The year 2025 will present fresh challenges for more than 1.15 million small, and medium enterprises (SMEs) in Malaysia. Key issues expected to impact the sector include the proposed petrol rationalisation scheme and the implementation of e-invoicing.
According to SME Association of Malaysia national secretary-general, Chin Chee Seong, these policies could affect the cost of production and profit margins across various sectors.
“Fuel subsidies have kept production and distribution costs down, benefiting SMEs in agriculture, manufacturing, retail, and services. We hope there won’t be a sudden removal of the RON95 petrol subsidy, similar to what happened with diesel this year,” said Chin.
“Comprehensive studies should be conducted to assess the impact on our industry. Ideally, subsidies should be phased out gradually rather than abruptly.”
Another challenge anticipated in 2025 is the mandatory adoption of e-invoicing. The government has set Jan 1 as the deadline for taxpayers with an annual turnover of RM25 million to RM100 million, and July 1 for all other taxpayers. The first phase, which began in August, involved taxpayers with an annual turnover of over RM100 million.
“There will be costs associated with the second phase of e-invoicing next year. Smaller SMEs may not see savings, as the additional costs could strain their finances,” said Chin. “Some SMEs might even lose business with multinational corporations if they are slow to implement e-invoicing.”
Chin added that smaller SMEs may need to hire additional staff to manage the transition to e-invoicing, unlike larger SMEs that are more financially equipped to adapt.
“Many are questioning why the government cannot just reintroduce GST, as it is essentially similar. To ease the burden on smaller SMEs, the government should consider offering tax reductions or matching grants in Budget 2025,” he said, while calling for a cooling-off period for smaller businesses to adapt to e-invoicing.
SMEs contribute over 38 per cent, or more than RM500 billion, to Malaysia’s GDP and are recognised as the engine of the nation’s economy.
Chin also raised concerns about the impact of foreign companies, particularly Chinese firms, setting up businesses in Malaysia. “Our SMEs can’t compete with these firms in terms of pricing. Moreover, many of these companies do not hire local staff or businesses; they bring in their own contractors and architects,” he said. He urged the government to enforce existing regulations requiring foreign companies to hire a certain percentage of local workers.
Chin emphasised the need for the government to support SMEs in penetrating international markets. He also expressed concern that continued budget cuts in government departments could adversely affect the economy and SMEs.
“We hope government projects will be rolled out without delays,” he said, adding that while the recent 15 per cent salary adjustment for civil servants would lead to increased expenditure, its phased implementation (starting Dec 1, 2024, and concluding Jan 1, 2026) means it will take time to impact the economy.
