Focus on SMEs and R&D key to investor confidence

SHAH ALAM - The corporate sector in the country is overwhelmingly dominated by small and medium enterprises (SMEs), which make up 98 per cent of the business landscape.

Economist Professor Dr Edmund Terence Gomez said there were about 1.2 million companies in Malaysia and out of the number, around one million were SMEs.

However, he said while these businesses form the backbone of the economy, the focus tends to fall on the remaining two per cent which were government-linked investment companies (GLICs), publicly listed firms, family-owned enterprises and other large corporations.

This, he said highlighted the need for greater attention on SMEs.

"My primary concern is that 98 per cent and to be fair, when Prime Minister Datuk Seri Anwar Ibrahim talked about the Gear-up plan, he said money should also go into helping and bringing SMEs into the supply chains which is very good.

"He talked about channeling money to these companies, the new startups. There are some interesting ideas. I am not here to criticise this, I am here to try and help the government improve on this," he said during the Wacana English Edition programme entitled "Risky Ventures: Is the Government Putting our Savings at Risk?."

He was one of the panelists on the programme together with former CIMB Group Holdings Bhd chairman Tan Sri Nazir Razak and Ipoh Timur MP Howard Lee Chuan How.

Gomez also believed that more could be done to lift SMEs and build investor confidence.

He said one key indicator of investor confidence was the level of investments in research and development (R&D).

The volume of R&D in Malaysia, he said was alarmingly low, which reflected the lack of risk appetite among businesses to invest in innovation and technological advancement.

"When talking about investor confidence, for me a key indicator is investments in R&D because that’s risky and that means the private sector is also willing to put their money in expensive R&D which can go either way.

"The volume of R&D in this country is very low. It is also another indication of the lack of the risk appetite among our business people to go into R&D, to help them move up the technological ladder," he said.

He said this was where the role of GLICs became crucial.

With their financial strength and ability to take on risky ventures, he said GLICs should partner with SMEs to invest in R&D.

"GLICs need to come in and bring in that kind of investment in risky R&D," Gomez said.

He supported the idea of GLICs carrying out R&D for SMEs, allowing them to commercialise the results and scale up.

However, he said the SME sector was not doing so well at the moment and a majority of them were micro firms.