SMEs which represent around 99.2% of total business establishments in Malaysia and provide employment for about 56% of the total workforce are an important source of growth for the nation. They will play a major role in Malaysia’s new economic model which envisions transforming Malaysia from a middle-income economy to a high-income economy.
2010 continues to be a challenging year for Malaysian SMEs as economies around the world strive to recover from the global economic and financial crisis. While the government put in place measures to assist local businesses and cushion the impact, continued success and the viability of existing businesses are dependent on the proactive measures taken by SMEs.

Malaysian Government’s Plan on SME Industry

SMEs are a major contributor to Malaysia’s economy. In 2005, the sector generated 32% of the country’s GDP and 19% of exports. Realizing the important role of SMEs, the Government has formulated many policies and development plans to assist the SMEs in all areas of operations. The Government is fully committed in further assisting the SMEs to realise their full potential, as can be seen in the national development agenda. Both the Ninth Malaysia Plan (9MP) and the Third Industrial Masterplan (IMP3) specifically outlines key strategies for SME development from 2006 – 2010 and 2006 – 2015 respectively, with a special focus on the broader application of Information and Communications Technology (ICT), capacity building and enhanced productivity.
The National SME Development Council (NSDC), on 9 June 2005, approved the common definitions of SMEs across all economic sectors, for adoption by all Malaysian Government Ministries and Agencies involved in SME development, as well as financial institutions.
Generally, SMEs are defined in two broad categories:
1 .Manufacturing, Manufacturing-Related Services and Agro-based Industrie
“Small and medium enterprises in the manufacturing, manufacturing-related services and agro-based industries are enterprises with full-time employees not exceeding 150 OR with annual sales turnover not exceeding RM25 million.”
2 .Manufacturing, Manufacturing-Related Services and Agro-based Industrie
“Small and medium enterprises in the services, primary agriculture and Information & Communication Technology (ICT) sectors are enterprises with full-time employees not exceeding 50 OR with annual sales turnover not exceeding RM5 million.”
sme overview
Note: The working definition for SMEs in the mining and quarrying and construction sectors is based on the SME definition for the services sector.

As reported in the SME Annual Report 2006, SMEs account for 99.2% of total business establishments but the SME sector contributed only 32% of real gross domestic product (GDP) and 19% of total exports. Therefore, there is vast opportunity to increase SME contribution to the domestic economy. In this regard, NSDC has set a number of performance targets for the SME sector. These targets include increasing SMEs’ contribution to GDP to 37%, its share of total exports to 22%, and for the SME sector to employ over 6.2 million workers by 2010. The Government’s programmes and initiatives for SME development will, therefore, be intensified with more focused and targeted programmes in 2007. A total of 189 programmes are being implemented and supported by a financial commitment of RM3.7 billion in 2007.
SMEs account for 96.5% (39,436), of all enterprises in the manufacturing sector. The majority are engaged in the food and beverages sub-sector (32.5%), followed by chemicals and chemical products (15.6%), rubber and plastic products (10.3%) and fabricated metal products (6.6%). These industries accounted for 79.0% of total SME output, 29.8% of total manufacturing output, 26.0% of total value added and 31.3% of total manufacturing employment.
Small and medium enterprises (SMEs) in the manufacturing sector continued to perform well in 2006 with a growth rate of 7.4% in value added to RM17.8 billion. Concurrently output grew from RM82.0 billion to RM88.3 billion or 7.7% while employment rose from 394,670 to 402,496 or by 2.0%.
According to the SME Annual Report 2006, during the 9MP, the principal SME policy is the development of a competitive, innovative and technologically strong SME sector that is able to contribute to the domestic economy and compete globally. Strategies will be directed at acquiring technologies to propel SMEs up the value chain in the manufacturing, agriculture and services sector. These include outsourcing, inter-firm linkages, entrepreneurship programmes and development of technical skills.