Sme Development in Malaysia

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International Review of Business Research Papers
Vol.2. No.1 August 2006 pp.1-14

An Evaluation of SME Development in Malaysia
Ali Salman Saleh∗ and Nelson Oly Ndubisi∗∗
Small and medium enterprises (SMEs) in play a vital role in the Malaysian economy and are considered to be the backbone of industrial development in the country. However, few studies examined their development, challenges and future prospects. Therefore, the aim of this paper is to examine and analyse the role of SMEs in different sectors as well as their major contribution to the economy. The paper goes further to review the existing literature as well as the empirical studies in order to identify the major challenges (domestically and globally) that face this sector. The key messages from the studies examined in this paper are that Malaysian SMEs still face many domestic and global challenges in achieving economies of scale and competing internationally. Among the challenges are the low level of technological capabilities and limited skilled human capital resources, a low level of technology and ICT penetration, low levels of research and development (R&D), a substantial orientation towards domestic markets, a high level of international competition (for example, from China and India), a high level of bureaucracy in government agencies, and internal sourcing of funds. These characteristics suggest that government programs and incentives are either insufficient or not delivered effectively enough to overcome these problems. This paper attempts to identify the challenges as a positive first step towards formulating a workable framework for the SMEs to overcome them.
Keywords: SMEs, development, contributions, challenges, Malaysia.

1. Introduction
Malaysian SMEs are a vital component of the country’s economic development. According to SMIDEC (2002), SMEs accounted for 93.8 per cent of…...

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