Is Budget 2021 a boost to Malaysia’s SMEs?
Malaysia’s SMEs need to expel the three million foreign labour, much of it illegal immigrants, introduce a higher minimum wage, increase salaries, and give those jobs to Malaysians. However, to do that, they need to first be less labour-dependent and more high-tech. If not, Malaysia is neither here nor there. We are not a Japan or Korea and neither are we a Vietnam or Cambodia.
NO HOLDS BARRED
Raja Petra Kamarudin
Small and medium enterprises (SMEs) make up 99% of the 920,624 business establishments in Malaysia. In 2018, SMEs employed 66.2% of the workforce in Malaysia, contributing RM522.1 billion, or 38.3%, to the Malaysian GDP. They are classified into three categories: micro, small, and medium, defined by industry, sales turnover, and the number of employees. Micro-enterprises make up 76.5% of Malaysian SMEs. In contrast, medium-sized enterprises comprise only 2.3% of SMEs. (The London School of Economics and Political Science: READ MORE HERE)
Over the next two weeks or so from tomorrow, Malaysia’s 222 Members of Parliament are going to debate Budget 2021. Instead of trying to see how Budget 2021 can be used to bring down the government via a backdoor no-confidence motion, MPs should focus on whether Malaysia’s SMEs are getting the proper support in the Budget.
Under Tun Dr Mahathir Mohamad, Malaysia focused on heavy industries, neglecting what was then called “cottage industries” — which to Mahathir was not glamorous enough. Malaysia’s Trade and Industry Minister, Rafidah Aziz, promoted Malaysia as a destination for cheap labour, where investors can relocate their factories from “expensive” countries, such as the US and Europe, to Malaysia.
Malaysia’s SMEs choose cheap illegal labour over technology
Singapore’s strategy, on the other hand, was to promote the island-state as a destination for skilled workers. That was why Singapore became more popular amongst foreign investors who preferred skills to a lower cost with a lower quality workforce.
This lower cost with a lower quality workforce worked for a while, at least back in the 1960s and 1970s. Then, when the wars in Indochina ended, and Vietnam, Cambodia, etc., opened up, Malaysia lost out in the “lower cost with a lower quality workforce” category.
Mahathir wanted Malaysia to be like Japan but the SMEs wanted to be like Vietnam
To make up for its un-competitiveness in terms of cost of labour, Malaysia began to import cheap labour, much of it being illegal immigrants. Factories could now pay below-market labour cost on an under-the-table arrangement. That may have solved an economic problem, but it opened up a social problem instead. It also caused unemployment amongst the “more expensive” local labour force comprising of local-born Malaysian citizens.
Imported labour and/or illegal immigrants was considered a “necessary evil” to help Malaysia’s SMEs remain competitive against “cheaper” countries such as Indonesia, Thailand, Philippines, Thailand, Vietnam, Cambodia, Burma, etc. Malaysia should have learned from the Japan, Korea and Taiwan example, where “cheap” is only temporary and eventually you need to go high-tech, like what Singapore did.
The four Asian Tigers: Singapore, Hong Kong, South Korea and Taiwan
Mahathir invented the “Look East Policy”. But he did not follow his own policy. Singapore, Hong Kong, South Korea and Taiwan, the four Asian Tigers, (Malaysia was NEVER one of the Asian Tigers as Pakatan Harapan claims), followed Japan and abandoned price for high-tech. Malaysia still chose cheap labour over high-tech.
Today, big businesses all over the world are collapsing. And it is not just because of the Covid-19 coronavirus pandemic. Many of these businesses were already floundering long before January this year. The Covid-19 problem just nailed the coffins they were already sleeping in.
The doctrine here is “change or die”. Those that change survive. Those that resist change die. And Malaysia’s SMEs are still stuck in the 1960s and 1970s. Hence no amount of government support can help them. Malaysia’s SMEs are still labour dependent, and cheap or illegal labour at that too.
Malaysia’s SMEs need to expel the three million foreign labour, much of it illegal immigrants, introduce a higher minimum wage, increase salaries, and give those jobs to Malaysians. However, to do that, they need to first be less labour-dependent and more high-tech. If not, Malaysia is neither here nor there. We are not a Japan or Korea and neither are we a Vietnam or Cambodia.
