Diyana Isamudin
KUALA LUMPUR: Malaysian micro, small and medium enterprises (MSMEs) are standing at a critical juncture, with boundless opportunities awaiting them beyond domestic borders.
Industry observers are calling on the businesses to take full advantage of free trade agreements (FTAs), new management strategies and smart acquisitions to secure a stronger foothold in the global economy.
MSMEs accounted for 96.9 per cent, or more than one million firms, of overall establishments in Malaysia in 2023, according to Department of Statistics (DOSM).
The businesses registered a growth of 5.0 per cent to achieve RM613.1 billion economic contribution, increase to 39.1 per cent in 2023 from 38.6 per cent a year ago.
Despite a challenging external environment, MSME exports grew by 4.5 per cent in 2023, reaching a total of RM152.2 billion.
This growth resulted in a significant rise in MSMEs' export contribution, increasing to 12.2 per cent in 2023 from 10.6 per cent in 2022.
UNLOCKING BOUNDLESS OPPORTUNITIES
The Small and Medium Enterprises Association national president Datuk William Ng emphasised the importance of capitalising on Malaysia's FTAs, including the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
"Given the geoeconomic challenges, MSMEs should take advantage of our FTAs for better access into these partner markets.
"These markets not only offer preferable trade conditions but also ensure better protection in case of disputes, with strong dispute resolution mechanisms," Ng told Business Times.
Echoing the same sentiment, Exponasia Growth Asia founder Giuseppe Di Lieto said FTAs play a crucial role in enabling Malaysian MSMEs to expand internationally by lowering trade barriers, enhancing product competitiveness and providing better access to supply chains.
He pointed that such agreements could reduced tariffs, making Malaysian products more competitive in foreign markets, while also offering businesses a broader range of of supply chain solutions, providing businesses with more options for procurement and manufacturing.
While the agreements provide MSMEs with access to new markets and competitive sourcing opportunities, he said they also present two common challenges observed both in Malaysia and globally.
"Many MSMEs are unaware of the opportunities available to them. This gap can be addressed through more effective educational campaigns and stronger support from trade institutions, chambers of commerce and industry associations.
"Additionally, compliance with FTA requirements—particularly certification and documentation—can be complex, burdensome and costly," he added.
FRACTIONAL MANAGEMENT FOR GLOBAL EXPANSION
As Malaysian MSMEs look to scale and globalise, fractional management — a strategy that involves hiring experienced executives on a part-time or project basis — offers a flexible and efficient solution.
Di Lieto said the service is ideal for companies, especially MSMEs, that need to implement initiatives and programmes but lack the internal capacity, offering access to valuable resources and expertise.
However, he said the concept is still relatively new in Malaysia, hence the availability of qualified executives may be limited.
"Moreover, there may be some hesitation among MSME owners and managers to invest in such services, that may stemmed from a culture where trust is built through long-standing, reliable relationships and the prospect of bringing in an external expert with decision-making authority may feel uncomfortable for some," he added.
ACQUISITION STRATEGIES: GATEWAY TO GLOBAL MARKETS
Instead of gradually building market presence or developing expertise, Di Lieto said acquisitions allow SMEs to enter new market and hit the ground running.
While acquisitions are often costly and inherently risky, he advised MSMEs to conduct a thorough strategy review of the whole initiative and due diligence on the acquiring company.
He added that acquisitions could fail due to integration challenges, and the primary reason often lies in cultural mismatch.
"Expert consultants can help ensure that key factors such as synergy potential, projected financial performance, regulatory and legal considerations, and country and political risks, are properly assessed," he said.
He also said that MSMEs should invest significant time, effort and resources in assessing whether the target company can be successfully integrated.
"In my experience, a failed acquisition is often the result of a failed integration process, rather than an unsuccessful deal itself," he said.
THE FUTURE OF SMES IN A CHANGING LANDSCAPE
Ng highlighted Asean as a natural first step for Malaysian exporters, given the shared cultural and economic ties.
However, he cautioned that non-tariff barriers (NTBs) — such as cumbersome product registrations and local distributor biases — remain persistent hurdles.
"As Asean chair this year, Malaysia could do more with other member economies to build stronger consensus among businesses on the ground to reduce NTBs and trade 'resistance'.
"With the US reciprocal tariff expected to hit the region hard, it makes a lot more sense to focus on intra-region trade as a natural hedge against the trade tension between the two largest global economies," he added.
He further called on the government, through Bank Negara, to help MSMEs establish subsidiaries and offices abroad, addressing the critical financing gap that limits international expansion.
"Currently, most MSMEs are unable to raise funds in new markets as local banks treat them as new, unproven businesses, while bankers in Malaysia do not generally want to take the risk of financing overseas operations.
"This is a gap that we will need to close if we are to encourage more SMEs to export and to grow globally either organically or via mergers and acquistion," he said.
As Malaysia progresses on its journey toward becoming a high-income economy, Di Lieto said the shift toward high-value supply chains for both goods and services will continue.
He noted that products and services with higher technology and added value will gradually replace the previous reliance on cost-driven, labour-intensive products and services.
"I often reference a well-known corporate quote: "What got you here, won't get you there." I believe this is highly relevant for Malaysian MSMEs today.
"The environment that has fostered the growth of many such companies will evolve significantly and this transition is likely to occur swiftly," he said.
As a result, Di Lieto foresees a wave of economic consolidation, with companies pursuing economies of scale, new entrants reshaping the landscape and some businesses inevitably exiting the market.
He pointed out that MSMEs' ability to reinvent themselves, differentiate their offerings and expand into new markets through internationalisation, will be crucial for them to navigate this transition.