What SMEs want from budget

Published: Monday October 21, 2013 MYT 12:00:00 AM 

Updated: Monday October 21, 2013 MYT 12:11:27 PM

ALL eyes will be on Budget Day, Oct 25, 2013. Given the uncertainties in the economic front, stronger headwinds from expected higher inflation and interest rates, slower growth rate and softer demand, businesses especially SMEs should brave for a choppier ride.

The SMEs would clamour for some goodies from the Prime Minister. While it is more pertinent for the Government to reduce the cost of doing business, facilitate an efficient business operating environment and not crowd-out SMEs through skewed socio-economic policies, here is wish list of fiscal considerations:

> More allocation for vocational education

Higher education is well supported by public and private institutions. However, equal emphasis should be given to the development of blue collar workers i.e. technicians, machinists and programmers.

Not all students are or need to be academically-inclined. The focus should also be on students who can develop skills which are required by industries.

The Dual Vocational Training System in Germany has been held up as a differentiating factor in sustaining the country’s competitive advantage. Why hasn’t it succeeded in Malaysia?

Incentives should be given to SMEs to buy-in to the programme, which should not be lopsided with affirmative action objectives.

> Higher market development grants (MDG) to Matrade

The MDG grants should continue and be increased. There should be matching financial support for first time exporters to engage export mentors to help develop an export marketing plan.

SMEs need expert guidance to

tap the vast international op-

portunities and avoid costly blunders.

Loopholes must be plugged and grants only given for internationally acclaimed trade fairs and exhibitions.

> Lower corporate tax for SMEs

In view of the “grey or informal economy” where not many smaller companies are paying taxes, a further lowering of the corporate tax rate for SMEs to 15% for the first RM500,000 of taxable income would serve two purposes: relieve the tax burden of the SMEs and elicit more companies to surface their profits.

> Access to finance

The role of development banks such as the SME Bank is vestigial if it continues to operate like an ordinary commercial bank. Collateral-based lending for an economy that is rapidly restructuring in favour of the services sector is foolhardy.

The young entrepreneurs in the services sector, whether in apps or software development, designing or retailing have limited access to fund their ideas.

Even tourism-related projects have been denied financing although they have been deemed to be viable by the ministry.

Unless we currently have a vibrant angel community to fund start-ups, the ideas of our young entrepreneurs are never going to see the light of day.

Apparently, CGC-guaranteed loans are not trickling down to the most deserving.

Try checking with banks and the trite reply is that the facility has been exhausted.

> Implementation of GST

If the GST is to be implemented, subsidised training should be given to SSEs to prepare them for the administrative requirements. For capital expenditure related to software required for GST administration, matching grants could be considered.

> Don’t crowd out SMEs

The government-owned GLCs and their subsidiaries should not be competing with SMEs when policies and financing costs are skewed in favour of the former.

The result is none other than a non-optimum economic outcome with unfair competition against the SMEs.

> Government procurement

The allocation of Government procurement to SMEs should be expanded and subsidiaries of public-listed companies and GLCs should be excluded.

Tender policies and administration should be more transparent. Margins of preference can be given to bumiputra-owned companies that do not fall under the criteria mentioned above. However, the non-bumiputra SMEs should have equal opportunities to compete in the tender.

There has been so much written on the wastage of public expenditure that I shall not repeat them. Macroeconomic policy is about maintaining growth, generating employment and keeping a tight lid on inflation.

In times of strong economic headwinds, prudent pump priming should continue albeit through the targeting of productive investments.

Reading the Auditor-General’s report on the wanton wastage would cause the SME entrepreneur to wonder: Couldn’t these “savings” be redirected to soft-loans for viable and worthy business ventures of SMEs?

SENG H. YEOH

Penang