By now, everyone knows that according to economists and experts, 2023-2024 is expected to be a bleak year economically, with a global recession expected to take place.
One sector of the economy that is highly expected to be struggling next year is the Small and Medium Enterprises (SME) sector, which is why Budget 2023 is also expected to offer some reprieve for these SMEs.
In preparation for Budget 2023, we spoke to several CEOs of SMEs to see what they would like to see in the tabling of the upcoming budget.
Dr. Kev Lim, CEO and Co-founder of Qmed Asia, a healthcare technology startup founded in 2018, agreed with the general forecast that the economy will be bleak for quite some time. Despite this, he also says that it might be good for several sectors.
Dr Kev Lim, MD, Qmed Asia
“I do believe generally the economy will continue to be gloomy for some time to come. However, with a weaker ringgit, I think it can result in economic benefits for certain verticals of the market like exporters, and for the healthcare industry it will encourage medical tourism,” said Lim.
“We are positive that the healthcare sector would continue to grow amid the economic status, thus we would be still aggressive in terms of our regional market expansion planning, i.e. towards the Indonesia and Vietnam markets,” he continued.
One thing that needs to be noted when talking about startups, SMEs and the struggles they face is that trying to make sure a startup/SME stays afloat is a huge struggle. After all, Fortune reported in 2017 that 90% of startups fail. Which is why to ensure a thriving environment for startups and SMEs, government support is essential.
When posed with the question about government support, Dr Kev Lim had nothing but praises for existing initiatives aimed at startups and SMEs.
“We applaud the Ministry of Health (MOH) and Futurise for recently establishing the Online Healthcare Services Regulatory Lab (OHS RegLab), where OHS players like Qmed Asia can work together with MOH to develop an appropriate regulatory framework for Online Healthcare Services in Malaysia,” said Lim.
He also heaped praise upon how the Malaysian government provided enough support for Qmed in their early startup phase.
“We also welcome National Technology & Innovation Sandbox (NTIS) by MRANTI, which gives us a testing ground so that our products and services ready to bring to market.Our early startup phase has been supported and funded by Cradle Fund, a funding programme run by the Ministry of Science, Technology, and Innovation (MOSTI) & Ministry of Finance (MOF),” stressed Dr Kev.
Which is why when asked about his personal budget wishlist, most of Lim’s wishlist is for the government to continue adding to the list of initiatives they already have, with several improvements such as tax relief for companies registered as Malaysia Digital status.
“I would like to see introductions of tax relief for companies with the Malaysia Digital status, more hiring incentive programmes, schemes that encourage adoption of local digital solutions, and enhanced access to financing aid,” he concluded.
Sun Tey, the CEO of digital marketing agency The Futuristic Group, believes that the bleak economy forecasted for 2023 is inevitable as some businesses are still struggling to recover from the effects of the Covid-19 Pandemic.
“Without a doubt, the economy was bleak from the beginning of the pandemic till recently in some states. As an owner of a digital marketing agency in Malaysia, our grand purpose was to elevate existing SMEs further and other corporations to survive these trying times with various digital marketing services, including growing your business organically on search engines with SEO, developing or improving your website design, and targeting the right customers with Google ads and Facebook ads marketing,” said Tey.
When asked what the government can do to help startups and SMEs thrive in Malaysia’s economy, Tey had three suggestions.
“Some efforts the government can provide employers to sustain and hopefully return the favour one day to the nation includes: providing mentorship and startup capital grants to fresh entrepreneurs with innovative business ideas, general funding for all SMEs and startups, and low-interest loans available for first-time entrepreneurs with strong business visions.
And finally when asked what he personally wishes to see in Budget 2023, Tey’s answer was simple enough, as the only thing he wants is more employment aid from the government.
“With the great retrenchment currently going on and affecting a lot of businesses, I hope that Budget 2023 will introduce further employment schemes and hiring incentives to stop the unemployment rate from increasing substantially,” said Tey.
And finally, we also contacted PricewaterhouseCoopers (PwC) Malaysia, to gather their experts’ thoughts on the state of the economy next year, and how they foresee the government will handle the situation.
And according to Mei Lin Fung, Tax Partner and Entrepreneurial & Private Business Leader, PwC believes that Malaysia will be affected by the global economic slowdown next year.
Mei Lin Fung, Tax Partner and Entrepreneurial & Private Business Leader, PwC Malaysia
“Many major economies are preparing for a global economic slowdown. We do not think that Malaysia will be spared from the effects of the slump. What matters now are the actions that companies and businesses in Malaysia take to weather the global economic slowdown,” said Fung.
On that topic, Fung also offered her thoughts on what SMEs should do in order to prepare for the upcoming economic downturn.
“Amidst the current economic climate, SMEs and mid-tier companies should start looking at innovative ways to increase value add for their output, be it products or services. This entails taking a critical look at how they are currently operating their business, and determining where their output can provide value add to their customers, such as solving a problem faced by customers or introducing a new way to address issues,” said Fung.
“They can also look into utilising technology for their business operations, and upskilling employees. For example, routine low-value repetitive tasks that are performed manually can be replaced by simple technology, like basic Robotic Process Automation modules.
The additional time saved can be used more productively for value-added activities that they did not have time for previously, to produce products and services customers will be willing to pay for. However, any changes introduced in the business must be accompanied by the human touch, since technology is only a tool to facilitate change,” added Fung.
When asked how the government can help SMEs and startups navigate through the upcoming challenging times, Fung said that the government has always been committed to helping SMEs and startups, which can be seen in the initiatives that have been implemented.
“The government has announced various tax incentives geared at SMEs and mid-tier companies to support them in their growth. Although tax incentives are not financial grants, they do provide some monetary relief to them, provided that they know how to benefit from it. Tax incentives, such as the Special Reinvestment Allowance and the special tax deduction for renovation and refurbishment, are examples of ways they can benefit from such measures as they are not difficult to qualify for and apply for.
Fung also added, however, that the government will do well by providing tax incentives to help SMEs and startups reduce the cost of digitalisation.
“SMEs and mid-tier companies also often focus on digitalisation, and it would be great if the government can provide tax incentives to help them reduce the cost of digitalisation adoption, such as special tax deductions or double deductions.”
When asked about the upcoming budget and what are the things she wishes to see from it, Michelle Chuo, PwC Malaysia’s Tax Director, said that she believes that the Budget will be focused on the well-being of the Rakyat.
Michelle Chuo, PwC Malaysia’s Tax Director
“The well-being of the Rakyat will continue to be the key focus in the coming Budget. We would certainly expect to see various measures to promote a holistic wellbeing of the Rakyat.
Michelle Chuo also shared with us her personal wishlist for Budget 2023:.
And finally, Chuo also concluded that while it is a herculean task for the government to toe the line between finding what’s best for the Rakyat and also reducing the deficit, the government has been showing great progress in this area, especially with the way they’re handling taxes.
“Over the years, various initiatives have been taken to broaden the tax base. As we do not expect new taxes to be announced at this juncture, one way to achieve this would be through the tightening of tax compliance measures.
“The government is already taking active steps to improve tax administration. The tax identification number (TIN) was implemented on 1 January 2022 where TIN will be given to Malaysian citizens above 18 years old. The government has also committed to exchange information under the Common Reporting Standard (CRS) to combat tax evasion and improve tax transparency,” she concluded.
The forecast for next year is expected to be very tough for SMEs and startups, which is why almost every CEO and business owner out there is preparing for it with various measures. But with prudent preparation, the economic downturn can be manageable.