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MAIN CHALLENGES FACING SMES

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he SME 100 debunks several myths that many (including some of us in the team) had about SMEs. From the response that we received, we can conclude that Malaysian SME owners are not just well read, they are technologically savvy and well educated. Accounts are generally in good order, and in many cases, of greater depth and details than are legally required. When we asked for management outlook, little did we expect that the conference room we have hijacked will be stacked up high to the ceilings with business plans that would shame any dotcom era rentseekers. The amount of effort put was astounding, and more importantly the myth that SMEs cannot get financing due to poor documentation is nothing more than hullabaloo. It is clear that most of the 100 will have no problem putting together a loan proposal anytime they wish to. We also asked the CEOs their take on how the economic climate in 2010 affeced them, and the response showed not just finesse, but experience comparable to those of multinationals. Malaysian SMEs have finally come of age. The SME 100 confirm that the key challenges facing SMEs in Malaysia are many and varied. Whilst all SMEs asked feel that the Government are doing its part to help SMEs in general, most feel that the Government could do more and in more specific areas. These challenges are grouped into four broad groupings: Access to Finance Access to Human Capital Access to Technology Access to Market

Ong Chin Seong of data centre operators Powerware Systems Sdn Bhd feel the government could do more in providing incentives to data centre operators if we are serious about growing our technology footprint. There are currently no government incentives for our data centre site infrastructure. There is also a lack of government assistance or financial aid to help companies doing data centre related business to aggressively go abroad to get overseas business. We hope to see changes in the government policies, such as lowering of duties for data centre site infrastructure related equipment, now that data centre has been identified as one of the core areas of development under the Economic Transformation Programme. The credit crunch appears to be even more severe among service providers. Many SMEs in the services sector do not own land or equipment, and as a result, find it difficult to provide any form of security or collateral to financial institutions resulting in an otherwise profitable business venture unable to obtain financing for business expansion. We call this is the curse of collateral. As long as financial institutions in this country rely on the current antiquated secured-lending principles, business simply wont grow. In more advanced countries, unsecured lending is fast becoming the rule rather than exception and theres plenty our SME banking operations have to catch up on.

ACCESS TO HUMAN CAPITAL

Whilst the government has realised the severity of the brain drain, especially among professionals and skilled workers, little is being done to help SMEs attract and retain world class talents. Take the Talent Corporation, for example. Whilst we are confident the plans will work given proper and transparent implementation, the returning talents are unlikely to want to work for SMEs. Our business is all about the talents that we have. Whilst the largest investment may be in the technology and equipment, without our people, we will not be anywhere near where we are today, said Lim Boon Siong, CEO of Vista Vision Specialist. Many SMEs such as Vista Vision Specialist has put in placed numerous practices to attract and retain talents including paying above market average salary, annual bonuses, continuous training and a conducive and supportive working environment. So it is not true that working for SMEs is not attractive. But the fact is, given a choice, candidates would prefer to work for larger companies. This is where the government could step in and offer incentives to returning talents to work in SMEs and provide more incentives to SMEs to provide greater staff benefits. Alan Hoo of image consultants Chapter One Asia agreed, saying, finding the right candidate at the right time and the right price is like striking a lottery. Most capable young adults would prefer to work in MNCs as it looks more promising, not to mention more glamorous; making smaller organizations like us difficult in finding suitable candidates. The biggest business challenges for us in 2010 and 2011 remain the availability of talents joining our team to fuel expansion plan, and the supply of manpower for the production side. Having the entire team to

ACCESS TO FINANCING

For many SMEs, while banks and the Government alike are making available funds for business expansion, the reality is it is getting tougher to secure financing. The global financial crisis have caused financial instituions to be more cautious and credit processing has become so complex, that very often SMEs find it difficult to both understand the procedures and decisions when it comes to loan processing. Robert Michael of vacuum and compression solutions provider, Airofluid Sdn Bhd agreed that financing is important for the company. Our traditional and biggest obstacle has always been in financing our projects. Despite our management skills, variety of profitable projects and great plans none of it will work without money. We hope to overcome this barrier through recommendation via BMI to financial institutions, he said. As we continue to grow, we require additional capital and financing power for expansions which are not easy to come by as an SME, Cheng Nyek Paw of Bennova Mechanical Engineering Sdn Bhd added. Rick Cheng, CEO of property developer Encomas Sdn Bhd couldnt agree more when he said, its financing, financing, financing. It is getting harder to secure financing from banks and they always set very high requirements for us to achieve in order to get financing. That is the most polite way to reject your loan. I guess it is the same for most SMEs.

