(i) The Importance of Rural SMEs to Economic Development of Local Community, State and Nation:
The government aim is to make the industry
more productive, efficient, and safe. Small and Medium-sized Enterprises (SMEs)
are the core of the Malaysia construction industry and account for about 90 per
cent of companies undertaking construction work. Small and medium industry
development (SMEs) is a very important for rural SMEs to economic development
of local community, state and nation.
Firstly,
the importance of rural SMEs to economic development of local community, state
and nation is caters to the need of
people in the country. The manufacturing sector SMEs has helped people from
depending on external goods. Diversity in SMEs have successfully caters to the
needs of the people. Indirectly, the country has managed to avoid the
dependence on imports. For example, SMEs sector for agriculture based food such
as paddy, fruits, cocoa and oil palm is able to provide a source of food
supply.
Secondly,
complementary industry. There are
products for SMEs which is semi finished goods and intermediate goods which
serves to supply components and semi finished goods required by the larger
industry e.g manufacturing industries. As enlightened, SMEs focusing on production
of component products for the manufacturing industry, vehicle electronic
components to produce computer, handicraft enterprises such as batik and
pottery which helps tourism and much more.
Thirdly,
create traditional expertise. Local
SMEs in the modern era and globalization has challenged local people’s skills
and knowledge. This is because they have to compete in producing products for
SMEs to raise the name of Malaysia at the international level. Therefore, it is
not denied that local products is indeed a reflection of the work culture and
skills of local specialties as well as highlighting local culture itself.
Traditional specialties such as making batik initiated from process of tighten,
drawing, design, paint, turn off color and finally dry in the sun can be used
as a source of lucrative quests. In addition, the manufacturing of batik
nowadays certainly much needed in Malaysia because of high demand, particularly
in tourism sector.
With their small and medium industries in the rural areas, it can create employment opportunities. SMEs
through this as well, at 44.2 percent of total employment of the total labor
force in the manufacturing sector are provided. In fact, a better distribution
of income can be realized compared with the structure of income and wages in
large firms and other international companies. As a result, poverty can be
eradicated with the birth of job opportunities are numerous. For example, a
factory making chips require employees to provide material, cooking, packaging
and marketing their products.
Next, the existence of SMEs in rural areas will also improve the state of agriculture and
fisheries sector. SMEs need raw materials in large quantities for the
production process of factory fishing or forestry. For example, entrepreneur of
banana chips require agricultural products such as bananas adequate and fish
crackers employers require fishery products such as fish. Indirectly, it can
also increase the activity of agriculture and fisheries in the country.
According to the laws of economics, when the rate of supply and demand affect
the price of goods, the prices of agricultural products will increase and
indirectly, the agricultural sector will increase. In the same time, a number
of efforts undertaken by the government agricultural agencies like FAMA, MARDI,
FARMERS and others providing expertise and financial support to farmers and
fishermen.
In addition, the
importance of SMEs is to improve the
country's economic development by creating, developing and strengthening the
basic structure of the national industry development. In fact, SMEs will also
improve the local economy, especially the rural population. Nowadays many
industries established in rural areas in line with the concept of 'One Village
One Product'. For example, a factory making chips, ketchup factory, handicraft
factory and many others. Plant operators can sell their products to local
residents and other visitors. Then, the
country's income distribution is more fair because SMES offering higher wages
to employees less skilled.
The existence of SMES can reduce the gap of income
of the population. SME provides an opportunity to employees less skilled and
semi-skilled salary equivalent to skilled workers and professionals. For the
majority of workers who are less skilled and educated, it is difficult for them
to find employment. The existence of SMES will provide job opportunities to
this group and help reduce the imbalance in the distribution of income. Other than
that, SMes is important to maximize the use of local raw materials for example
SMES industry-based furniture simply using bamboo as raw materials. Increase in
SMES in the production of goods of the country then it is able to reduce
reliance on import goods at once an outflow of national currency will be
reduced.
Reduce
imports of consumers goods is
also another importance of rural SMEs. Small and medium enterprise (SMEs) of rural area
produce many types of consumer goods. These earning will causes the customer or
society will not depend on the imported product from abroad. It can preventing
our community from too depending on imported product. When too depending on
imported product the importing country will sabotage or increase the tax that
we must pay to get the product from them. Because of that producing own product
is more safe then importing product from other country. It is because when the
local entrepreneur will know needs and desire in this country. Beside the
product get halal certificate from our JAKIM. So its safe to muslim and non
muslim to use it. Furthermore, it also can decreasing the flow of money
overseas. Besides it also will decrease the dumping stock of the imported
product that will effect to the economy of Malaysia and also decreasingly
deficit of Malaysia.
