Budget 2024: SMEs need guidance, matching grant
KUALA LUMPUR - Small and medium enterprises (SMEs) are hoping that the government can guide them to better understand environmental, social and corporate governance (ESG) practices in the business sector.
SME Association of Malaysia national president Ding Hong Sing said they are also hoping that the government would allocate a one-to-one ESG matching grant of RM2 billion under Budget 2024, saying that the matching grant is important to enable SME’s ESG transformation.
"With the recent launch of the Industry Environmental, Social and Governance (iESG) Framework, I hope that the government can assist SMEs to understand ESG practices better," he told Bernama.
Ding also proposed for the government to continue channelling automation and digitisation-related grants to SMEs with an interest rate of below two percent, and increase funding for the Market Development Grant (MDG) in Budget 2024.
Meanwhile, Small and Medium Enterprises Association of Malaysia (SAMENTA) national president Datuk William Ng said Budget 2024 should focus on fostering independent SMEs, upgrading SMEs in the value chain, and narrowing the financing gap for competitive SMEs.
To encourage SME’s independence and eliminate ‘grantpreneurs’ and grant-leakage, he proposed the transition of financial assistance to SMEs -- from direct grants to matching grants, low-interest loans and financing guarantees -- to ensure that government assistance can reach as many SMEs as possible.
"We suggest mandatory registration of all businesses with the Companies Commission of Malaysia and relevant agencies, including the Malaysia External Trade Development Corporation and SME Corp to ensure that assistance can be disbursed based on data and suitability and eliminate intermediaries.
"We also hope that Budget 2024 would empower trade associations to provide mentoring, business information, linkage to government programmes and capability building programmes by providing matching grants for association activities,” he said.
Meanwhile, to upgrade SMEs in the value chain, Ng said there is a need to strengthen SME’s capacity and capability to supply international companies through intensive business matching and capacity-building programmes.
He said the government could also encourage SMEs to invest in research and development (R&D) through matching grants of up to RM50,000 for collaborative R&D activities with public and private higher education institutions, as well as technology and patent licensing, and hiring of technical and subject experts.
"The government should encourage SMEs to upgrade their packaging design through matching grants of up to RM 20,000 for packaging and marketing material design while supporting our creative and gig economy.
"It should also assist SMEs in employing skilled local workers through joint financing to sponsor Technical and Vocational Education and Training (TVET) fees for those from B40 families,” he added.
To narrow the financing gap for competitive SMEs, Ng suggests the government to allocate RM2 billion for low-interest loans, with a limit of RM1 million per eligible company to assist their transition to low-carbon operations, including the purchase of new machinery, plant upgrade, consulting fees, training and certification costs.
SAMENTA also suggests the government to provide loan guarantees for up to RM10 billion with guarantee costs capped at 0.5 per cent for eligible SMEs, for the purpose of operational upgrades and working capital under Budget 2024.
"We also propose that the government provide a two per cent tax reduction for the first RM300,000 taxable income to enable these savings to be reinvested in business development,” said Ng.
He noted that many SMEs are trapped in the ‘low value, low margin’ cycle. As such, during difficult economic periods like the recent pandemic, many SMEs had to fold due to low margin.
"Hence, our hope is that the government will be able to address this challenge by helping SMEs move up the value chain and be more independent,” he said. - BERNAMA
