The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) Report on the SME Survey 2017 Background of the Survey Small and Medium Enterprises (SMEs) play a major role in Malaysia economy. This survey aims at identifying the current SMEs challenges in Malaysia. The government is actively fostering SMEs in access to finance through provision of credit guarantees and also increasingly paying attention to financing SMEs by introducing new programmes and encouraging venture capital etc. Indeed, by looking at the results of this survey, it shows clearer picture of despite having various government assistances and programmes targeting for SMEs, SMEs continue to face challenges particularly in financing, of which is key ingredient to the development of their business! Other than financial constraints, there are other government policies and other matters that highlighted SMEs challenges from many dimensions, i.e. GST issues, Human Resource Development and Employment Insurance System (EIS). This survey aims to highlights these challenges faced by SMEs, and whether these issues affecting the cost of doing business, or as a heavy regulatory burden of SMEs. Henceforth, ACCCIM would like to understand these challenges for onward submission and deliberation with the relevant Government Ministries and Agencies so as to seek measures to resolves the issues. Objectives of the Survey 1. To understand the sources of financing and challenges faced by Malaysian SMEs, issues of human resource development and their stand on Employment Insurance System (EIS). 2. The survey results will provide the basis for ACCCIM in the submission of memoranda and related dialogue sessions with the Government and its related agencies. It will also be used as a reference for future events and action plans to be formulated by ACCCIM. Respondents Background 1. The survey was conducted during the period of 28 th April 2017 to 30 th June 2017. A total of 1,100 survey questionnaires were distributed and can also be downloaded online. A total of 808 copies were received in return. 1 P a g e
2. The survey was conducted mainly through ACCCIM s 17 constituent chambers located throughout Malaysia, as well as participated by KOJADI, other national level chambers of commerce, trade and sectorial organisations. The survey findings reflect the collective views of industries and businesses irrespective of ethnic group. 3. Chart 1 shows the geographical distribution of the responded entities, of which 25% are from Central Region; followed by Northern Region (24%) and Southern Region (23%). Chart 1: Profile of Respondents Operating Location in Malaysia East Malaysia 9% Wilayah Persekutuan (Kuala Lumpur, Putrajaya and Labuan) 7% Northern Region 24% East Coast 12% Southern Region 23% Central Region 25% 4. Chart 2 shows that, 71% of the respondents are private limited corporations (Sdn. Bhd.), 16% are Sole Proprietors whilst the rest are in the form of partnerships, amongst these partnerships, 11% are conventional partnerships and the remaining 2% are limited liability partnerships (LLP). 2 P a g e
Chart 2: Respondents Legal Entity 8 7 6 5 4 3 1 Sdn Bhd Sole Proprietor Partnership LLP 5. The respondents industry sector are categorised in Chart 3. Out of the 808 respondents, 27% are in Wholesale and Retail businesses, followed by 23% in Manufacturing, 14% in Professional services and 1 in Construction & Contractor. By reviewing this Chart 3, obviously it shows that most of the respondents are engaged in various services industries, which are Logistics, Construction & Contractor, Property Development, Agriculture, Timber, Fishery, Farming & Gardening, Wholesale & Retails, Imports & Exports, Hotel, Restaurant (F&B), Travel, Leisure & Entertainment, ICT and Professional Service. Chart 3: Respondents Industry Sector ICT 5% Professional 14% Manufacturing 23% Travel, Leisure & Entertainment 1% Restaurant (F&B) 5% Hotel 1% Imports & Exports 4% Wholesale & Retails 27% Logistics 3% Construction & Contractor 1 Property Development 4% Agriculture, Timber, Fishery, Farming & Gardening 3% 3 P a g e
