This literature review instigated on the topic of SMEs in the Malaysian economy. The sources found referred from the previous researches, journalists, articles, professionals, etc which relevant to this topic. Finding methodologies are from the books, electronic books, online journals, annual report, etc. The main objective of this literature review is to talk about the important and the development of SMEs in the Malaysian economy in term of infrastructure facilities and application of ICT, financial assistance and advisory services, and market access.
2.0 History of SMEs in Malaysia
After Malaysia independence, resource-based and agriculture sector was the main economy. According to Ching (2004), there were two different industrialization strategies ran by Malaysian government from 1960s-1980s. The import substitution industrialization (ISI) was the first strategy during 1960s, the second strategy was the export oriented during 1970s, there was more focusing on the sector of textiles and electronics in 1980s. The New Economic Policy was established in the early of 1970s intended to reshuffle ethic economic inequities and progress people’s welfare which was under the government’s promise for help the development of SMEs (Salah and Ndubisi, 2006). Furthermore, in the second Industrial Master Plan (IMP2) and third Industrial Master Plan (IMP3) government act as a very important actor to assist SMEs, move forward to adapt the 2020 country’s vision (MITI, 2005).
3.0 A Profile of SMEs in Malaysia
Small and medium enterprises (SMEs) play an important role in the development of Malaysian economy. Message from YAB Prime Minister Malaysia, Dato’ Sri Mohd Najib Tun Haji Abdul Razak (2009), SMEs in Malaysia accounted for 99.2% of total business sector, and SMEs are an important source of endogenous growth, a key government priority national agenda in the development of SMEs. According to Grilo and Thurik (2006), the main driving forces of SMEs are to take part in the development and growth in the current economic. Generally, the key element of a nation’s economy is referred by development of the SMEs sector. SMEs act as a significant function on the development between the developing and developed countries. Additional, the United Nation stated that the economic, social and cultural dimensions of a country are being considered on the characteristics of a SME (United Nations, 2004). If an enterprise is independent and not part of a larger organization, managed in a personalized manner and controls relatively small share of the market, it can be consider as a SME (Bolton, 1971). According to Cosh and Hughes (2000), SMEs often have their own limited customers based and products portfolio. Definition of SMEs in Malaysia based on 2 categories, there are: 1. Manufacturing, manufacturing-related services and agro-based industries are enterprises with annual sales turnover not exceeding RM25 million or full time employees not exceeding 150. 2. Services, primary agriculture and information & communication technology (ICT) are enterprises with annual sales turnover not exceeding RM5 million or full time employees not exceeding 50. An enterprise classified as an SME as it meets either the specified number of employees or annual sales turnover definition as indicated in Table 1. According from SME info Portal, distribution of SMEs by business sector in 2010 has shown in Table 2. The majority of SMEs business sector in Malaysia are manufacturing sector and services sector which represented 5,965 or 35.6% and 5,406 or 32.3% in the total of 16.750 (SME info, 2010). Performance of SMEs in 2005 in contribution to GDP of the nation is 32%, employed is 56.4% and owned 19% of total exports. The expectation in 2010 of nation GDP is up to 37%, 57% of the employment and total export of 22% (SME Annual Report 2008, 2009). Table 3 shows that SME’s contribution to Malaysian economy.