Malaysia's SMEs Embrace Digitalisation to Boost Competitiveness

In Malaysia, 98.5% of the 920,624 business establishments are small and medium enterprises (SMEs), serving as the backbone of the nation's economy.

Despite their critical role, digital adoption among SMEs significantly lags behind larger enterprises, as highlighted by the World Bank.With digital technologies like artificial intelligence (AI) rapidly transforming industries, SMEs' readiness to embrace this shift is crucial for sustained economic growth and positive revenue.Bridging this digital gap is urgent. SMEs must catch up to ensure their survival and contribute to Malaysia's economic future.

Small and Medium Enterprises Association Malaysia (SAMENTA) revealed that many SMEs are not IT savvy.National secretary Yeoh Seng Hooi said they depend on the IT department and vendors' recommendations instead of recruiting in-house talent to drive digitalisation.He added that digitalisation costs can be offset with matching grants or soft loans.

KRI found that SMEs' digital adoption is primarily in front-end computing devices and connectivity, with only 44% and 54% using cloud computing and data analytics (Source: Khazanah Research Institute).

"This helps micro SMEs go online but doesn't enable customer relationship management or manufacturing execution systems," he told The Malaysian Reserve (TMR).To address this, Yeoh urged SMEs to lead the digitalisation initiative by incorporating these tools into their business strategies and understanding the digitalisation process instead of relying on vendors.

"There are many cases of SMEs investing in enterprise resource planning systems that were not effective. Systems consultants should understand SMEs' businesses better and recommend scalable and affordable strategies," he said.The Khazanah Research Institute (KRI) found that SMEs' digital adoption is primarily in front-end computing devices and connectivity, with only 44% and 54% using cloud computing and data analytics.

As of 2023 to 2024, 21,591 SMEs have adopted digitalisation through MDEC's 100 Go Digital initiative (source: mdec.com.my).