In Post-COVID 19 Development Strategy 2030 (PCDS 2030), one of the key outcomes in the manufacturing sector is to have 70 per cent of SMEs adopting digital platforms.
SMEs as the backbone of nation’s economy
SMEs encompassed 99 per cent of 920, 624 business establishment in the country.
In 2018, it was reported that SMEs employed 66.2 per cent of the workforce in Malaysia which contributed to RM522.1 billion or 38.3 per cent to Malaysian GDP.
A study conducted by the University Consortium of Malaysia found that SMEs that used social media experienced a 26 per cent increase in productivity while those that engaged in e-commerce saw productivity increase by 27 per cent.
In Sarawak, SMEs make up over 75 per cent of our business sector, contributing 20 per cent to Sarawak GDP and providing about 600,000 jobs for Sarawakians.
How is digitalisation sustainable?
These days, sustainability becomes a top priority for investors, customers and employees as people are becoming more conscious of the things they buy and consume.
Following the COVID-19 pandemic which resulted in massive lockdown, as stated in PCDS 2030, it prompted the need for digitalization across all sectors as it helps make up for the shortfall in traditional source of revenue.
Digitalisation has becoming increasingly useful for SMEs as the use of digital technologies would significantly improve SME productivity, efficiency in financial and competitiveness, upgrade the scale of businesses in a fast rate as well as make key decisions quickly and accurately.
Digitalisation also helps SMEs integrate into global markets, through reductions in costs associated with transport and border operations and significantly enhances the scope to trade services.
It reduces transaction costs by providing better and quicker access to information and communication between staff, suppliers, and networks.
It also helps SMEs integrate into global markets, through reductions in costs associated with transport and border operations and significantly enhances the scope to trade services.
Digitalisation supports innovation and greater access to innovation assets, as well as the potential for firms to generate data and analyse their own operations in new ways, to drive improved performance.
In encouraging digitalization among SMEs, the Minister for International Trade and Investment, Sarawak has conducted various digital programmes and activities to enhance the capacity and capability of SMEs. The programmes include Digital Entrepreneurship Program: Digital Marketing, Youtubing, Smartphone, Social Media, Creative Content Courses and Randau Digital.
This was mentioned by Awang Tengah during the DUN Sitting in November 2022.
However, it must be noted that the SMEs in Malaysia is not as quick to adopt digital transformation as it was revealed by the World Bank’s 24th Malaysia Economic Monitor: Weathering the Surge report.
It was stated that “The COVID-19 pandemic has exposed the gaps and exacerbated the vulnerabilities in Malaysia’s private sector. This is especially the case for SMEs, which have been hard hit by both demand and supply shocks. Malaysian firms especially SMEs lag behind their global peers on productivity measures and have lower rates of technology adoption.”
Even before the pandemic, World Bank data shows that Malaysia’s businesses have underperformed in terms of digitalisation relative to most of its ASEAN peers like Thailand, Philippines, Vietnam, and Singapore.
In making sustainability a top priority
For SMEs, sustainability should be integrated as part of their business branding to ensure longevity.
SMEs needed to address ESG standards in their business models if they wanted to be relevant in international trade
A study, Gen Z Shoppers Demand Sustainable Retail, revealed that the majority of Generation Z shoppers prefer to buy sustainable brands and are willing to spend 10 per cent more on sustainable products.
The study also found that Generation Z along with Millennials are the most likely to make purchase decisions based on values and principles (personal, social, and environmental).
As sustainability becomes a top priority for investors, customers and the public at large, it is important for SMEs to incorporate ESG strategies into their operations.
By implementing ESG standards, it shows the company’s efforts toward reducing its carbon footprint, going green, reduce resource waste, encouraging diversity or introducing employee wellness programs, hence leading to gaining investor confidence, earn customer loyalty, reduce operating costs and improve both asset management and financial performance.
Those that fail to act on ESG goals can potentially risk losing investor interest, as well as alienating customers and top-notch talent, especially among the younger groups.
However, many SMEs opt not to adopt ESG standards into their business models mainly because they feel it is not relevant to them.
Aside from that, most SMEs feels that it would increase operational costs.
But, those that prioritize ESG today are putting themselves in a better position to penetrate new markets, expand in existing ones, and ensure their long-term success.
In Malaysia, the Malaysia External Trade Development Corporation (MATRADE) urged SMEs to incorporate ESG in their business models if they want to be relevant in international trade.
In promoting sustainability among SMEs, MATRADE has launched a programme in 2018 called Sustainability Action Values for Exporters to ensure Malaysian exporters are able to continue exporting their products and services to traditional markets and new markets.
By embracing sustainability this will help achieve the country’s aspirations of becoming a carbon-neutral and net-zero emission nation by as early as 2050.
[…] has become a norm, Malaysian SMEs have been somewhat slow in adopting digital transformation. The World Bank’s 24th Malaysia Economic Monitor highlighted that Malaysian SMEs lag behind their global counterparts in terms of productivity […]