Venturing into China and Asean region

28/08/2010
By DALJIT DHESI
daljit@thestar.com.my

SMALL and medium enterprises (SMEs) should tap into the rising consumption in the Asean region and China to boost their profit margins.

Associated Chinese Chambers of Commerce and Industry Malaysia (ACCCIM) Small & Medium Enterprises deputy chairman Koong Lin Loong says SMEs are entering into an era of “nano profit” where margins are thinning rapidly due to over reliance on domestic market and middlemen.

Among ACCCIM members, not more than 3% of local SMEs export directly overseas while the majority of them still use a middleman.

“The Asean region, particularly the Mekong river delta, which runs through Vietnam, Cambodia, Laos, Myanmar, Thailand and Southern China, is rich in agriculture and has strong potential for downstream agriculture products. SMEs should change their mindset and start tapping into this market to ensure they do not lose out to their regional counterparts.

“By venturing into China and Asean which has a population of 1.3 billion and 600 million respectively, there will be a bigger market for SMEs to penetrate compared with 27 million in Malaysia,” he says during an interview.

The China-Asean Free Trade Area (CAFTA) which came into force this year is another platform for SMEs to springboard into the China market as well as into other Asean countries.

With this trade area in existence, they can export their products without any duties. Koong says it appears that only Chinese companies are taking advantage of this tax breaks to bring their products into the Malaysian market, hence flooding the market with Chinese goods and threatening SMEs livelihood.

As such, SMEs ought to act fast in this info-era and view CAFTA as opportunity rather than a threat.

Koong urge SMEs and the relevant trade associations to set up their own “buying house” like in Singapore and Hong Kong where it will facilitate small businesses to buy and sell their products in bulk overseas.

This, he adds, will save costs and curb the threat of dumping of foreign products in the local market and at the same time help small businesses to venture overseas.

Another way SMEs can effectively market their products overseas is participating in exhibitions organised by Matrade and by tapping its Market Development Grant (MDG).

Under this grant, successful qualified exhibitors or participants are allowed to reimburse 50% of their expenses incurred from exhibitions overseas.

He adds they should closely keep watch of Matrades exhibitions via its website rather than solely depending on the Government for assistance.

Of equal importance, he says for SMEs venturing abroad is to have their own brand identity and capitalise on information and communications technology (ICT), which at the moment is still lacking.

“They must be brand conscious to be competitive to market their products overseas. Otherwise they will lose out to their competitors. Money spent on branding is worthwhile to help their products stand out in the international market,” Koong notes.

Proper usage of computerised in all processes and marketing can also lower the cost of production and enhance earning margins.

Ultimately, for a small business to expand, it should not be too labour intensive as this is not workable and can result in shrinking of margins resulting from higher labour cost, hence defeating the Government New Economic Model for a high income nation.

In addition, Internet websites are not frequently used by small businesses for communications, which could hinder them from securing clients and retaining customer confidence, he says.