completely utilized especially in the aspect of digitalisation. According to Tan Sri Munir, the importance of e-commerce is an aspect that all businesses should adopt, especially the MSMEs in Sabah in order to revitalise their trade activities.

During the Virtual Dialogue, among the key insights shared were:

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) presented that most manufacturers in Sabah are MSMEs and their limited capabilities hinder their ability to maximise the rich potential of Sabah’s natural resources. This is compounded by further obstacles such as a small home market within the state, inefficient logistics infrastructure and high production costs.

“The ASEAN nations yield similar products to compete with one another as opposed to complementing each other and that at times can kill an industry”, Datuk stated. Datuk Chong provided an example by saying 15 years ago, Sabah was at its peak in the sales of garden furniture with the market value at $10 per piece. Soon after, Indonesia and Vietnam competed with Sabah and that resulted in its market value plunging to RM8 per piece.

He mentioned that the Sabah Economic Action Plan has identified its manufacturing industry as a sector that needs to multiply its GDP growth by 7 in order to achieve the projected growth for Sabah.

In the past, incentives were given to SMEs to rebuild their transportation such as trucks, lorries and buses. Due to a change in policy, the auto-parts industry is almost extinct. Datuk Chong said that there should be a policy to balance the linkages between the auto-part industry and the ecosystem industry.

Datuk Chong projected FSI’s wish with the statement of contributing to the manufacturing industry by investing in the sustainability of raw materials supply and high value will add to the manufacturing and distribution activities.

Furthermore, he underlined the fact that the majority of the local SMEs in Sabah are in the F&B industry and a lot of them are operating in a small-scale manner. With the establishment of trading houses to serve the overseas market, it will give the F&B industry a competitive edge.

2. Continued government support is needed to help Sabah MSMEs recover from the effects of the COVID-19 pandemic

Federation of Malaysian Manufacturers (FMM) Sabah presented a 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 of this year has found that the majority of respondents reported a 25% to 50% decrease in sales and output volume with 77% of respondents grappling with cash flow issues. Moreover, more than 60% of the businesses surveyed are planning to retain their current workforce within the next three to six months while 20% stated that they are expecting to reduce their workforce over the same period of time.

FMM has drafted a proposal named ‘Special Assistance and Incentives’ which contained suggestions for the Federal Government to consider in view of the worsen COVID-19 situation in Sabah.

Mr James’s emphasised on the Special Loan Scheme which was extended to Sabah-based companies was similar to the PENJANA scheme which would help the SMEs to ease the cash flow issue. He said that most of the time when the Federal Government announces a special scheme or a special grant, chances of companies in Sabah getting approved of the grant are extremely slim. Moreover, businesses tend to get rejected by the bank when it comes to loan applications.

Dialogue Session 1

In this session, three attendees raised their concerns, views and opinions of the current struggles of Sabah MSMEs.

Ms. Natalie Fung, Director of Sabah Skills & Technology Center underlined Tan Sri Munir’s opening statement on the implementation of technology and digitalisation to cushion the effect of COVID-19. She mentioned that although it is vital, infrastructure in many districts in Sabah have yet to reach or improve their digital skills. Ms. Fung also shares Malaysian Communications and Multimedia Commission (MCMC)’s sentiment on how Sabah will achieve digitalisation by the year 2025. Her question was ‘What can Sabah MSMEs do now?’.

Tan Sri commented that the digitalisation problem has been acknowledged. He used an example of a seaweed seller in Kota Kinabalu who managed to multiply her sales with the help of Telekom Malaysia. When it comes to Internet connectivity, he urged everyone to take it up with the government as it is the top brass’ role to do so especially when it comes to Sabah and Sarawak. He said that meanwhile, ASEAN-BAC may approach I.T. or telecommunications companies to assist on this matter.

This was then followed by Mr. Ho, Director of Power Co Technology. He expressed his concern by saying that although Sabah is centrally located within the ASEAN region, there is a lack of skills of Human Resources. Being in the Electric & Electronic (E&E) industry, Mr. Ho encountered the issue of hiring highly skilled workers for his company.

Tan Sri Munir Majid stressed that the PRIHATIN package which was worth RM3 billion has been allocated to combat the human capital issues. He said SME Corp could perhaps put it on their website the available schemes for MSMEs.

Mr. John Artemio, a member of FSI expressed his concern on how the media resources are expensive especially for young businesses. Mr. Artemio stressed on the fact that there should be an agency that offers online courses to help SMEs to venture and market their products. The agency should also guide SMEs in preparing the necessary documentation. He also added that the government should offer subsidies for the production and marketing costs to kick start their businesses.

Tan Sri said that MSMEs in Sabah could perhaps resource the pool by sharing the entire cost equally. In terms of online courses, The ASEAN Mentorship for Entrepreneurs Network (AMEN) may help in mentoring small entrepreneurs. Tan Sri also highlighted that SME Corp, as part of the government should be able to help with aiding and guiding them towards this requirement.

