Survey: SMEs see slower growth for Asia

However, Malaysian small- and medium-sized enterprises remain upbeat about their business growth prospects, says United Parcel Service managing director

MALAYSIAN small- and medium-sized enterprises (SMEs) are less optimistic about Asia's economic growth this year than they were a year ago, according to results of a survey released recently by United Parcel Service Inc (UPS).

Optimism that the region's economy will grow slipped four per cent from 51 per cent in 2007 to 47 per cent in 2008.

United Parcel Service (M) Sdn Bhd managing director, Vivian Chuah, said Malaysian SMEs' confidence dip was around the regional average, which fell five per cent to 52 per cent in 2008.

"However, while many Malaysian SMEs are forecasting slower economic growth for the region this year, they remain upbeat about their business growth prospects," she said at the UPS Asia Business Summit to present findings of the UPS Asia Business Monitor (ABM) survey in Petaling Jaya on Tuesday.

The survey reflected a seven per cent increase in confidence in Malaysian SMEs of their companies' prospects this year to 73 per cent, from last year's 66 per cent.

Based on a telephone survey of 1,201 SME leaders across 12 countries, the 2008 UPS ABM looks at the regional competitive environment of SMEs in Asia.

Chuah also said, unsurprisingly with the current economic slowdown in the US and the possibility of a recession looming, Asian SMEs see significantly less opportunity for them to trade with the US this year.

"Only 39 per cent of respondents projected trade with the US to grow in 2008, compared with 51 per cent in 2007.

"Consequently, they are shifting their focus of opportunities to other markets such as the Middle East, Latin America and Europe," she added.

Fourty-one per cent of Malaysian SMEs polled are of the opinion that the US economic downturn will hamper their businesses.

"However, a larger proportion (45 per cent) feel that there will be no impact, while a minority of 14 per cent feel they will benefit from it," said Chuah.

"This latter minority view could be driven by US import-driven businesses, seeing cheaper costs due to the current weakness in the greenback," she added.

The majority of Malaysian SMEs (60 per cent) also see China as a positive influence on their businesses.

"Bilateral trade between China and Malaysia is worth RM100 billion per year and more SMEs in Malaysia are exploring strategic business partnerships there," said Chuah.

When it came to workforce issues, Asian SMEs polled shared almost the same storyboard. Top three concerns revolved around the retention of quality employees, the quality of products and services, and political and economic stability.

"In Malaysia, SMEs felt that it is the quality of products and services that most concerns them," she said.

Meanwhile, more than 80 per cent of Malaysian SMEs polled recognise the importance of supply chain efficiency, but a majority (42 per cent) are still experimenting with various ways to manage their supply chain.

"In fact, about one-fifth acknowledged that they are underutilising or neglecting the management of their supply chain completely. This represents a huge opportunity for SMEs to generate greater efficiency in moving them up the value chain and be more competitive," said Chuah.

"It is thus unsurprising that most Malaysian SMEs polled said they have difficulty in forecasting demand and that their lack of knowledge and expertise in supply chain management are areas they should tackle," she added.

In his paper entitled "Challenges to Malaysian SMEs", Federation of Malaysian Manufacturers (FMM) immediate past president Datuk Mustafa Mansur said Malaysian SMEs should look beyond the region when comparing their competitiveness.

"They should look to advanced markets such as Germany, France, Italy and Australia.

"There is also an urgent need to shift the mind-set of Malaysian SMEs to be less dependent on government protection and compete on meritocracy and quality as well as to improve competitiveness through a combination of training and skills upgrading," he said.

Bank Perusahaan Kecil & Sederhana Malaysia Bhd vice-president II and head of corporate planning, Rokiah Razak said delays for disbursements to SMEs are mainly due to incomplete documentation, clients' inability to comply with conditions stated in the terms and conditions and changes to the terms and conditions requested by clients.

"Clients tendency to change their business plans and terms of loan offer impedes the bank's effort to convert the loan into its loan portfolio through disbursements.

"Delay in loan disbursement means lost opportunity for the bank to get other clients, while at the same time it affects the bank's ability to grow its portfolio," she added.