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SMEs in Malaysia

Just like many other countries, SMEs (small and medium-sized enterprises) are one of the main pillars that support Malaysia’s economic development. In fact, Malaysia has declared that this year, 2017, as the Startup and SME Promotion Year in line with SMEs significant role and contribution to the nation’s growth and labour market.


SMEs’ Significant Contributions to Malaysian Economy

Over the years, Malaysian economy has outpaced its peers through a considerable transformation over the last few decades from agricultural-based to industry-based. It is an undeniable fact that SMEs have been at the core of Malaysian economy and they are definitely the key driver of employment and economic growth. As of now, Malaysian economy consists of almost 97% of SMEs where they contribute nearly 36% of the country’s GDP, more than 50% of the country’s employment, and around 18% of Malaysia’s exports. Malaysian government targets to raise SMEs’ contribution to GDP to 41%, and the share of the country’s exports from SMEs to 23% by 2020.


New Definition of SMEs

The strong SME growth in Malaysia can be largely attributed to the new definition for SMEs, which has its one-off effect to the growth and promotion of SMEs in the country. The new definition of SMEs in Malaysia that covers all sectors, namely services, manufacturing, agriculture, construction and mining & quarrying, was endorsed at the 14th NSDC Meeting in July 2013.

Prior to the commencement of new guidelines, SMEs in Malaysia are defined with the parameters as follow:

a) Manufacturing sector: Sales turnover of less than RM25 million OR number of full-time employees of less than 150.

b) Primary Agriculture and Services (including ICT) sector: Sales turnover not exceeding RM5 million OR number of full-time employees under 50 people.


Under the new definition, sales turnover and number of employees are the two parameters used in determining the definition of SMEs with the “OR” basis:

a) Manufacturing sector: Firms with sales turnover less than RM50 million OR number of full-time employees under 200 people.

b) Services and other sectors: Firms with sales turnover not exceeding RM20 million OR less than 75 people of employees.

Other than the revised guidelines, Malaysian government has put in the effort to address red tape, foster innovation among SMEs, provide financial aids, help business owners with management training, as well as improve infrastructure to untapped growth potential of SMEs in both domestic and international markets.