Economists and industry representatives assess whether tax cuts and increased financing facilities can spur business growth in the new year.
But to what extent will these measures be enough to make 2027 “the year of Malaysian MSMEs”?
Economists and industry representatives assess the impact of the measures on cash flow, productivity, and local businesses’ ability to expand into wider markets.
Tax savings provide working capital
The 2027 budget proposes reducing corporate tax from 15% to 14% on the first RM150,000 of chargeable income, and from 17% to 16% on the next RM450,000.
The move is expected to save eligible businesses up to RM6,000, benefitting about 300,000 MSMEs.
Economist Lai Wei Sieng of Universiti Kebangsaan Malaysia said the proposed rates were the lowest for these income brackets to date.
Malaysian Small and Medium Enterprises Association (Samenta) president William Ng said the savings should not be dismissed as insignificant, as the money could be put directly towards working capital.
“I know some people have played down the RM6,000 in savings, but for an MSME, these tax savings allow a company to retain more money each year for working capital,” he said.
Ng said that unlike grants, which require applications and documentation, tax cuts allow eligible companies to retain more of their earnings.
He said the move also showed that the government understood the cash flow challenges businesses faced.
Guarantees help overcome collateral constraints
According to SME Corp, RM67.9 billion had been allocated for MSME development in 2027 through initiatives and programmes that could benefit these businesses directly and indirectly, the highest amount on record, up from RM54.9 billion in 2026.
Some financing facilities are also available to mid-sized companies.
Ng said many small businesses, particularly in the services sector, struggled to obtain loans because of inconsistent financial performance or a lack of collateral.
Credit guarantees can reduce banks’ risks and improve businesses’ chances of securing financing, he said.
However, he cautioned that lending decisions remained with the banks, and business owners needed to help financial institutions understand their operations and financing needs.
Room to adjust wage costs
The 2027 budget also sees the minimum wage raised from RM1,700 to RM2,000 from June next year. MSMEs with annual sales below RM50 million will be temporarily exempted to give them time to adjust.
Ng said the exemption recognised that businesses in major cities generally had greater financial capacity than those in smaller towns.
Many MSMEs in the Klang Valley, Johor Bahru and Penang already paid wages above RM2,000, while businesses in smaller towns tended to have lower revenue and wage levels, he said.
Ng stressed that wage increases were inevitable and business owners should use the time provided to adjust their operations, including by adopting automation and digitalisation to reduce their reliance on labour.
Modernisation no longer optional
Economist Tan Peck Leong said support for modernisation was among the most important measures in Budget 2027 to ensure MSMEs remained viable and competitive.
The budget also raises the threshold for small-value assets eligible for capital allowances to RM3,000 and extends accelerated capital allowances for certain ICT machinery and equipment until the end of 2030.
The government has also allocated RM30 million through the Malaysia Digital Economy Corporation to help 4,000 MSMEs adopt AI and automation.
Another RM60 million has been allocated to the Malaysia External Trade Development Corporation, while Bank Pembangunan Malaysia Bhd will provide RM1 billion in financing to help businesses expand into export markets.
Tan said investing in technology could help businesses increase production without sharply raising labour costs, but such efforts had to be accompanied by capable management and a skilled workforce.
“In today’s competitive environment, modernisation is no longer an option, but a necessity to survive and grow,” he said.
Assistance opens the door to growth
The experiences of two entrepreneurs show how government assistance can help businesses grow.
R Abiramee started making ice cream from home after losing her job during the pandemic. A RM76,000 grant from SME Corp later helped her buy three production machines.
“If SME Corp had not given me the grant then, my dream might never have become a reality,” she said.
For Abiramee, the proposed tax savings of up to RM6,000 were far from insignificant, as the money saved could be used to buy six freezers for restaurants selling her Jumboo Ice Cream products.
Abiramee hopes to get her products into supermarkets and eventually overseas. However, she said more help was needed to overcome barriers to entering bigger markets, including product listing fees.
Meor Tawfik of Ventura IoT also received help from SME Corp after his business struggled with project delays and late payments during the pandemic.
The grant helped his company develop portable demonstration equipment for its fibre-optic sensing technology, allowing potential customers to see how it worked.
The equipment was also taken to Indonesia, Thailand and Vietnam, allowing potential customers to see how the technology worked.
“We secured projects not just in Malaysia, but also overseas,” he said.
Ventura IoT has since grown from four employees to 40, half of whom are engineers.
What would make 2027 a success?
Tan said the success of efforts to make 2027 the year of Malaysian MSMEs should not be measured by the amount of aid distributed or the number of new businesses established.
Instead, the focus should be on whether existing businesses could survive, grow and become more productive.
Sales growth and the ability to enter international markets should also be used to measure progress, he said.
“We want to see more micro enterprises grow into small enterprises, and small enterprises grow into medium-sized enterprises,” he said. - FMT
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