SME and exports

Small and Medium-scale Enterprises (SME) are truly one of the key backbone of the Malaysian economy. As a percentage of Malaysia's Gross Domestic Product, SMEs contributed 32% in 2005 and, the contribution is expected to increase to 37% in 2010. In 2005, SMEs contributed 19% of the total value of Malaysian exports. This is also expected to increase to 22% by 2010. Bank Negara publishes the SME Annual Report.

The Minister of Finance 1's reference to the need to strengthen SMEs through new initiatives by financial institutions and access to special Bank Negara funds underlines the importance of this sector and its multiplier effect on the wider economy.

SMEs can look forward to credit supply and, possibly an opportunity to restructure their loans. The government will, no doubt, be trying to urge banks to keep the credit supply lines going and, not hold back on good loan proposals.

Trade finance
The supply of credit must also be available for trade finance in imports and exports by SMEs who usually arrange for Letters of Credit and related instruments.

This leaves another important feature that needs to be looked into quite seriously and earnestly.

Export finance
To assist the SME exporters to reach out internationally, we have the Malaysian Industrial Development Authority (MIDA) and Matrade.

Sometimes, foreign buyers need sweeteners to get into an export deal. This is quite commonplace in new markets.

This is where the EXIM Bank can play a pivotal role where private commercial banks shrink during a tough economic environment such as the one we see today. Where commercial banks chicken out the EXIM Bank is supposed to step in.

Any plan by the Ministers of Finance I and II and, the Minister of International Trade and Industry, must include a significant allocation of funds to support these elements that form part of the process of exporting Malaysian goods.