truly understand the essence of sustainable quality both in terms of products and services is another constant challenge that we are committed to take head on, said Liow Ren Jan, CEO of halal food manufacturer AVS Sdn Bhd. Bennovas Cheng agreed, due to the complex nature of our business, the biggest challenge we are facing in 2010 is the technical knowledge of our staff. Many young engineers lack industry experience either due to their youth or training. We have had to continuously train while mentoring and coaching them. Being a technology based business, we need to keep abreast with the development of the fuel cell technology. In this we need more knowledge-based human resource to support our innovation and development of the technology. To us, human resource is critical to the success of our company and business. As such we are diligently developing and tapping on university students to help fuel our manpower requirements, said Yiap Tea Sin of fuel cell manufacturers G-Energy Technologies Sdn Bhd. Chong Tiean Leang, Deputy CEO of International Brass Manufacturers Sdn Bhd felt 2010 was a year marked by severe labour shortage, on top of commodities and currency volatility, which has affected the companys business. Mohamed Shajahan Iqbal of Three-OPP (M) Sdn Bhd finds recruiting skilled managers to be a challenge. As managers, they will need to handle not only the staff, but also customers effectively. And Foo Chi Ching of Astramina Sdn Bhd think that retaining talents in SMEs is as challenging as recruiting them.

plan to transition SMEs to K-SMEs, K as for knowledge. We have to realise that technology is moving fast and other SMEs in countries like South Korea and Brazil - another fast mover in the world economy - are leading the way. Our SMEs need to be more innovative to survive.

ACCESS TO MARKET

Although Malaysias entry into WTO and AFTA has promised to open up new markets for our SMEs, many of our SMEs are instead facing such intense challenge that many has even considered folding up. The year 2010 in particular has seen marked increase in competition. As the country recovers from the global financial crisis of 2008 / 9, many companies resort to cutting price to secure lost businesses and to get back on track. This has resulted in stiff competition in almost all industries. The rising cost of goods did not help, as this has resulted in razor thin margins like never seen before. Ken Kang, Managing Director of Wah Ha Children Products Sdn Bhd said, In 2010, we faced stiff business challenge due to a significant drop of purchasing power of domestic consumers. Our challenge in 2011 will be to build up the confidence of consumers and regaining their purchasing power. Sunny Phang of Protect Print Sdn Bhd concurred. The same challenges we faced in 2010 will also be faced in the 2011 with the uncertainty in the global economy. There has been a dramatic rise in regional / global counterfeiting which is threatening business livelihood and consumer safety, contributing to billion dollars of losses. There other main challenges are rising production costs and a price war among players in the security printing industry. World Prominence Sdn Bhds Ahmad Fauzi Kari said that his companys biggest challenge would be to manage the cost of doing business. For us, high and cyclical raw and packaging materials cost, increase in other operational cost such as labour cost, utility cost and distribution cost are putting tremendous pressure on us. Passing the increased cost to the customers is not an easy task either, he said. Lim Kee Siang of My Gopeng Resort Sdn Bhd agree that the cost of material has gone up. We now have to set-up a new department just to monitor product cost. Labour cost is also on the rise, he said. In 2010, the major challenges were the labour shortage and deteriorating currencies and limits export to abroad. We are expecting the protectionism of major economies will be the major challenge in 2011, said Ratanam Visvanathan of Malaysian Aluminium & Alloys Sdn. Bhd. More optimistic is seasoned entrepreneur Teoh Wun Seong of Kooka Marketing (M) Sdn Bhd, who said, As I have always stressed to my team, in business, it is full of challenges. In fact, the business comes from the challenges that you could manage or overcome. We were not only sandwiched in between our committed selling price and the ballooning operation cost but also undergoing tremendous pressure when the raw material cost starts rocketing since the beginning of the year. The pressure was really great! Anyway, we kept to our words and delivered our promises and commitments. In return, we saw more orders pouring in!

