Kuala lumpur: Malaysian small and medium enterprises (SMEs) must upgrade their capabilities and embrace rising global competitiveness and environmental, social and governance (ESG) standards under the New Investment Framework (NIF) to remain integrated within the global supply chains, said an economist. Bank Muamalat Malaysia Bhd chief economist Dr Afzanizam Abdul Rashid emphasized the need for the government to provide incentives that are balanced and not too restrictive under the outcome-based framework.
According to BERNAMA News Agency, Dr Afzanizam highlighted that the global landscape is increasingly challenging due to rising geopolitical risks, tariffs, and climate-related concerns. He stressed the importance of careful government planning and resource allocation to address these issues. He pointed out that SMEs must embrace competitive forces and upgrade their operations to prevent widening income inequality.
Dr Afzanizam shared these insights during a panel discussion titled 'Tax Reforms: Navigating the Outcome-Based Era, A Strategic Briefing' at Malaysia's New Incentive Framework (NIF) Seminar, organized by the Malaysian Investment Development Authority (MIDA). He cited Penang's experience in the electrical and electronics sector as an example of how local firms can integrate with multinational corporations and scale up their businesses with the right ecosystem and policy support.
Echoing similar concerns, Datuk John Patrick Antonysamy, the Ministry of Finance's tax division under-secretary, mentioned that one of the six new investment aspirations under NIF is to enhance domestic linkages. The government aims to encourage foreign investors operating in Malaysia to integrate local suppliers into their supply chains, even if these suppliers initially do not meet the required standards or quality levels.
To support this initiative, the government has introduced a domestic linkages tax incentive package. This package encourages investors to spend on training local companies and transferring know-how, which will help them enter global supply chains. Datuk John Patrick emphasized that integrating local companies into supply chains would make investments more 'sticky' as investors rely more on local suppliers.
Ultimately, SMEs stand to benefit significantly by becoming part of the value chain, aligning with NIF's broader aim to increase economic participation and strengthen domestic linkages.