Previously in Malaysia, there was no standard
definition as to what Small and Medium Enterprises were and SME stands for
Small to Medium Enterprise. However, what exactly an SME or Small to Medium
Enterprise depends on who is doing the defining. In Malaysia, the size of the
enterprise can be categorized based on the annual sales, number of employees, assets,
or any combination of these. Small to medium enterprises (SMEs) are the most
majority of businesses in most countries. In order to successful in SMEs, SMEs
business may have some challenges need to face and also have the solution to be
Definition of SMEs
Based on the official website of SME CORP Malaysia,
98.5% business establishments in Malaysia are SMEs. It can be said that SMEs
are the backbone of Malaysia economy. Besides that, Malaysia SMEs can be group
into three categories which are Micro, Small, and Medium. The majority of the
SMEs are micro enterprises which make up 76.5 per cent of the total SMEs,
followed by the small-scale enterprises, which comprise 21.2 per cent and
Medium-sized enterprises are 2.3 per cent of the total SMEs.
In 2005, the National SME Development Council (NSDC)
laid out two main criteria which are annual sales turnover and number of
employees. These criteria apply to all SMEs of various sectors of agriculture,
manufacturing and services. According to official SMEs website, SMEs are defined
as firms with sales turnover not exceeding RM50 million OR number of full-time
employees not exceeding 200 for the manufacturing sector. For the services and
other sectors, SMEs are defined as firms with sales turnover not exceeding RM20
million OR number of full-time employees not exceeding 75.
As the other parts of the world, SMEs in Malaysia
operate various business. There have three components that may be categorised
in SMEs Malaysia which are agriculture sector, manufacturing sector and general
business sector. Each of these sector and some example are be descried in
The agriculture sector includes perennial crops and cash
crops. Perennial crops includes rubber, palm oil, paddy, and coconut while cash
crops includes vegetables and fruits.
The main activities of manufacturing sector is physical
or chemical transformation of materials or components into new products, such
as food, beverage, petroleum, rubber, plastic, wood, chemical, electronic and
Meanwhile for the general business sector involved
with wholesale and retail trade, construction, restaurant, transport and
storage, hotel and business services and activity.
Role of SMEs
Currently, SMEs are crucial to the economic growth
process and play a vital role in the development of Malaysian economy. SMEs in
Malaysia have to embrace the change in Malaysia and next is across the country.
Now the economy is shifting from industry-based to a knowledge-based economy to
achieve vision 2020. By 2020, Malaysia aims to rise from its present 36% to
41%, and the share of SME exports must hit 23% in order to achieve this vision.
In addition, SMEs have a significant role to play in creating opportunities for
women and youth. This is for actively participate in a country’s productivity.