ACCESS TO TECHNOLOGY

At a time when the country is preparing to move into high technology industries agressively, not only as a consumer but also as developers of technology many SMEs still find it a challenge to acquire or develop new technology. This become a critical point as the rapidly evolving market demands cutting edge technology in almost every aspect of business, and the new mantra of the 2010s is latest, best and most advanced. While we want to move forward to become a global hub for biotechnology among others, we need to admit that many of the leading research and technological developments are coming out from Europe and North America. Finding partners and vendors who are willing to transfer these technologies to Malaysia is tough enough let alone transfering these technologies to SMEs. Again, this is an area that many SMEs hope the government will play a facilitating role. Business or product life cycle has become shorter due to market competition. The amount of development work required has increased and it demands the company to carry out more R&D seeding to secure future businesses, said Char Tze Hiang of VAW Technology Sdn Bhd. i-HRs Supra Ramasamy agreed, saying, The government have outlined a

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The uncertainty of 2010 seems to be a recurring theme for many SMEs. Most of those interviewed agreed that it was a year of spiraling costs and decreasing margins. Bernard Tang of Jayacom Information Sdn Bhd said that the biggest challenge is the increase in uncertainty in the market. Businesses have to reduce costs and improve productivity in the midst of adapting to changing market conditions. Customer expectations continue to change as well. From a strategic standpoint, we have to pay attention to basics like strong customer service. Our aim is to find ways to adapt, evolve and move forward despite uncertain conditions. This calls for creativity, flexibility and perseverance. We have to focus on long-term visions even as we continue to wrestle with short-term challenges. We have to make our business models flexible so as to prepare for unexpected future trends. His view is shared by Toh Yew Liang of Everest Dental Supply Sdn Bhd. He said, we compete in a competitive industry where success is dependent on its ability to increase market share and market presence. We are aware that our future performance will substantially depend on market acceptance of the products and services we provide. A reduction in demand or an increase in competition in the industry in Everests existing or future products will have a material effect on our business, results and financial condition. Hence, Everest has set our motto as we grow beyond technology as a constant reminder. For the most part of last year and 2011, the biggest business challenge will be that of the highly competitive industry with many players and suppliers that suppress average selling price (ASP) as well as competing for customers attention and support, said Boey Tze Nin of EKO Metal Industries Sdn Bhd. Some are even more optimistic. We believe that the expertise we have developed in the Asian markets will enable us to continue to grow in the face of competition from other banking solution providers, some of whom may be more established and larger than us but may not have as much experience in these markets, said Chris Phang of Cedar Plus Sdn Bhd, a provider of technological solutions to financial institutions.

FROM TOP TO BOTTOM, THEN LEFT TO RIGHT Robert Michael Cheng Nyek Paw Rick Cheng Ong Chin Seong Lim Boon Siong Alan Hoo Liow Ren Jan Yiap Tea Sin Chong Tien Leang Mohamed Shajahan bin Mohd. Char Tze Hiang Supra Ramasamy Ken Kang Sunny Phang Ahmad Fauzi Kari Lim Kee Siang, Ooi Beng Yeaw Teoh Wun Seong Bernard Tang Toh Yew Liang Boey Tze Nin Chris Phang

