Barriers and Way Forward

While adoption of automation and digital tools can prepare MSMEs for the future, there are systemic and structural barriers to investment in these tools: 

In the evolving landscape of Malaysian MSMEs, there are financial pressures compounded by factors such as the Capital Gains Tax (CGT) (5), that intersect with challenges posed by participation in intricate supply chains. Engagement in complex supply chains exposes these enterprises to risks associated with investing in capital, such as machinery, which may become obsolete due to shifts in demand. To address these intertwined challenges, the Malaysian government's provision of grants and loans becomes a pivotal remedy. By strategically deploying financial support and simultaneously fostering local ecosystems for specific industries, the government can empower MSMEs to navigate challenges, invest in innovation, and fortify their resilience, thereby promoting economic diversity and sustainable growth within the Malaysian context.

In the era of automation and digitalization, the knowledge and talent necessary for MSMEs to thrive are paramount. However, many Malaysian SMEs may face challenges in acquiring the skills needed to effectively utilize these tools. Remedies include the promotion of knowledge-sharing platforms, collaborative networks, and vocational training programs. By fostering an ecosystem that encourages the exchange of expertise, MSMEs can tap into a collective pool of knowledge. The government, in partnership with industry stakeholders and educational institutions, can champion initiatives that provide accessible training, ensuring that Malaysian SMEs are equipped with the digital literacy required for sustainable growth.

These barriers are not unique to Malaysian SMEs, and there are lessons to be learned from initiatives in other contexts. For example, a dedicated database scheduled for its debut in 2024, has been developed by the Robot Industrial Basic Technology Collaborative Innovation Partnership (ROBOCIP), which promises to open up automation access for small enterprises. This collaborative effort by prominent robot manufacturers will disseminate fundamental information on robot specifications, operations, and software, offered free of charge for smaller enterprises. By facilitating the sharing of information on robot operation and adjustments, the system aims to streamline the introduction process and simplify the selection of the most suitable equipment. By democratizing access to robotic technology for SMEs, this initiative could potentially reduce their cost of integrating automation by up to 60%, narrowing the productivity divide between Japan's smaller businesses and their larger counterparts (6). 

A similar initiative is also seen in Hong Kong where major players in the office automation sector, such as Canon, are directing their efforts towards Hong Kong's 300,000 small and medium-sized enterprises (SMEs), offering a comprehensive suite of packaged hardware, software, and services to enhance efficiency and productivity within these businesses (7). Meanwhile, the UNDP Global Centre Singapore is working with the Monetary Authority of Singapore to develop unique digital identities for MSMEs, providing an ecosystem that strengthens confidence, transparency, and trust in digital transactions. These strategies could serve as a guidance in adopting automation and digitalization for the Malaysian context.