The SME Association of Malaysia (SME Malaysia) has called for Budget 2027 to take a more outcome-driven approach to SME development, focusing not only on the amount of grants, financing and incentives announced, but on whether these measures deliver measurable improvements in productivity, investment, business growth and competitiveness.
In its Budget 2027 Proposal, SME Malaysia said Malaysian SMEs are facing growing labour, utilities, financing, taxation and compliance costs while simultaneously needing to invest in digitalisation, automation, artificial intelligence (AI), environmental, social and governance (ESG) readiness and workforce capabilities.
The Association said Budget 2027 should therefore address immediate business pressures while creating a clearer pathway for Malaysian enterprises to survive, formalise, transform, scale and globalise.
SME support should focus on measurable business outcomes
SME Malaysia said Malaysia has already developed a broad ecosystem of SME financing, incentives, grants, digitalisation and capability-building programmes.
The next challenge, it said, is ensuring that these interventions are better coordinated, easier for businesses to access and capable of producing measurable business outcomes.
The Association proposes that the effectiveness of Budget 2027 support should progressively be measured through indicators such as the number of SMEs receiving support, approval and disbursement timelines, adoption of automation and AI, productivity improvements, private investment and Domestic Direct Investment (DDI) generated.
Other indicators should include the number of SMEs becoming qualified suppliers, domestic procurement generated, innovations successfully commercialised, export performance and the number of Malaysian companies successfully scaling into regional and global markets.
The key policy question, according to SME Malaysia, should move from “How much assistance was announced?” to “What measurable change did the assistance create in the business?”
Reduce the cumulative cost of doing business
SME Malaysia is also calling for a Cumulative SME Cost and Regulatory Impact Assessment to assess the combined impact of major policy and regulatory changes on SMEs.
While individual measures may appear manageable, the Association said their cumulative impact across labour, utilities, financing, the Sales and Service Tax (SST), e-Invoicing, licensing and compliance can compress margins, weaken cash flow and reduce SMEs’ ability to invest, hire and grow.
It has therefore proposed greater coordination and sequencing of regulatory measures, the removal of duplicative compliance requirements, appropriate transition periods and meaningful SME consultation before major measures with significant business-cost implications are introduced.
Given the cumulative increase in operating and compliance costs already faced by SMEs, SME Malaysia maintains that any further upward review of the current RM1,700 minimum wage should be deferred at this stage.
The Association said priority should first be given to raising productivity, accelerating automation, strengthening workforce capabilities and supporting business expansion.
The objective, it said, is not to constrain wage growth but to ensure future wage growth is sustainable and supported by higher productivity and stronger business performance.
Financing must follow the SME growth journey
SME Malaysia has proposed an SME Life-Cycle Financing and Investment Framework, recognising that businesses at different stages of growth and with different purposes require different forms of capital.
The framework should provide appropriate access to working capital, machinery and automation financing, digital and ESG transition financing, growth and export financing, as well as equity, co-investment and commercialisation capital for high-potential SMEs and mid-tier companies.
It should also strengthen DDI by enabling viable Malaysian-owned businesses to reinvest, expand productive capacity, automate and move into higher-value activities.
The Association said Malaysia’s financing ecosystem should move beyond a one-size-fits-all approach and combine grants, guarantees, debt, equity, co-investment and private capital.
Public support should increasingly be used to mobilise private capital for commercially viable businesses, including through appropriate participation by government-linked companies (GLCs), government-linked investment companies (GLICs) and institutional investors.
Turn FDI into stronger opportunities for Malaysian businesses
While Malaysia should continue attracting high-value Foreign Direct Investment (FDI), SME Malaysia believes such investment should generate stronger domestic economic spillovers through local procurement, supplier development, technology transfer, knowledge transfer and talent development.
The Association proposes a structured Supplier Development, Localisation and Procurement Programme to help Malaysian SMEs upgrade their capabilities, obtain required certifications, meet procurement requirements and participate in higher-value supply chains.
Opportunities should extend beyond multinational corporation (MNC) supply chains to qualified SMEs seeking appropriate procurement opportunities with GLCs and the Government.
