MIRI: A federal minister said Malaysia will not fall into a recession despite the depreciating ringgit, low commodity prices and the gloomy global economy, saying the country is resilient enough to ride out the storm.
Minister in the Prime Minister’s Department Datuk Seri Dr Wee Ka Siong said the government was aware of the obstacles and was prepared for them.
“There is no risk of recession at the moment as the economy is expected to hit four to five per cent GDP growth next year, well in line with the 4.5 per cent forecasted by rating agencies, including Moody’s Investors Service,” he said.
He was speaking at the opening ceremony of the 3rd Asian SME Conference here, which was officiated by Head of State Tun Pehin Sri Abdul Taib Mahmud.
Wee said Malaysia’s fiscal reform, ability to reduce deficit, and strong economic fundamentals had retained confidence in its economic outlook.
The minister, however, conceded that the country needed to wean itself from over-reliance on its oil revenue and commodity-based industry and adopt a more diversified and service-oriented economic model.
Welcoming the launch of Asean Economic Community (AEC) in two months to promote Asean economic integration, he said it augured well for cross-border collaboration to face the changing economic landscape in this region.
The proposed launch of the ICSB Asean platform would be a shot in the arm for collaboration among Asean countries.
Thus, Wee said, it is imperative that openings be created to propel local SMEs to go beyond their traditional markets to tap into the borderless market, including the enormous 125 million Asean households by 2025.
Such market would not only widen SMEs client base but would enable SMEs to become major players under Afta, Afec and soon, the Trans Pacific Partnership Agreement (TPPA), he added.
He also said China’s drive to create a vast market network through the One-Belt-One-Road initiative would inevitably affect local markets.
The Secretariat for Advancement of Malaysian Entrepreneurs (SAME) initiative by Prime Minister Datuk Seri Najib Tun Razak would also encourage uptake in innovative technology to reduce dependence on foreign labour and raise their capability to be competitive and export-oriented, he added.
SAME plays the role of enabler in bridging the gap between SMEs, funders and the government under a conducive ecosystem that explores alternative financing models such as angel investing, venture capital and crowd funding as a boost to the current SME scene.
The minister also called on local SMEs to either diversify or move up the value chain for their products by undertaking value-adding initiatives.
Pointing to Budget 2016 as SME-centric, he said it had a slew of incentives for SMEs to pursue innovations through research, including GST relief for re-import of goods exported for research and automatic double tax deduction for R&D projects expenditure of up to RM50,000.
The budget also allocated RM235 million to Matrade for the 1Malaysia Promotion Programme, Services Export Fund and Export Promotion Fund.
In targeting 41 per cent contribution to GDP by SMEs, the government also introduced RM107 million for affordable financing beyond conventional banking.
The government also introduced five major funding initiatives for SMEs; RM1 billion Shariah-compliant financing schemes, RM60 million for Entrepreneurs Acceleration Scheme and capacity enhancement, RM200 million SME Technology Transformation Fund, RM18 million Small Retailers Transformation (Tukar) and Automotive Workshop Modernisation (Atom).