Introduction of SMEsWhat does SME stand for?The SME are stand for Small and Medium Enterprise. Previously in Malaysia,there was no standard definition as to what Small and Medium Enterprises were.However, each country has a legal definition about what exactly of SME and itis depends on who is doing the defining. Small to medium enterprise make up thevast majority of business in the most of the country. The enterprise can becategorized by the size that based on annual sales, number of employees and soon.Definition of SMEsAccording to the officialwebsite of SME CORP Malaysia, 98.
5% business establishments in Malaysia areSMEs. It can be said that SMEs are the backbone of Malaysia economy. Besidesthat, Malaysia SMEs can be group into three categories which are Micro, Small,and Medium. The majority of the SMEs are micro enterprises which make up 76.5per cent of the total SMEs, followed by the small-scale enterprises, whichcomprise 21.2 per cent and Medium-sized enterprises are 2.3 per cent of thetotal SMEs.
The two main criteriathat laid out by National SME Development Council are annual sales turnover andnumber of employees. These criteria apply to all SMEs of various sectors of agriculture,manufacturing and services. Based on the official SMEs website, SMEs aredefined as firms with: The Manufacturing sector: The sales turnover notexceeding RM50 million or number of full-time employees not exceeding 200; Forthe services and other sectors: Sales turnover not exceeding RM20 million or thenumber of full-time employees not exceeding 75.
The detailed definition thecategories are present as Table 1 below: Size Manufacturing sector General Business sector (include services) Medium Sale Turnover: not exceeding RM50 mil OR Employees: from 75 and not more than 200 Sale Turnover: not exceeding RM20 mil OR Employees: from 30 and not more than 75 Small Sale Turnover: not exceeding RM15 mil OR Employees: from 5 and not more than 75 Sale Turnover: not exceeding RM3 mil OR Employees: from 5 and not more than 30 Micro Sale Turnover: not exceeding RM30 mil OR Employees: not more than 5 Sale Turnover: not exceeding RM30 mil OR Employees: from 75 and not more than 5 Table 1: Definitionof SMEs in MalaysiaAs the other parts of theworld, SMEs in Malaysia operate various business. There have three componentsthat may be categorised in SMEs Malaysia which are agriculture sector, manufacturingsector and general business sector. Each of these sector andsome example are be descried in detail below:A. Agriculture sectorThe agriculture sectorincludes perennial crops and cash crops. Perennial crops includes rubber, palmoil, paddy, and coconut while cash crops includes vegetables and fruits.
B. Manufacturing sectorThe main activities ofmanufacturing sector is physical or chemical transformation of materials orcomponents into new products, such as food, beverage, petroleum, rubber,plastic, wood, chemical, electronic and electrical components. C.
General Business sectorMeanwhile for the generalbusiness sector involved with wholesale and retail trade, construction,restaurant, transport and storage, hotel and business services and activity.Role of SMEsCurrently, SMEs arecrucial to the economic growth process and play a vital role in the developmentof Malaysian economy. SMEs in Malaysia have to embrace the change in Malaysiaand next is across the country. SME are very important to Malaysia because itcontribute the nation’s gross domestic product. For an example, SMEscontributed 35.9 per cent of the country GDP, following by this, 36.6 per centin 2016.
It can show that SME are thebackbone of the Malaysia economic. Now the economy is shifting fromindustry-based to a knowledge-based economy to achieve vision 2020. Malaysiaaims to rise from its present 36% to 41%, and the share of SME exports must hit23% in order to achieve this vision by 2020. In addition, SMEs also have theresponsibility by creating opportunities for women and youth. This is for activelyparticipate in a country’s productivity.