A shot in the arm for the SMEs in Sabah

At a recent dialogue with Perdana Fellows – they are youths from a fellowship programme that allows them to intern with Cabinet ministers – one question I received from my audience was, what would be the biggest challenge for Malaysian businesses to adopt automation, or in general, to brace for the Fourth Industrial Revolution.

The first hurdle would be for them to look past their current bottom lines. Technology foresight is a rather new concept to us especially to the small and medium enterprises (SMEs).

Very often we are in our comfort zones and would be resistant towards change, especially if it involves monetary “sacrifices” though for the short term.

According to the World Bank, SMEs in Malaysia constitute 97 per cent of total business establishments, contributing 37 per cent to our gross domestic product (GDP), 65 per cent to job opportunities and almost 18 per cent to exports.

Through the Malaysia’s 2012 – 2020 SME Masterplan we set a goal of achieving an SME contribution of 41 per cent to GDP within the next three years.

Deemed the “backbone of economy” and “game changers”, various government initiatives have been introduced to boost SME growth. SMEs play an important role in transiting Malaysia into a high income country.

Existing efforts and programmes by the government include streamlining the business registration process, creating a conducive and vibrant ecosystem for start-ups, offering early stage financing, going global, setting up commercialisation platforms, pushing e-commerce and supporting capability development.

Most recently, the International Trade and Industry announced a few days ago that they had doubled the maximum financing amount in the form of soft loans for SMEs in the manufacturing sector from RM 10 million to RM 20 million to promote automation.

Mosti through Sirim Berhad plays a role in boosting the capability development of SMEs to help them remain competitive. The key is by innovating and raising productivity.

By partnering with Fraunhofer Gesellchaft of Germany, Malaysia is learning first hand from the world leader of Industry 4.0 in adopting the German ecosystem to help SMEs in their initial technological upgrading.

Through the Sirim-Fraunhofer programme, interested and eligible SMEs especially in the manufacturing sector could invite technology auditors from Sirim to systematically assess their technology management practices through a site visit and staff interviews.

This first process is called technology audit and is completely government funded.

The auditors would then propose to the companies on how to raise productivity, technology management capabilities and to value add.

Should the SME decides to take up the proposal they would proceed to the next step – the intervention programme.

Companies that join this programme would receive a grant that covers 80 per cent of the cost of adopting new technologies.

At the “Enhancing SME Growth in Sabah: Sirim-Fraunhofer” event last Thursday, I announced an additional RM 400,000 by Mosti to aid Sabah SMEs to fund the remaining 20 per cent for technology uptake.

With participants of the Innovation Workshop.
With companies that participated in the SIRIM-Fraunhofer programme.

This is in response to feedback from SMEs that they face difficulties to fund even the 20 per cent.

Several companies have seen great success upon undergoing the technology intervention programme.

One company reduced its electricity usage by 30 per cent, translating to RM 246,807 of savings a year.

Another is expected to be able to increase its production capacity by 108 per cent in three years.

Since the inception of programme two years ago, 446 SMEs nationwide have participated in the technology audit programme, of which 35 are from Sabah.

From this more than 200 companies have advanced to the intervention programme through the adoption of automation and mechanisation, application of new technology or packaging and labelling.

In my last column on this Sirim-Fraunhofer programme entitled “Gov-funded tech audit for local SMEs”, I lamented the lack participation from Sabah considering that 98 per cent of businesses here are SMEs.

Next I urged them to look out for the Innovation Workshop conducted by Sirim that would train them to manage technology and to generate ideas for new product development.

Qualified companies would be invited to this workshop to also learn a number of techniques to make prudent investment in technology.

In just six months since the Sirim-Fraunhofer programme was highlighted to members of the National Innovation Council in February, we have made small but impactful progress to ensure that more SMEs can benefit from it.

The event on Thursday for example, attracted 150 Sabah SMEs from the food and beverage, service and manufacturing industries to participate in the Innovation Workshop.

At an exhibition to showcase products of companies that have graduated from the programme, I saw many creative and promising local products, cleverly leveraging on the unique bioeconomy resources we have in Sabah.

These entrepreneurs are very passionate in taking their businesses to the next level.

They have a progressive mindset of wanting to embrace change by automating their facilities and unfazed in adopting new technologies to boost productivity. I was heartened to hear positive reviews about the Sirim-Fraunhofer programme from the horse’s mouth.

Finally this is a fine example of how the state and federal government can work together on a common cause.

We are very grateful for the support from the Ministry of Industrial Development Sabah toward Mosti’s role in the technological advancement of SMEs.

We especially would like to thank Datuk Hashim Pajian, Permanent Secretary to the Industrial Development Minister, for gracing the event on Thursday.

Our SMEs truly need to embrace change to remain competitive. The Sirim-Fraunhofer programme is an excellent initiative and Mosti hopes to implement it at a much larger scale.

Together we can do so much more. As Marissa Mayer, former president and CEO of Yahoo said, “When you need to innovate, you need collaboration.”

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