By Dr. Chin Chee Seong, SME Malaysia National President
KUALA LUMPUR, 10 October 2026 – The SME Association of Malaysia (SME Malaysia) welcomes the Government’s decision under Budget 2027 to exempt micro, small and medium enterprises (MSMEs) with annual sales below RM50 million from the increase in minimum wage from RM1,700 to RM2,000, scheduled for June 2027.
The Association expresses its sincere appreciation to the Government for recognising the financial challenges faced by MSMEs and providing much-needed breathing space for businesses to adjust their operations.
However, SME Malaysia remains concerned that Budget 2027 does not provide sufficient direct relief from the rising cost of doing business, which continues to be one of the biggest challenges facing Malaysian SMEs.
Cost of Living and Cost of Doing Business Must Be Addressed Together
SME Malaysia National President, Dr. Chin Chee Seong, said that Budget 2027 continues to focus significantly on helping the rakyat cope with the rising cost of living through increased household assistance, personal income tax relief and measures to stimulate domestic consumption.
“We welcome the Government’s efforts to strengthen household purchasing power, particularly among the B40 and M40 groups. When consumers have more disposable income, local businesses can benefit from increased spending.
“However, higher consumer spending does not necessarily translate into higher business profits when operating costs continue to rise.”
Dr. Chin pointed out that SMEs continue to face cumulative increases in utilities, commercial rental, financing costs, logistics, wages, SST and regulatory compliance expenses.
SME Malaysia’s April 2026 survey found that 76% of respondents were significantly affected by higher fuel and energy costs, while 45% anticipated cash-flow difficulties within three to six months.
“These cost pressures are not isolated. They affect businesses simultaneously, squeezing profit margins and weakening cash flow.
“We cannot continue addressing the rising cost of living without giving equal attention to the rising cost of doing business. Both are closely connected.”
Minimum Wage Exemption Welcomed, but Indirect Cost Pressures Remain
While welcoming the exemption for MSMEs with annual sales below RM50 million, the Association cautioned that smaller businesses may still experience indirect effects from the higher minimum wage.
Dr. Chin said:
“When larger companies increase wages, smaller businesses may face difficulties recruiting and retaining workers. They may eventually be pressured to adjust their salary structures to remain competitive.
“Similarly, higher labour costs among suppliers, manufacturers and logistics providers may be passed down through supply chains, increasing costs for smaller businesses.”
SME Malaysia therefore urges the Government to clarify the duration and implementation of the exemption while supporting SMEs through productivity incentives, skills development and automation assistance.
“We support better wages for workers, but wage increases must be sustainable and supported by productivity growth. Higher wages must not come at the expense of jobs, business survival and competitiveness.”
Tax Reductions and Financing Are Welcome, but SMEs Need More Direct Cost Relief
SME Malaysia acknowledges and welcomes several measures announced under Budget 2027, including:
- The one-percentage-point reduction in qualifying MSME corporate income tax rates, providing potential annual savings of up to RM6,000.
- The increase in business financing and guarantee facilities from RM50 billion to RM57 billion.
- Enhanced capital allowances and targeted sales tax refunds for qualifying business purchases.
- Support for AI adoption, automation, TVET and business expansion.
However, the Association emphasised that these measures primarily support tax savings, financing access and investment, rather than providing broad-based immediate relief from recurring operating expenses.
Dr. Chin explained:
“Tax reductions are welcome, but businesses making little or no profit may receive limited immediate benefits. Even the maximum RM6,000 annual tax saving represents only RM500 per month, which may be insufficient to offset rising operating expenses.
“Financing facilities are useful, but loans must eventually be repaid. Similarly, automation and digitalisation are important for long-term competitiveness, but many smaller businesses are struggling with today’s electricity bills, rental payments and cash-flow requirements.
“Our SMEs do not merely need more loans and incentives. They need practical assistance that directly reduces operating costs and improves their financial sustainability.”
SME Malaysia Calls for Targeted Operating-Cost Relief
The Association urges the Government to consider additional practical measures:
- Targeted utility and energy cost relief for SMEs facing significant increases in operating expenses.
- Temporary SST relief on commercial rental and leasing, particularly for micro and small enterprises.
- Affordable short-term working capital facilities, supported by stronger SJPP and CGC guarantees, simplified applications and faster approvals.
- More accessible automation and productivity grants, particularly for smaller businesses with limited financial resources.
- A comprehensive cumulative SME cost and regulatory impact assessment to evaluate the combined effects of government policies on business costs, employment and competitiveness.
SME Malaysia also calls for closer consultation with industry associations to ensure assistance programmes reflect actual business conditions and reach enterprises most in need.
Business Sustainability Must Be a National Economic Priority
Dr. Chin stressed that supporting household consumption and strengthening business sustainability must go hand in hand.
“The Government is rightly concerned about the rising cost of living faced by the rakyat. However, we must be equally concerned about the rising cost of doing business faced by the enterprises that employ workers and provide goods and services.”
He cautioned that continued operating-cost pressures could force some SMEs to increase prices, freeze recruitment, postpone investments or scale down their operations.
“If businesses cannot remain financially viable, the consequences will eventually affect workers, consumers and the wider economy.
“Helping consumers spend more is important, but ensuring businesses can afford to operate, retain employees and create jobs is equally important.”
Budget 2027 Must Be Measured by Real Outcomes
SME Malaysia reiterates its support for the Government’s efforts to strengthen household purchasing power, promote investment, develop talent and improve productivity.
However, the Association emphasises that the effectiveness of Budget 2027 must be assessed through measurable outcomes rather than the size of allocations announced.
Dr. Chin concluded:
“We sincerely appreciate the Government’s decision to exempt MSMEs from the RM2,000 minimum wage increase. However, our biggest concern remains insufficiently addressed: the rising cost of doing business.
“The success of Budget 2027 should be measured by how many SMEs genuinely benefit, how many jobs are sustained, and whether businesses achieve real improvements in cash flow, productivity and competitiveness.
“A strong domestic economy requires not only consumers who can afford to spend, but also businesses that can afford to operate. Both must be supported for Malaysia to achieve sustainable economic growth.”
