KUALA LUMPUR: The business confidence of large corporations and small and medium enterprises (SMEs) are positive going into 2018, even though the larger businesses look to exude more optimism than their smaller counterparts, according to the quarterly RAM Business Confidence Index.
The survey took into account factors such as turnover, profitability, hiring intentions, business expansion, capacity utilisation, investment intentions and access to bank financing. Jointly produced by RAM Holdings and RAM Credit Information Sdn Bhd, a total of 3,500 respondents comprising 974 corporates and 2,500 SMEs were surveyed.
It showed that both large corporations(55.6) and SMEs(52.4) had scored above the benchmark 50 points, whereby corporates appeared to be more bullish on turnover, profitability and business expansion.
In terms of hiring, albeit marginally lower than a year ago, large corporations and SMEs both still indicated interest in increasing headcount.
This was especially notable among agriculture, mining and manufacturing firms in line with the output recovery in palm oil sector and external demand for manufactured goods.
SMEs projected weaker sentiments in terms of expectations for profit and turnover, due to uncertainties and limitation to economies of scale, operational flexibility and bargaining power unlike corporate firms.
RAM Holdings Bhd Group CEO Datuk Seri Dr K. Govindan said the struggle faced by local SMEs in terms of financing, economies of scale and others is not unique to Malaysia, as this happens to be the case in other parts of the world.
On the domestic front, large and medium capacity firms are more likely to be the ones steering Industry 4.0 rather than small and medium enterprises (SMEs), which are on the smaller size bracket, given the advantage larger firms have in terms of capacity, productivity and labour.
Industry 4.0 refers to the trend of automation and data exchange in manufacturing technologies. It is described as the fourth industrial revolution, smart manufacturing or digital factories.
On top of that, Govindan added that a number of the SMEs are not in a position to take advantage of the growth opportunities available for them, because of financing issues e.g. lack of collateral, lack of initiative and access to export opportunities and to some extent literacy.
“Smaller ones need attention and the possibility of helping them grow in e-commerce,” he said.
On another note RAM Ratings Economist Kristina Fong said, the bullishness projected by both large corporations and SMEs going into the first quarter of 2018 is a sign that Malaysia’s economic growth momentum will remain resilient.
RAM is forecasting the full year gross domestic product(GDP) growth to be at 5.8% in 2017 and 5.2% this year on the back of strong domestic and external demand.