3. Adaptability is key to survive and thrive in a competitive and fluid business environment

Mr Rizal Nainy, CEO of SME Corporation Malaysia, stated that with 98.5% of firms in Malaysia being small and medium-sized enterprises, the government is continuously looking at different policies and steps to mitigate the effect of COVID-19 on this market. This is in addition to the sequence of economic stimulus packages, namely PRIHATIN, PENJANA and KITA PRIHATIN, declared in a bid to soften the negative effects of COVID-19.

Mr. Rizal Nainy, CEO of SME Corporation Malaysia explained on how the SMEInfo Portal provides comprehensive information on Government initiatives and programmes for the MSMEs

Mr. Rizal Nainy emphasised the need for companies to continually re-skill and upskill themselves. He said that by complementing the government’s efforts, small and medium-sized companies must equip themselves with the right expertise, skills and innovation to find ways to thrive and sustain their business.

In addition to that, Mr. Nainy admitted that Sabah SMEs are facing challenges such as difficulty to access loans due to strict requirements and insufficient funds. Another factor is the disruption of supply chain due to raw materials being sourced from Peninsular Malaysia and China. Some of the locally sourced raw materials are more expensive and there has been a delay in the fulfilment process due to forwarder’s restriction primarily in the F&B sector.

There are specific initiatives introduced for Sabah SMEs to combat this pandemic. For instance, RM72 million had been allocated by the Sabah Government to further assist the SMEs. There are also programmes such as SME Go Global that was launched last year which facilitates SME expansion into global markets and the Biz-Up programme that was aimed to enhance the SME capabilities and to expand their businesses.

Mr. Raja Singham, ASEAN-BAC Malaysia Council Member, and Founder and Managing Director of Brickfields Asia College (BAC) Education Company, brought to attention by stating that entrepreneurs will need to adapt to remain relevant if they want to survive and expand their companies while battling COVID-19.

He said to all business owners to reflect on the purpose of why they began their enterprise and to list down the values required not just for themselves but for the wellbeing of their trade. He used the restaurant businesses in Malaysia as an example where they have adopted the take-out method when they were forced to cease dine-in operations. BAC also offers online courses for international students which has proven to be effective and have been requested by institutes in the UK to hold the same online courses for them.

Mr. Raja Singham, Managing Director of BAC Education Group & Council Member of ASEAN-BAC Malaysia presented on how entrepreneurs will need to adapt to stay relevant if they want to sustain and grow their businesses whilst combating COVID-19

Mr. Raja Singham, Managing Director of BAC Education Group & Council Member of ASEAN-BAC Malaysia brought to attention that in order for businesses to stay relevant in the midst of all these economic upheaval and enormous changes which is deeply affecting all businesses, organisations would need to quickly build new competencies, adapt and continually innovate. Business owners would need to revisit their original purpose for starting their businesses and be clear on the values and principles that really drive them and their people.

He said that once that is clear and in place, business owners would have to re-design customers’ experience with new Customer Touch Points to serve them better, making it convenient for customers to receive their purchases, without compromising on an amazing experience.

He reiterated that this would mean taking their businesses online and equipping themselves with remote working tools. This may entail the need for key changes in their systems and processes and a re-look at their supply chain.

He explained that business owners, regardless of how long they may have been in business, would have to think and work like a start-up with a strong core team and keep costs lean in order to survive this crisis.

Brickfields Asia College (BAC) was given an ASEAN Business Award recently for its COVID related initiatives. Details of these social good initiatives can be seen below:

Dialogue Session 2

In this session, Datuk Dr. Pang Teck Wai, CEO and Director of POIC Sabah started by saying that the understanding of Sabah MSMEs in regards to COVID-19 or the impact of it is not holistic or thorough enough as opposed to West Malaysia. The effectiveness of the government programmes and initiatives were vague.

Dr. Pang stated that the nation is currently in a deep economic depression and SMEs need to expect less help from the government as the nation’s resources are almost depleted.

Furthermore, he also drew attention to the crisis management centres that have been set-up around the nation and said that a similar centre of task force is essential in Sabah to manage the “life transition”. Sabah is in need of this support to resume businesses and to find ways in surviving this third wave.
Conclusion
In summarising the session, Tan Sri Dr. Munir Majid, Chairman of ASEAN-BAC Malaysia, emphasised the need for companies to respond to the new standard. He claimed that they will not succeed and there will be no future until Sabah MSMEs learn to run their companies better and embrace technology such as e-commerce platforms to increase production and sales.

He acknowledged that Sabah SMEs are facing the once-in-a-lifetime threat of COVID-19 pandemic, which the province is currently in a critical condition. It may sound insensitive to expect them to look to the future when their own life is at stake — but life is connected both now and in the future.

“Sabah MSMEs must also look at opportunities outside the kingdom, such as neighbouring countries of Indonesia and the Philippines. What kind of opportunities do the markets offer? What kind of challenges do they face in order to enter those markets? These are some of the ways that ASEAN-BAC Malaysia will aim to support. We will also continue to help mentor entrepreneurs through the ASEAN Mentorship for Entrepreneurship Network (AMEN), ” said Tan Sri Munir.