Washington, DC July 5, 2016—Ninety-seven percent of business establishments in Malaysia are small and medium enterprises (SMEs). These businesses are responsible for nearly 36% of the country’s GDP, 65% of the country’s employment, and nearly 18% of Malaysia’s exports.
SMEs have been at the core of Malaysia’s economic transformation since the 1990s to an upper-middle income nation and are an important driver of employment and growth.
“In terms of numbers, SMEs are significant, and they form the backbone of Malaysia’s economy,” said Dato Hafsah Hashim, chief executive of SME Corporation Malaysia at a recent event organized by the new World Bank Group Knowledge and Research Hub in Kuala Lumpur in partnership with the Trade & Competitiveness Global Practice. “To us in Malaysia, small is the new big.”
Hafsah, who is responsible for coordinating and overseeing policies for the overall development of SMEs in Malaysia, helped create and is now implementing the 2012-2020 SME Masterplan. Designed in conjunction with the World Bank Group, and described by Malaysia’s Prime Minister as a “game changer,” the Masterplan includes a structured framework to advance SME development.
By 2020, Malaysia aims to push SMEs’ contribution to GDP to 41%, and the share of the country’s exports from SMEs to 23%.
“Malaysia’s transition to a high-income economy will highly depend on SMEs’ contribution to GDP growth,” said Anabel Gonzalez, Senior Director of the Bank Group’s Trade & Competitiveness Global Practice. “In addition, SMEs have a significant role to play in creating opportunities for women and youth.”
Malaysia’s SME growth has outpaced that of the overall economy, but the country’s target of 8% SME growth through 2020 will be tough to maintain, given that the overall economy is growing only at about 5% annually, according to Hafsah.
“Our overall vision is to have globally competitive SMEs across all sectors that enhance wealth creation and contribute to the social wellbeing,” said Hafsah.
Secondary goals include increasing business formation by 6% on average per year and increasing the number of high growth and innovative firms by 10% per year.