Time to unlock new markets, unleash endless opportunities

INTERNATIONAL trade has always been the backbone of the Malaysian economy. In the last few decades, the economy has undergone a slew of transformations, among which was the strengthening of the domestic demand market.

But as a small and open economy, Malaysia is still relying on the external sector to boost growth and accelerate the development of the country.

In the last decade, among some of the crucial initiatives by the government to enhance and deepen external trade linkages with other countries was the participation in the negotiations of the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) free trade agreements.

After Donald Trump came to power in the United States, TPP was dissolved and evolved into a Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

After more than nine years of negotiations, the RCEP agreement has finally come into force for Malaysia.

This is clearly an opportune period at a time when Malaysia and the world are still rebuilding their economy due to the impact of the Covid-19 pandemic.

Indeed, for Malaysia, one important segment that has been heavily affected by the pandemic are small- and medium-enterprises (SMEs).

SMEs are significant to the economy — 98.5 per cent of firms are SMEs, accounting for more than two-thirds of employment in the labour force and around 40 per cent of the gross domestic product (GDP).

Thus, it's no surprise that a big chunk of the eight stimulus packages was launched to help ease the unprecedented impact of the pandemic on the economy. Also, "pandemic budgets" of 2021 and 2022 are mostly directed towards SMEs.

Even the RM400 billion medium-term economic planning of the 12th Malaysia Plan (12MP) has greater focus on SMEs.

But challenges remain, such as in penetrating new export markets and competition in the existing limited local market.

The need to reset the economy, the post-pandemic economy, the fast pace of digitalisation, Industry 4.0 challenges, cashless transaction, the shift to sustainability, green economy, green trade — all these would pose new challenges for SME players.

RCEP certainly has the potential to unlock new markets and unleash endless opportunities to be tapped and harnessed but by the same token, it also poses threats.

The immediate question is: how can our SMEs, or micro, small and medium enterprises (MSMEs), reap the full benefits?

RCEP, after all, is today's world largest trade deal with 30 per cent of global population, one-third of world's GDP, and 31 per cent of world's exports.

Thus, the potential is huge. The government must show leadership and how it will position Malaysia and the local SME players vis-à-vis RCEP. This is very important as many SMEs or MSMEs are perhaps still clueless about the benefits and challenges under RCEP.

And, even if they are aware of its opportunities, perhaps the ecosystem is inadequate for their business operations to benefit optimally under RCEP. If they are not prepared for RCEP, how can they prepare for CPTPP in the near future?

Therefore, it is crucial for the government to come up with a new Industrial Master Plan (IMP) to chart the direction of the industrial sector in general, and the SME sector in particular.

The last IMP is the Third Industrial Master Plan that ended in 2020.

It began in 2006 to continue the agenda of the Second Industrial Master Plan, from 1996 to 2005. Malaysia's First Industrial Master Plan started in 1986 and continued until 1995.

Thus, since 1986, Malaysia consistently had a clear long-term policy framework to transform the manufacturing and services sectors towards global competitiveness.

Perhaps, the new IMP document is more important than ever now with RCEP and the CPTPP, not to mention challenges from the pandemic, the Russia-Ukraine crisis, the weakening ringgit as well as the looming global stagflation.

The other important policy document that has nurtured SMEs rather successfully in the past is the SME Masterplan, which was introduced in 2012 and ended in 2020.

SMEs today clearly need a new "game changer" to move forward, and a new approach to SME development in confronting the threats and challenges of RCEP. More importantly, to optimally reap the benefits of RCEP.

Source: New Strait Times