How private and SME businesses can thrive under the Malaysia MADANI roadmap

It's important to understand that private and SME enterprises should also develop their unique strategies to thrive within the framework of MADANI initiatives.

In brief

• SMEs must work to educate and train their people in the necessary skills for a digital future, especially in preparation for the implementation of electronic invoices.
• Private businesses must take the opportunity to develop robust governance processes to ensure data integrity and tax compliance moving forward.

On 22 September 2023, Prime Minister Datuk Seri Anwar Ibrahim made his debut address at the United Nations General Assembly (UNGA) in New York and took Malaysia Madani to the world stage. The Prime Minister’s speech on the country’s roadmap under the Malaysia Madani framework was well received and helped raise the country’s profile on the international stage.

According to the Chief Economists Outlook, 60% of economists expect the global economy to weaken in the coming year. The Madani Economy Framework is timely in providing a roadmap to boost Malaysia’s economy amid slowing global momentum and continuing economic uncertainty. The launch of the New Industrial Master Plan (NIMP) 2030, which serves as a roadmap for the country's economic development over the next ten years, and the National Energy Transition Roadmap, which aims to accelerate the country’s green and sustainable growth agenda, if well implemented, will drive domestic growth and spur the growth of small and medium-sized enterprises (SMEs).

The NIMP 2030 is instrumental in supporting the Madani Economy framework. It emphasises the role of SMEs as key contributors to economic growth, targeting to double SME exports to 25% in seven years. SMEs make up roughly 97% of the Malaysian economy, accounting for 48% of employment and contributing 38% of total Gross Domestic Product (GDP). The Government recognises that support is needed in order for SMEs to achieve the goals of the NIMP 2030. In Budget 2023, the Government focused on initiatives to support SMEs, from financing to funding, tax cuts and even a Digitalisation Grant Scheme.

Ease of doing business: Digital transformation

Emerging from the COVID-19 pandemic, SMEs and micro-SMEs (MSMEs) have accelerated their digital journeys, such as using digital wallets like TnG and GrabPay, online trading platforms, digital QR codes for electronic / digital menus and robotic waiters. As approximately 79% of MSMEs consist of micro businesses, the Government has promised an additional RM100mil in matching digitalisation grants to help MSMEs digitalise their business models. However, there is still a lot of progress to be made in the area of digital transformation. While there are great challenges, there are also tremendous opportunities for SMEs to advance towards the full digitalisation of their businesses, ultimately achieving extensive digitalised industrial collaboration throughout the value chain and creating the right ecosystem for SME businesses to thrive in.

The Government had allocated RM400mil for micro loans from agencies such as SME Corp and MARA for SMEs to build up their competitiveness, which includes investing in human capital resources. This is an opportunity for economic and technological transformation. SMEs must work to educate and train their people in the necessary skills for a digital future, especially in preparation for the implementation of electronic invoices (e-Invoicing) next year and beyond. The targeted implementation of e-Invoicing means businesses needs to prioritise required system changes, as well as process improvement and talent recruitment actions.

Governance and compliance

e-Invoicing is being introduced by the Government to streamline and enhance the country's tax system, promote transparency and provide the Inland Revenue Board of Malaysia (IRBM) with a more accurate compliance risk assessment. The implementation of e-Invoicing is in line with the Twelfth Malaysia Plan which aims to enhance digital services infrastructure and digitalise tax administration. The Government should consider granting deductions or double deductions for businesses, especially SMEs, to prepare for their e-Invoicing journey.

There is also a call for partnerships between SME businesses and the Government, such as the continued adoption of the Co-operative Tax Compliance approach by the IRBM, where the IRBM provides taxpayers with the support to “do the right thing”. This will reduce confrontation and controversy by promoting a relationship of mutual respect. As part of the commitment to the co-operative tax compliance approach, the IRBM introduced the concept of awareness, education and services (AES) as well as the Tax Corporate Governance (TCG) Framework. The TCG Framework was issued to assist companies in designing and operating their tax governance frameworks. This will provide greater certainty for taxpayers in meeting their tax compliance obligations and help expedite the resolution of tax issues.​ 

SME businesses should also take the opportunity to develop robust governance processes to ensure data integrity and tax compliance moving forward. With the reintroduction of the voluntary disclosure programmes (VDP) by the IRBM and the Royal Malaysian Customs Department (RMCD), SMEs should capitalise on the opportunity to participate in the VDP to regularise their tax positions and make voluntary disclosures where relevant.

While the above are global best practices and may cost more for SMEs to adopt, it is imperative for SMEs to recognise that these advanced changes or best practices play a key role in their future sustainability in keeping up with the evolving business environment. SMEs must continue to find mechanisms to build their roadmaps for a sustainable business, coordinating with multiple stakeholders to create bridges and leveraging on the support given by the Government to overcome the current economic challenges and achieve success under the Malaysia Madani initiatives.