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The Growth and the Role of Small and Medium Industries (SMEs) in Malaysia

Small & Medium Enterprise

Small and medium industries (SMEs) play an important role in the development and growth of the country's economy. The rapid economic growth rate of 8.4% per annum during the period 1989-1994 would not have been possible without the significant contribution and support of SMEs.


More importantly, the robust growth of the manufacturing sector since the 1980s has positioned SMEs as the main driving force in diversifying activities in this sector. The contribution of SMEs is becoming more apparent and this can be seen in several areas such as the number of establishments, number of jobs, value of output and fixed assets.



Opening Job Opportunities


One thing that is often said in SMEs is that it is able to open more job opportunities to the public. This is because SMEs are able to use labor intensively in their production techniques compared to large firms. This can directly open up many job opportunities in several production functions in SME operations. Data in the census of manufacturing industries in 1991 showed that fixed capital for a workforce increased according to the size of the firm especially to firms with 100 employees and above.

SMEs also provided 44.2% of employment opportunities of the total workforce in the manufacturing sector, 48.9% and 31.7% respectively in total value of output and total value of fixed assets. More important than the percentages of the above statistics are the real role played by SMEs in the growth of the manufacturing sector and the overall economic development of the country.

It is estimated that the total capital per employee for SMEs is approximately 14 to 50% lower compared to large -sized industries. Overall, in all censuses and research that have been conducted it has been found that the larger the size of an industry, the higher the use of capital or capital.


Savings in the Economy and Income Distribution


SME activities either directly or indirectly can help increase the amount of savings in the national economy. In most small industrial operations, a large amount of financial resources and capital come from the owners themselves. There is also capital contributed by family members, relatives or friends, in addition to their business partners. Studies show that over 70% of financial resources in SMEs come from their respective owners or entrepreneurs.


This clearly implies that SMEs are the main source of the country's total savings and savings. If the amount of capital and financial resources are not invested and used in SMEs, it is very likely that they will be used for other necessities. Thus, the establishment and activities of small industries in economic terms encourage savings rates and economic funds. This can increase the overall savings rate of the population in the country and reduce the problem of rising inflation. In addition, the sources of raw materials used by SMEs such as machinery, equipment, offices and buildings also help towards increasing the national savings fund. SMEs, in this context as well, can reduce the rate of excessive waste.


The importance and role of SMEs can also be seen in terms of income distribution among the population. Large firms and international companies are generally more likely to pay and offer high salaries, benefits and social welfare to only a small group of employees especially to top managers, skilled workers and professionals only.


While it is believed that a real and fairer distribution of national income distribution is difficult to establish, the involvement of entrepreneurs, owners and employees in SMEs can help reduce income inequality of the population. The impact of their involvement in SMEs will be able to create and promote more significant income compared to the existence of income and wage structures in large firms and other international companies.


Training for Employees


The role of SMEs as a training ground in various skills for employees, entrepreneurs and potential entrepreneurs can no longer be disputed. With that amount of capital, SME entrepreneurs can build useful training and knowledge on the particulars of business operations and depend on the business for their livelihood.


For a small amount of capital, it is also difficult for an entrepreneur to get the same benefits in a large firm. More importantly, with a small amount of capital, SMEs can provide employment opportunities to family members, neighbours and the public. These employment opportunities in SMEs can certainly provide and provide useful training and skills to themselves as well as the employees involved.


In addition, most employers and employees in SMEs have low levels of education. This low level of education is evident when compared to managers and employees in large firms and other international companies. The majority only passed Sijil Rendah Pelajaran and Sijil Pelajaran Malaysia levels. With the level of approval they have, it is very difficult for them to get high and well-paid salaries as managers, administrators, accountants, engineers and others in the public and private sectors. With low formal qualifications, it is also very difficult for them to get rewarding jobs in large firms and international companies. However, entrepreneurs and employees like this can be involved in SMEs.


Thus, through participation in SMEs, they not only get training, but also be able to enhance the training experience and skills. The training and skills that can be acquired in SMEs are also not limited to a single area of ​​operation. Production methods that emphasize more labour intensive in SMEs and the absence of a fixed and clear specialization of work areas have resulted in many workers being able to acquire such training and skills in various functions and areas of operation.


In conclusion, SMEs can also create industries that complement the needs and development of the country's industry. This is so important because our country needs diversity in the industrial sector. The active involvement of SMEs in various sectors also enables a strong and solid industry base and will not be compromised and affected if there is a withdrawal of operations and investments from international firms and companies.



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