SMEs resilient but rise in those hard hit by downturn

MALAYSIA'S small businesses are still resilient during the economic downturn although more companies say they are severely affected, according to a government survey.

The January-March survey done by Small and Medium Industries Development Corp (Smidec) found that almost 80 per cent of SMEs (small and medium enterprises) plan to maintain their operations over the next six months.

However, a fifth of the respondents said they may downsize operations, close down or relocate to other countries.

This was up from 10 per cent based on a survey for the fourth quarter of 2008.

"Despite the gloomy economic outlook, 24 per cent of the SMEs are maintaining a positive view on the economy, with 19 per cent believing that the crisis presented opportunities for their business to grow, an increase from 12 per cent who believed so in the previous survey," chief executive officer Datuk Hafsah Hashim said in an interview in Kuala Lumpur yesterday.

A total of 1,248 SMEs responded to the first quarter survey, of which 760 were from the services sector including construction, 478 from the manufacturing sector and the remaining from the agriculture sector.

The survey attracted participation from all over the country including Sabah and Sarawak. Half of them were from Selangor, Penang, Johor and Kuala Lumpur.

Respondents identified four key issues namely weaker demand, payment collection delays, funding problems and the higher cost of raw materials.

However, about half are benefiting from tax incentives or other government relief such as grants, soft loans and training.

Hafsah also said from the Oct-Apr retrenchment figures, a third of the total were those laid off by SMEs.

"Despite the SMEs employing 56 per cent of the country's total workforce, they only contribute a third of total workers retrenched," she said.

Hafsah said although some SMEs that supply parts and components to the electronics sector have begun receiving orders in April and June, it is still unclear whether the worst is over.

"Since the impact on SMEs is lagged, an upturn in economic activity would also take time to reach smaller companies," she said.