COMPLETE SME 100 LISTING

COMPANY NAME Advance Micro Product Sdn Bhd Advanced Air Trafc Systems (M) Sdn Bhd Airouid Sdn Bhd Ascap Builders Sdn Bhd Asia M & E Engineering Sdn Bhd Asia Pacic Flight Training Sdn Bhd Asian Resinated Felt Sdn Bhd AYS Sdn Bhd Ban Lee Hin Engineering & Construction Sdn Bhd Banway Marketing Sdn Bhd Bennova Mechanical Engineering Sdn Bhd Biofact Life Sdn Bhd Bison Stores Sdn Bhd Bizztax Alliance Sdn Bhd Breps Sdn Bhd Brilliant Merchandising Sdn Bhd Builtech Project Management Sdn Bhd Buzznet Sdn Bhd Cedar Plus Sdn Bhd Chapter One Asia Sdn Bhd City-Link Express (M) Sdn Bhd CMC Engineering Sdn Bhd Corporate Wardrobe Sdn Bhd Datamation (M) Sdn Bhd Diayo Die-Casting (M) Sdn Bhd ED-Online Technologies Sdn Bhd EGOnutritions Sdn Bhd EKO Metal Industries Sdn Bhd Elabram Systems Sdn Bhd Encomas Sdn Bhd EPS Computer Systems Sdn Bhd Era Herbal Products Sdn Bhd Everest Dental Supply Sdn Bhd Facade Treatment Engineering Sdn Bhd Gastrodome Management Services Sdn Bhd G-Energy Technologies Sdn Bhd GranuLab Sdn Bhd i-HR Consulting Sdn Bhd Icon Consulting Enginners Sdn Bhd Icon Trans Sdn Bhd Integrio Business Solutions Sdn Bhd Intellect Worldwide Sdn Bhd International Brass Industries Sdn Bhd iProperty.com Malaysia Sdn Bhd Jayacom Information Sdn Bhd Job Hunt Sdn Bhd Kemuncak Facilities Management Sdn Bhd Kooka Marketing (M) Sdn Bhd KV Advertising Sdn Bhd Leaderonomics Sdn Bhd CEO/MD/GM Robert Chua A Rahman bin Dardak Robert Michael Hj. Azinal Abidin Rathinam a/l Rengasamy Dato Faruk Othman Norsham binti Shamsuddin Liow Ren Jan Dato Tony Looi Chee Hong Tan Hoy Leong Cheng Nyek Paw Chua Wee Kok Dang Tai Luk Sam Lim Nelson Chiong Liew Bin Leong Kit Leong Sanjoy Bose Chris Phang Wendy Lee David Tan Dato Abdul Rahman Yusof Chia Kee Kim Alex Wee Lim Huat Chai Lee Chuen Loong Lim Kim Tim Boey Tze Nin Yaw Lung Uei Rick Cheng Kevin Liang Jimmy Tan Toh Yew Liang Yong Chuan Chin Edward Hyde Yiap Tea Sin Romli Ishak Supramaniam Ramasamy Lim Wee Tin Teoh Ai Lee Arnab Sarkar Solomon Lee Dato Muthukumar Ayarpadde Shaun Di Gregorio Bernard Tang Sip Hon Dato Michael C H Wong Nurol Amin Teoh Wun Seong Hui Kok Ping Roshan Thiran INDUSTRY Industrial & Commercial Products Professional & Business Services Industrial & Commercial Products Construction, Property Development & Building Materials Oil & Gas, Mining & Energy Education & Training Chemical & Plastics Food & Beverage Construction, Property Development & Building Materials Trading & Wholesaling Industrial & Commercial Products Healthcare, Pharmaceutical & Biotechnology Retail Financial Services Professional & Business Services Trading & Wholesaling Construction, Property Development & Building Materials Telecommunications & ICT Telecommunications & ICT Personal Services Transportation & Logistics Telecommunications & ICT Trading & Wholesaling Telecommunications & ICT Industrial & Commercial Products Telecommunications & ICT Retail Industrial & Commercial Products Telecommunications & ICT Construction, Property Development & Building Materials Professional & Business Services Healthcare, Pharmaceutical & Biotechnology Trading & Wholesaling Construction, Property Development & Building Materials Hospitality, Food Service & Tourism Industrial & Commercial Products Healthcare, Pharmaceutical & Biotechnology Professional & Business Services Construction, Property Development & Building Materials Transportation & Logistics Professional & Business Services Professional & Business Services Construction, Property Development & Building Materials Trading & Wholesaling Telecommunications & ICT Professional & Business Services Professional & Business Services Consumer Goods Professional & Business Services Education & Training