SMEs
in rural area improve the tourist sector.
Malaysia has much culture from the community that can used to become asset to
country. For example, handcraft from the community that have quality can be
emblem to culture because each handcraft produce unique item that can get good
profit. Other than that, handcraft also is symbolizing identity to our culture.
Tourism and entrepreneurial activities also are complementing each other’s, as
the development of tourism depends on the SMEs while in the same way SMEs
activities also require the help of tourism in way to grow and survive.
Tourism
sector help to generate opportunities for the local community to start a business
activity, while tourism sector depends on the SMEs activities to provide the
tourist's needs and wants. Tourism is conservatively a small and medium- sized
enterprises industry as in the point that majority of the tourist amenities are
provided by the small and medium-sized businesses. Nowadays, many program are
introduce to increase total of tourism such as in Hulu Perak district local
plan in 2002-2015 had come out with effort to develop a concept of ‘one product
one village’. Other than that, the local community produces agro product such
as “serunding”, “dodol”, preserved fishes, black paper spices, and run
activities of farming cattle and goats in small scale. This program is
supported by the local government.
Next, the important of rural SMEs is
improving technology in the country.
With the SMEs facilities for processing is becoming easier because of the creation
of machines that is able to reduce people ‘s energy consumption and take a
short time to create goods or services. For example in technology sciences
nowadays, make earning food and make it long lasting with a material that can be
use for food to make sure it is safe to eat is no longer impossible. Activity
of rural SMEs can also encouragement
export and marketing based on technology information and communication for
purpose to promote product of SMEs in global. Malaysia already takes initiative
for hold conversion MSEs ASEAN +3. This
conversion provides platform for member state of ASEAN to exchanges ideas and
opinion to another country such as Japan, Korea, and China. Example of
international exhibitions which was hold for advance export sector MSEs is
halal exhibition Malaysia, agriculture horticulture and agro tourism
exhibition, construction exhibition and entrepreneur.
Last
but not least, Malaysian women
entrepreneurs are increasingly recognised to play an important role to the
unprecedented rate of growth of the Small and Medium Enterprise (SMEs) and
indirectly to Malaysian economy. The number of woman in percent Malaysia SMEs
in 2003 was 1,122,000 or 36.8 percent of the total employment in SMEs. A proxy
for women entrepreneurs obtained from population Census in 2000 indicates that
30.0 percent of them are working proprietors and active business partner. Forty-four
percent of Malaysian women surveyed professed desire for self-employment and is
likely to grow overtime. It is no
surprising that the number of women entrepreneurs in Malaysia has increased in
the past three decades due to the emphasis on industrialisation,
self-employment and business oriented employment. All these have been
facilitated by the growth in various sector such as food manufacturing,
agricultural and service sector such as tailor. The Malaysian has come to
realise that fostering the development of entrepreneurship in the country is
crucial for the achievement of Malaysia’s broader development objectivities,
including economic development growth.
(ii)
Barriers / Challenges of Rural SMEs :
Nowadays, there is a lot of challenges that occur to small and medium
industry development in rural SMEs to growing rapidly. One of the challenge
that they need to face it is the lack of
technology. People who live in rural areas less exposed to modern and
sophisticated technology as well as lack of knowledge about the technology. In
addition, the yield and quality of production is low and cannot meet the
requirements and needs of the market. This is because the technology used is
inefficient and outdated categorized and maintenance are not perfect. Thus,
their chances to develop their SME product sales at the international level is
very limited.
Another
challenge of rural SMEs is the challenge
of marketing. Products of cottage industry cope with market competition.
This is so because SMEs face challenges in marketing knowledge such as
marketing strategies, the use of e-commerce and online business which is
extremely shallow. In addition, SMEs also had to compete with each other to
dominate the limited local market share where SMEs face competition from large
enterprises. For example, the food and beverage industry is dominated by giants
company like F&N, Yeoh Hiap Seng, and Nestle, which has been long operating
in the country. The consent of Malaysia to participate in the open market
through AFTA also make SMEs suffer from market great products competition.