6. Respondents Number of Employees and Annual Turnover (RM) Chart 4 and 5 show the respondents number of employees and their annual turnover (RM) respectively. Chart 4: Number of Fulltime Employees Manufacturing Services & Other Sectors 7 6 62% 6 5 51% 5 4 3 1 1 22% 6% 4 3 1 26% 14% 9% less than 5 5 to 74 75 to 200 more than 200 less than 5 5 to 29 30 to 75 more than 75 Chart 5: Annual Turnover (RM) Manufacturing Services & Other Sectors 45% 4 35% 3 25% 15% 4 12% 18% 3 25% 15% 1 17% 25% 21% 26% 11% 1 5% 5% 5% 5% below 300,000 300,000 to less than 5 5 to less than 10 10 to less than 15 15 more than to 50 50 below 300,000 300,000 to less than 1 1 to less than 3 3 to 20 more than 20 Based on the analysis of these 2 charts, more than half of the respondents are in the small enterprise category. 1 1 Definition of Small Enterprise: For Manufacturing: Sales turnover from RM300,000 to less than RM15, or number of Employees from 5 to less than 75; For Services and other sectors: Sales turnover from RM300,000 to less than RM3, or number of Employees from 5 to less than 30 4 P a g e
7. Respondents' Number of Years in Operation Chart 6 depicts that 65% of the respondents are businesses that are in operation for at least ten (10) years. Only 13% of the respondents are newly established companies with less than four (4) years in operation. Chart 6: Respondents Number of Years in Operation less than 4 years; 13% 4 to less than 7 years; 11% 10 years and above; 65% 7 to less than 10 years; 11% 5 P a g e
SURVEY FINDINGS A. Financing Issues Difficulties in Financing Sources of Financing B. GST Input Tax Input Tax Credit Updates on GST-related Information from Customs C. Issues of Human Resource Development Human Resource Development Fund (HRDF) Training provided by HRDF D. Employment Insurance System (EIS) 6 P a g e
A. Financing Issues Difficulties in Financing In general, 43% of the respondents claimed that their company encountered difficulty in financing in the past 3 years. To a large extent, the key concerns are businesses in F&B sector, Construction and Contractor, Travel, Leisure & Entertainment which account for more than half, 59%, 53% and 5 respectively, while only 28% from Professional Service encountered this difficulty, marked the least. Chart 7: Encountered difficulty in financing in the past 3 years Professional 28% ICT 41% Travel, Leisure & Entertainment 5 F&B 59% Hotel 33% Imports & Exports Wholesale & Retails Agriculture, Timber, Fishery, Farming & Gardening Property Development Construction & Contractor 42% 46% 46% 43% 53% No Yes Logistics 32% Manufacturing 42% 4 6 8 Source(s) of financing Despite alternative financing are increasingly by leveraged on the era of digital platforms, commercial bank remains the significant platform for SMEs source of financing (62%). 7 P a g e
Chart 8: Source of Financing Venture Capital, 6% KOJADI, 7% SME Corporation Malaysia, 5% Commercial Bank, 62% SME Bank, 12% Others, 5% An analysis on awareness of selected five major types of financing schemes which should provide a further insight; KOJADI SME Loan Scheme, Bank Negara Funds for Small and Medium Industries 2 (FSMI2), SME Corp Business Accelerator Programme (BAP), MIDF Soft Loan Scheme for Small & Medium Enterprises (SLSME) and SME Bank Financing Program For SME (SME-LEAP). Survey shows that majority of the respondents are not aware of these financing schemes whilst the most popular financing schemes are KOJADI SME Loan Scheme (38%) and SME- LEAP (37%). Whereas Bank Negara-FSMI2 is the least, only. 8 P a g e
Chart 9: Are you aware of the following financing schemes No Yes KOJADI SME Loan Scheme 38% 62% Bank Negara Funds for Small and Medium Industries 2 (FSMI2) 8 SME Corp Business Accelerator Programme (BAP) MIDF Soft Loan Scheme for Small & Medium Enterprises (SLSME) 25% 29% 71% 75% SME Bank Financing Program For SME (SME-LEAP) 37% 63% In line with this low awareness, only 21% of the respondents revealed that they had applied for the above mentioned schemes. What concerns the most is as high as one forth, 27% of the respondents indicated that they are not aware of these financing schemes. 18% said that they are not clear on the application procedures. Chart 10:Reasons for not applying for the above mentioned financing schemes Loan amount applicable is too small 8% Others 26% Not aware about the schemes 27% Not clear what are application procedures 18% Assume that it will not be approved, so do not want to waste time 1 Complexity of application procedures, too many documents required 11% 9 P a g e