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COMPANY NAME Leesa Formula Sdn Bhd Linsun Engineering Sdn Bhd LMC Star Sdn Bhd Malaysian Aluminium & Alloys Sdn Bhd Mayfair Bodyline Sdn Bhd ME Technology Sdn Bhd Mediawork Resources Sdn Bhd Medical-Latex (Dua) Sdn Bhd Multi Cargo Express Sdn Bhd My Gopeng Resort Sdn Bhd MyKris Asia Sdn Bhd Natural Wellness Holdings (M) Sdn Bhd NetEon (M) Sdn Bhd Neuropower (M) Sdn Bhd OSA Technology Sdn Bhd Pacic Engineering Sdn Bhd Perusahaan Azan Sdn Bhd Plastech Industrial Systems Sdn Bhd Platform2u.com Bhd Powerware Systems Sdn Bhd Power Woosh Sdn Bhd Proguard Technologies (M) Sdn Bhd Proreka (M) Sdn Bhd Protect Print Sdn Bhd Puncak Generasi (M) Sdn Bhd Redring Solder (M) Sdn Bhd ROHM Semiconductor Malaysia Sdn Bhd SA Kargo Sdn Bhd Safetyware Sdn Bhd Seasonings Specialities Sdn Bhd Serba Dinamik Sdn Bhd Shins Corporation Sdn Bhd Smart Reader Worldwide Sdn Bhd SmartLink International Sdn Bhd Softegic Systems Management Sdn Bhd SPV Nosa Sdn Bhd Success Resources Sdn Bhd Ten Ten Telecommunications Sdn Bhd Three-Opp (M) Sdn Bhd Timber Global Resources Sdn Bhd Tomta Furniture Manufacturer Sdn Bhd Translab Sdn Bhd Ultra Racing (M) Sdn Bhd VAW Technology Sdn Bhd Vista Laser Eye Center Sdn Bhd Wah Ha Children Products Sdn Bhd Wellness Concept (M) Sdn Bhd World Prominence Sdn Bhd X Trade Resources Metal Sdn Bhd Xpose Images Sdn Bhd

CEO/MD/GM Che Muna Din Ramlee bin Mohd Hashim Low Fung Hoon Dato Muthukumar Ayarpadde Karen Chong Michael Wong Annuar Hamzah Frank Foo Har Chai Hoh Ding Wei Lim Kee Siang Chew Choo Soon Shahnas binti Oli Mohamed Richard Lim Wah Lee Felin Lam Dr. Hyzan Yusof Chai Fook Chong Mohd. Ghazali Chin Yuan Tai Lim Tau Liang Ong Chin Seong Tan Su Cheng Cindy Choh Yem Mei Yong Nam Yun Sunny Phang Fu Toi Ting Wong Kum Fatt Daisuke Nakamura Dato Samsudin Wong Kee Wei Foo Chi Ching Dr. Ir. Hj. Mohd. Abd Karim Abdullah Teh Kong Yaa Dr. Richard Ong Dr. Sharon Tong Lim Teik Han Mohd. bin Abd Azis Richard Tan Tan Seng Giap Mohd. Shajahan bin Mohamed Iqbal Malik Dhanani Goh Sin Long Teo Cheng Hock Elson Tong Kam Yew Char Tze Hiang Lim Boon Siong Ken Kang Vivian Tan Ahmad Fauzi Julian Leong Yu Loon Lee Kong How

INDUSTRY Healthcare, Pharmaceutical & Biotechnology Construction, Property Development & Building Materials Trading & Wholesaling Industrial & Commercial Products Personal Services Industrial & Commercial Products Professional & Business Services Consumer Goods Transportation & Logistics Hospitality, Food Service & Tourism Telecommunications & ICT Healthcare, Pharmaceutical & Biotechnology Trading & Wholesaling Industrial & Commercial Products Industrial & Commercial Products Industrial & Commercial Products Food & Beverage Construction, Property Development & Building Materials Professional & Business Services Telecommunications & ICT Education & Training Industrial & Commercial Products Automotive Professional & Business Services Electrical & Electronics Electrical & Electronics Industrial & Commercial Products Transportation & Logistics Industrial & Commercial Products Food & Beverage Industrial & Commercial Products Retail Education & Training Professional & Business Services Professional & Business Services Oil & Gas, Mining & Energy Education & Training Telecommunications & ICT Telecommunications & ICT Furniture & Woodbased Manufacturing Furniture & Woodbased Manufacturing Trading & Wholesaling Automotive Industrial & Commercial Products Healthcare, Pharmaceutical & Biotechnology Trading & Wholesaling Healthcare, Pharmaceutical & Biotechnology Consumer Goods Industrial & Commercial Products Professional & Business Services