Many SMIs may have to close shop

(The Sun) : About 1.35 million small and medium industries (SMIs) in the country will face an operational crisis due to dwindling revenue if the government does not raise domestic consumption in the next six month.

Many of these SMIs may even have to close shop, according to a report in China Press  today.

SMI Association of Malaysia national secretary Lee Teck Meng said there are 1.5 million companies and businesses registered under the Registrar of Companies or Companies Commission of Malaysia, and of these 90% come under the micro- and small-industry categories.

He said of the 11 million workers in Malaysia, 56% are employed in SMIs and these SMIs are facing survival test in the next six months.

"The market has sudden become very quiet after the Chinese New Year, and consumers' spending power has also dropped greatly, hitting the various industries head-on," he said.

"Although the government has not released the latest consumer indices, many industry players have revealed that sales were down after the Chinese New Year, notably for electronics and electrical appliances which have seen a 50% drop, and fashion wear, which dropped 25%. Even sales of food products have gone down by 10%.

He told the daily that the drop in consumption demand has directly impacted on the manufacturers upstream, saying 90% of some 45,000 manufacturers are in crisis mode.

He said the association has 3,000 members and 1% to 2% of them have indicated that they would switch to other businesses, a euphemism for business closures.

"Many believe it is a big shame to have to close shop, as such no members would want to tell us that they would be closing down their factories. The association has no way of getting the true picture of the crisis."

Lee said due to the lack of good financial planning, the majority of the SMIs do not have reserve fund to last them beyond six months.

Only those with a reserve fund of more than two years can weather the global economic storm, he added.

He disclosed that of the companies registered in Malaysia, 60% are micro industries which have an annual revenue of less than RM500,000, 30% are small industries with revenue of between RM500,000 and RM10 million, and the medium industries generating an annual revenue of between RM10 million and RM25 million make up another 10%.