B. GST Input Tax Input Tax Credit (ITC) Survey results show that majority of the businesses (78%) indicated that they have their input tax credit refunded. This represents an important step in the professionalization of the Customs Department. However, amongst those 22% respondents who are facing the delay in claiming back their input tax, mainly are from Travel, Leisure & Entertainment (37%), Imports & Exports (32%) and Agriculture, Timber, Fishery, Farming & Gardening (32%). 10 Chart 11: Facing any delay in claiming back input tax 8 6 77% 77% 72% 7 68% 76% 68% 83% 91% 63% 84% 87% 4 23% 23% 28% 3 32% 24% 32% 17% 9% 37% 16% 13% No Yes Amongst those respondents who are facing this delay, as high as 44% stated that they were not informed of any reason nor received any reply from Customs, whilst 16% of the delay is due to Customs needs time to verify those enormous amount claimed and 13% due to insufficient documentation. Updates on GST-related Information from Customs Survey shows that only 39% of the respondents are aware that Customs updates its GST Portal in respect of latest information on GST, and published the Director General s Decision for clarification, explanation and remedial measures on various GST-related technical issues. 10 P a g e
C. Issues of Human Resource Development Human Resource Development Fund (HRDF) Effective 1 st April 2017, the Human Resources Development Fund (HRDF) has expanded the scope of coverage of the PSMB Act 2001 by standardising the existing criteria for mandatory registration across all 63 subsectors within the 3 sectors which the Act covers - Manufacturing, Services, and Mining & Quarrying. The Act is standardising a single requirement of only having in employment 10 Malaysian employees or more to register, and further expanded to allow for the voluntary registration of employers across the 3 sectors which have in their employment between 5-9 Malaysian employees. Out of 808 respondents, 74% are not registered with HRDF. Amongst these 598 respondents, majority are from Wholesales & Retails, Imports & Exports and Professional Service industry. Hotel industry has most registered entities with majority of the respondents (67%) are registered with HRDF. The main reason for not registering with HRDF is they are not sure whether their companies are liable (51%). On the other hand, 28% of the respondents affirmed that their companies are not liable to be registered with HRDF. Chart 12:Have your company registered with HRDF 10 8 6 74% 54% 55% 77% 73% 68% 89% 87% 33% 75% 63% 78% 84% 4 26% 46% 45% 23% 27% 32% 11% 13% 67% 25% 37% 22% 16% No Yes 11 P a g e
Chart 13:Reasons for not registering with HRDF Not liable, 28% Others, 15% Government do not enforce, 2% Not willing to pay HRDF levy, 4% Not sure whether my company is liable, 51% Training provided by HRDF Survey result finds that more than half of the respondents (55%) are not aware of the benefit of HRDF. As high as 8 of the respondents stated that their staff has not participated in any training provided by HRDF, which Wholesale & Retails marked the highest (92%), followed by Travel, Leisure & Entertainment (88%) and Professional Services (87%). The reasons for not sending their staff to training are lack of related information on training programmes (5), unable to send their staff for training due to limited manpower (16%); training programme has limited benefit to their company development (1); training programme does not meet market demand (4%) and others reason (), such as not required and out-dated training content. 12 P a g e
Chart 14:Have your company staff participated in any training provided by HRDF 10 8 6 8 69% 68% 76% 63% 79% 92% 84% 5 84% 88% 76% 87% 4 31% 32% 24% 37% 21% 8% 16% 5 16% 12% 24% 13% No Yes Chart 15:Reasons for not participating in the training Others, Training programme does not meet market demand, 4% Training programme has limited help to company development, 1 Do not have related information on training programmes, 5 Unable to send staff for training due to limited manpower, 16% 13 P a g e
D. Employment Insurance System (EIS) Survey result shows that 43% of the respondents object to the Employment Insurance System (EIS) which is expected to be enforced by the Government in January 2018, whereas another 43% claimed that they are not aware or not sure about the details. Under the EIS, employers and employees are required to contribute an equal percentage of employees salaries to a common pool to be managed by SOCSO. All business establishments of the private sector, including small and micro enterprises are required to contribute. EIS is another form of contribution on top of EPF, SOCSO and HRDF. Chart 16:Are you supportive of the Employment Insurance System (EIS) Support 14% Object 43% Not Aware/ Not sure 43% 4 6 8 10 14 P a g e