GEORGE TOWN: The government wants local content to be given greater consideration in procurement by government agencies, government-linked companies (GLCs) and multinational corporations (MNCs) to create more opportunities for local micro, small and medium enterprises (MSMEs).
Entrepreneur Development and Cooperatives Minister Steven Sim said the approach was aimed at ensuring local businesses benefited from investments and the development of domestic supply chains.
“We also want government procurements, GLC procurements and, of course, MNC procurements to have a perspective for local content. We want foreign direct investment (FDI) to come in to benefit local businesses. So, there must be a requirement for local content,” he said.
He said this during a panel discussion with Grant Thornton Malaysia National Tax Practice Leader Datin Seah Siew Yun at the Grant Thornton Tax Seminar on Budget 2027 here today.
Sim said local content requirements were among the components of the Scale Action Plan, which would form the ministry’s next phase of longer-term structural reforms for the MSME sector.
He said Scale covered SME redefinition, cash flow protection, artificial intelligence (AI) adoption, local content requirements and easier access to financing.
The ministry was looking at implementing the reforms through legislation, regulations or policy, he added.
On FDI, Sim said the government had also revised its investment incentive system under the new incentive framework, with tax incentives linked to key performance indicators (KPIs).
The criteria included creating high-paying jobs for Malaysians and developing local supply chains, with the approach intended to ensure foreign investments generated spillover benefits for MSMEs instead of benefiting only large companies.
Meanwhile, Sim said GLCs and government-linked investment companies (GLICs) had an important role in developing local industries and helping smaller businesses grow, while avoiding crowding them out of the market.
He said the government had instructed GLCs and GLICs to invest up to RM25 billion annually in developing local supply chains, adding that part of the funds should be invested domestically to build local industries.
Sim said strengthening MSMEs was crucial as they accounted for about 96 per cent of business establishments in Malaysia, although their contribution to gross domestic product (GDP) remained below 40 per cent.
The government was targeting MSMEs to contribute at least 40 per cent to GDP, he said, noting that while SMEs also made up the overwhelming majority of business establishments in many developed economies, their contribution to GDP was higher.