SME Malaysia outlined the intended pathway as:
MATCH → UPGRADE → QUALIFY → PROCURE → SCALE
Where major investment incentives are provided, the Association believes domestic economic spillovers should increasingly be assessed through measurable outcomes such as local supplier development, technology transfer, talent development and domestic value creation.
Accelerate productivity through technology, AI and skills
SME Malaysia is also calling for a more integrated SME Productivity and Capability Programme covering automation, robotics, AI, cloud computing, data analytics, cybersecurity and smart manufacturing.
However, the Association said technology adoption must be accompanied by the necessary capital, technical capabilities, management capacity and workforce skills.
Support should therefore extend beyond equipment purchases to include software, systems integration, implementation, training, reskilling and upskilling.
SME Malaysia also called for stronger technical and vocational education and training (TVET)-industry pathways aligned with SME requirements.
The ultimate objective should be measurable improvements in productivity, cost, capacity, quality, revenue and market access.
Make ESG readiness a market opportunity
SME Malaysia believes ESG requirements should be addressed in a practical and commercially relevant manner as they increasingly influence financing, procurement and access to international markets.
Budget 2027 should strengthen simplified and sector-specific ESG support for SMEs, including carbon measurement, energy efficiency, sustainability and international certification, alongside access to appropriate green and transition financing.
Anchor companies should also be encouraged to help their SME suppliers meet relevant ESG requirements.
The Association said the objective should be to turn ESG readiness from a compliance burden into stronger supplier readiness, financing access and market competitiveness.
Help SMEs innovate, commercialise and go global
Beyond technology adoption, SME Malaysia said Malaysia must develop more home-grown companies capable of creating and commercialising their own products, technologies and intellectual property.
It proposes strengthening the pathway:
R&D → PROTOTYPE → IP → COMMERCIALISATION → SCALE
This should include stronger industry-university collaboration, access to prototyping, testing and research infrastructure, intellectual property development and protection, market validation, pilot and first-customer opportunities, and appropriate venture, equity and growth capital.
SMEs also require stronger market intelligence to respond to tariffs, trade measures, geopolitical developments, technology shifts and changing global supply chains.
Support should connect qualified Malaysian SMEs with international buyers, supply chains and emerging markets, particularly across ASEAN and other major growth markets.
One SME, one profile, one development pathway
SME Malaysia further proposes an integrated SME Development Gateway based on the principle:
ONE SME → ONE PROFILE → ONE DIAGNOSTIC → ONE DEVELOPMENT PATHWAY
The proposed Gateway would help SMEs identify and sequence the most relevant financing, incentives, technology, ESG, skills, certification, supplier-development and export support available across different agencies and institutions.
The objective is not to create another layer of programmes or another agency, but to integrate access to existing support, reduce unnecessary duplication and provide businesses with a clearer development pathway based on their actual needs and stage of growth.
Building Malaysia’s next generation of champions
SME Malaysia believes Budget 2027 should ultimately strengthen Malaysia’s pipeline of companies capable of progressing from small businesses into competitive mid-tier, regional and global enterprises.
Malaysia should continue attracting high-value global investment, but the next phase of growth must also strengthen DDI and enable Malaysian-owned businesses to invest, automate, innovate, expand and internationalise.
Dr Chin Chee Seong, National President of SME Malaysia, and Prof Dr Anthony Dass, National Council Member of SME Malaysia, said Malaysia’s next phase of growth cannot depend solely on attracting foreign companies.
The country must simultaneously strengthen Malaysian businesses so they can invest, innovate, automate, expand and internationalise.
“The success of Budget 2027 should not be measured by how much assistance is announced, but by what that assistance enables Malaysian businesses to achieve — higher productivity, stronger investment, greater innovation, better-paying jobs and more Malaysian companies competing regionally and globally,” they said.
SME Malaysia summarised its policy direction for Budget 2027 as:
ATTRACT GLOBAL CHAMPIONS.
BUILD MALAYSIAN CHAMPIONS.
The Association said it looks forward to continued engagement with the Government and relevant stakeholders to strengthen the proposed measures and ensure that Budget 2027 delivers meaningful and measurable outcomes for Malaysian SMEs and the wider economy.
