A country with over 32 million people, Malaysia is mid-table when it comes to population size in Southeast Asia, but when it comes to the economy, it currently punches significantly above its weight. Malaysia ranks third according to GDP in the region, and most of this comes from its SMEs (Small and Medium Enterprises). 

One of ASEAN’s tiger economies, SMEs in Malaysia make up 98.5% of the businesses, numbering around 910,000.  So, with a conditional movement control order (CMCO) in place till earlier this month and now the recovery movement control order (RMCO) in place, how are these smaller enterprises surviving in the COVID-19 world?

We look at digitalisation in Malaysia and see what role it plays as the pandemic affects trade across the many SME sectors. 

The impact of COVID-19 

The Malaysian government invoked a Movement Control Order (MCO) on March 18, 2020, in response to the COVID-19 outbreak in the country. This immediately led to the shutting down of all non-essential business premises in the nation and brought many industries to a halt. As the government’s strict management of the pandemic began to yield results, it started to loosen the reins a little and moved into the CMCO phase. 

With a less restrictive lockdown in place, the country began the uphill battle of stabilising its economy and preparing to return to business. Most companies were allowed to open their doors once more but with strictly enforced Standard Operating Procedures (SOPs) in effect. 

Shopping malls, bars and restaurants as well as hardware stores were amongst the first to get back to normal, with social distancing measures and contact tracing used to protect employees and customers alike. However, with some SMEs in Malaysia unable to implement protections, they had to alter their business processes, and in many cases, move online. 

Leveraging digitalisation: Challenges and benefits

Malaysia has been steadily progressing down the digitalisation path for many years. It has established a healthy eCommerce ecosystem, with around 50% of the population shopping online. Food delivery services are also extremely popular, and there is an increasing number of people using eWallets

Therefore, when the coronavirus struck, many of the country’s businesses were able to shift their operations to online platforms. Companies, such as Grab jumped in to help smaller enterprises by onboarding restaurants, bakeries and shops onto their delivery service platforms quickly. 

The country already had a positive attitude towards using technology in business as demonstrated by a joint SME Corp Malaysia and Huawei study that showed only 20% of the surveyed SMEs to be hesitant about investing in digitalisation. 

While the use of laptops and smartphones in all businesses were commonplace, and around 50% of SMEs use digital finance and accounting systems, only 19% were using POS systems and a shockingly low 11% were using technology for order fulfilment as part of their business processes. 

With the pandemic forcing people to work from home, the broadband infrastructure was under extreme pressure, and internet speeds slowed considerably. Malaysia has lagged a little in terms of speed of connectivity for years, and the increased reliance on home internet and 4G networks during the MCO highlighted the problem further. 

Add to this that many Malaysians are unhappy having to work from home, and the SMEs have yet another hurdle to productivity and solvency. 

Post-virus economy

Maybe the solution to Malaysia’s survival is to adopt digitalisation at a faster pace and embrace the technology available. To do so, many more companies will require government support and funding. 

orange vehicle running on the road

Government agency SME Corp is trying to encourage this move through its Automation and Digitisation Facility (ADF) initiative which offers financing to purchase equipment, hardware, software and services. With funding available up to 3 million MYR, the government is hoping that more SMEs will take the opportunity to upgrade their business processes and take steps to sustain and grow their enterprises in a digital world. 

Like most countries in the world, Malaysia has to start bringing the country back to normal. On the brink of a recession due to COVID-19, a slowdown in the oil and gas industries, and political instability, the country has a fierce battle ahead if it is to continue the economic growth of the past number of years. 

With one of its rising stars of the economy—tourism—all but decimated by the country’s lockdown, Malaysia will have to look to other methods of bolstering their GDP. The digitalisation of traditional SME sectors, in tandem with increased investment in technology startups, may be the only way this ASEAN country will survive and hopefully thrive as the ripple effect of COVID-19 is felt throughout the region.