This
market is competition in terms of quality and price of local products with
competitive foreign products, may affect the demand for Malaysian goods
oversees. The statement is capable of threatening the new industry based on new
or involved in SMEs. Problem-chain inefficient marketing channels also stunt
the development of SMEs. As a result, many SMEs have to operate their own
product marketing. Because SMEs are not able to enjoy economies of scales
(production cost saving effects of large-scale withdrawal) effect of relatively
small quantities of its product, the prices for their products placed less
competitive. This is coupled with limited promotional activities is one of the
causes for SMEs products less well received among consumers.
The
next challenge of rural SMEs is raw materials.
Sometimes a problem in terms of getting raw materials at certain seasons
restrict the industry. The problem of price fluctuations in raw material also
affects the cost of production and is seen as a barrier to the development of
the industry. In addition, raw materials cannot be saved because it could
suffer damage or no facilities store is also a problem. Suppliers who sold the
raw supply also imposes a variety of credit in conditions to be complied with
by the operators of SMES. Entrepreneurs are hard to get quality raw materials
at low prices. Raw material prices unstable imports also present a problem to
the operators of rural SMES. Sometimes the SMES in rural area had to pay the
price of raw materials higher than large industry.
Then,
less capital and facing financial problem
is also another challenge of rural SMEs. For example, less property for made
security can make it difficult for local SMEs entrepreneur to convinces the
loaner to get facility loan from financial institution. Financial institution
also not interested to give loan because they’re avoiding less interest rates
and to increased their administrative cost to manage small loan. Commercial
banks have to review capacity and ability of entrepreneur for doing their
business and payback loan before get approval of loan application.
(iii)
Steps to Encourage and Develop the Rural SMEs:
Marketing development
programme. This method can be implemented through entourage as
well as intensify international exhibitions in introducing Malaysian goods in
the eyes of the world and indirectly to attract foreign investors to invest in
Malaysia. For example, through the Malaysia External Trade Development
Corporation (MATRADE) which has an important role in the implementation of
various strategies such as export promotion, exhibition, Expo business trip as
well as the publication of magazines and brochures to help introduce and expand
the market for SMEs products.
The
government also played a role in the development of marketing SMEs where the
government through the Small Industries Development Corporation (SMIDEC) and
medium enterprises need to ensure closer industrial linkages between SMEs with
large companies or multinational companies and other global buyers through the
Global Chains and Global Supplier Chain.
The next step is to provide a
sufficient labor force. Most people in
rural areas are those that are less prominent in terms of academics. However,
if given the chance to shine in the practical field, they certainly can. That
being the case, the parties involved should provide a variety of specialized
training for them. For example, the government may establish vocational schools
and can help produce more skilled workers to meet the needs of skilled manpower
in the field of SMEs. In fact, an adequate skilled workforce can improve the
quality and productivity of SMEs. In addition, they can generate and create new
items. SMEs
should also be given more opportunities to participate in technical training
and consultancy services and advice as a way to help SMEs improve the quality,
delivery and design of their products, while at the same time reducing
production costs.
Undoubtedly,
increase the level of technology is
one of the most important step to develop SMEs, especially in the rural areas.
For SMEs to compete in the wider market, rural entrepreneurs in particular need
to be technopreneurs who need to make sure their products produced are based on
technology and at the same time have a market demand. Although the field of
technology is relatively new in Malaysia, it is not a deterrant to
entrepreneurs of SMEs in Malaysia to venture into this field. The Government of
Malaysia with the help of the Ministry of Science, Technology and Innovation (MOSTI) has provide
many opportunities to entrepreneurs in rural SMEs and give them encouragement
to venture into the field of science and technology to be applied in the
business.
To
develop rural SMEs, the role of the
government is indispensable. One of the prime step taken by the government
is to supply funding, grants, loans and incentives to the operators of SMEs.
This can help to motivate farmers who operate business based on agriculture,
fisheries, farming, food processing, etc. Among the grants and incentives
available to SMEs include financial schemes, research and development grant
scheme, and so on. The loan facility is available at a lower price through
government financial institutions, such as the Bank of Agriculture and National
Savings Bank, commercial banks such as Bank Rakyat and CIMB Bank, as well as
finance companies. Through special schemes of Bank Negara, the central bank has
established a special unit for SMEs which aims to assist SMEs to obtain
financing. With the availability of help and government support, SMEs would be
able to thrive.
