KUCHING: Sarawak’s ambition to move more small medium enterprises (SMEs) into high-growth sectors risks being held back by weak digital readiness, talent shortages, and slow uptake of existing funding schemes.
Malaysia Private Tax leader and partner, Bernard Yap, together with partner, Linda Kuang, of Ernst & Young Tax Consultants Sdn Bhd, said federal and state measures had widened capital access for SMEs, but many firms still struggled to take advantage of the available support.
“From a policy perspective, the government has increased access to capital funding and guarantee capacity to small and medium enterprises via development financial institutions and promoted by the relevant government agencies.
“It is now important to create awareness among the SMEs and micro enterprises to appreciate such accessibility and the opportunities to improve and expand their business operations,” they told Sarawak Tribune.
They noted that Sarawak’s RM31-million allocation for Sarawak Micro Credit Scheme, SMEs Loan Scheme, and other programmes would support micro SMEs, alongside enhanced training and upskilling initiatives.
To make these schemes more effective, the partners said agencies must simplify application procedures and create an ecosystem that allows SMEs to use the funds for digitalisation, automation, recruitment, reskilling, logistics improvement, and process modernisation.
They welcomed the state’s move to consolidate existing approval systems into a single digital platform to speed up decision-making and improve the business environment.
They emphasised that collaboration between the public and private sectors was essential for enabling SMEs to innovate, scale and enter international markets.
“It is also important to appreciate the uniqueness of operations of an SME or a micro enterprise and how it can adapt to the way a multinational corporation operates, as SME represents 96 per cent of Sarawak’s total business establishments.
“Furthermore, there are a significant amount of tax incentives available to SMEs and micro enterprises, such as double deductions, reinvestment allowances, export incentives and grants,” they said.
Despite improved access to capital, the partners said many SMEs remained limited by structural challenges that slowed technological adoption and scaling.
“With the availability of financial support from both federal and state governments, it is now important to develop an ecosystem that meets the requirements of an SME in Sarawak,” they said.
They pointed out that connectivity gaps continue to affect businesses across the state, especially in rural areas, while the cost of building technology infrastructure poses challenges for micro enterprises operating on thin margins.
They said the work of the Sarawak Digital Economy Corporation in expanding internet coverage and rolling out commercial projects with private firms would help improve digital adoption among micro SMEs.
“Another major constraint is the lack of workers with the right digital and technological skills.
“Learning on the job is one way to improve the workforce skills but there is now a need for the education system to invigorate technology as part of the graduate’s learning curriculum,” they said.
They added that SMEs must treat digitalisation as part of everyday business routines and widen their market reach beyond Borneo to enter ASEAN markets.
They noted that Sarawak had recognised the importance of developing local talent through CENTEXS training programmes and the Free Tertiary Education Scheme, which will cover 64 undergraduate programmes from 2026.
On strengthening SME competitiveness in higher-value sectors and export markets, the partners said firms must first adopt an export-oriented mindset.
“To adopt an export-oriented mindset, it is important for SMEs to be able to specialise in their own industry with the opportunity to work with large SMEs, government-linked companies, and multinational corporations,” they said.
They noted that climbing the supply chain would expose SMEs to industry standards and international expectations, including certification, digitalisation and understanding global market needs.
Once the right mindset is established, they said the government and industry should design sector-focused schemes that include vocational training aligned with Sarawak’s key economic clusters, development of regional supply chains, identification of innovation within SMEs, and improved logistics to support export opportunities.
They added that continued partnership between the private sector and government was essential to manage costs, risks and challenges that SMEs could not overcome alone.
“The first step is to recognise that SMEs need to accelerate their focus from low productivity, informal business models to high value and competitive supply chain before it can be ready for international export markets,” they said.
“It could intensify trade and investment promotion efforts, encouraging greater participation from both foreign and domestic investors, as well as SMEs in key sectors, to empower SMEs to become export-ready through targeted trade expos and facilitation programmes,” they said.
