KUALA LUMPUR, 21 MAY 2026 – SME Association of Malaysia backs Government Procurement Act implementation as rising operating costs and weakening consumer demand continue to pressure local businesses
SME Association of Malaysia has called for the immediate implementation of the Government Procurement Act, describing it as a critical step towards helping Malaysian small and medium enterprises (SMEs) manage mounting economic pressures and worsening cash flow challenges.
The association voiced its full support for the proposal previously raised by the Federation of Malaysian Manufacturers (FMM), urging the government to gazette and enforce the legislation without delay in order to strengthen support for local businesses amid a challenging economic environment.
According to the association, many SMEs across Malaysia are currently facing rising fuel prices, higher logistics and raw material costs, weak consumer spending, and continued uncertainty in global trade conditions — factors that are increasingly pushing businesses from growth mode into survival mode.
SMEs Facing Intensifying Cost Pressures
National President of SME Association of Malaysia, Dr. Chin Chee Seong, said SMEs remain particularly vulnerable because they often lack the financial buffers available to larger corporations.
He explained that many businesses are struggling to absorb rising operational expenses while also dealing with delayed payments and declining orders, creating significant liquidity pressure across the SME sector.
A nationwide survey conducted by the association in April 2026 revealed that:
- 76 per cent of SMEs reported that rising fuel prices had severely impacted their operations
- More than 80 per cent experienced double-digit increases in operating costs
- Many businesses recorded cost increases exceeding 20 per cent
- 45 per cent expressed concern about serious cash flow problems if current market conditions persist
- 88 per cent urged the government to introduce immediate relief measures
The findings highlight growing concerns within Malaysia’s SME ecosystem as businesses continue navigating inflationary pressures and slowing consumer demand.
Government Procurement Seen as Key Economic Support Mechanism
According to Dr. Chin, the Government Procurement Act could play a significant role in stimulating domestic economic activity by prioritising local products and services through a more structured and transparent procurement system.
He noted that the government, as the country’s largest purchaser, has the ability to create meaningful opportunities for local SMEs by strengthening domestic demand and reducing dependence on external supply chains.
“By prioritising local products and services through a transparent and structured procurement system, it can directly stimulate domestic economic activity,” he said.
The association also emphasised that procurement reforms must genuinely benefit SMEs rather than disproportionately favouring larger corporations or conglomerates.
Calls for Fairer SME Participation in Public Projects
To ensure wider participation among smaller businesses, the association proposed several measures, including allocating a fixed portion of public procurement projects specifically for local SMEs.
It also recommended that large-scale government contracts be divided into smaller packages, enabling more SMEs to participate competitively within public sector supply chains.
In addition, the association called for:
- Simplified tender application procedures
- Greater digital transparency in procurement processes
- Faster payment mechanisms to improve liquidity
- Stricter monitoring to prevent excessive subcontracting layers
The organisation warned that delayed payments and inefficient procurement systems could further weaken SMEs already operating under financial strain.
SMEs Remain the Backbone of Malaysia’s Economy
The association stressed that SMEs continue to play a central role in Malaysia’s economic landscape, contributing significantly to employment, supply chain resilience, and domestic economic activity.
Dr. Chin cautioned that if rising operational costs and liquidity pressures remain unresolved, the impact could extend beyond individual businesses and affect broader economic confidence and national supply chain stability.
He also urged the government to introduce additional short-term relief measures, including logistics subsidies, working capital financing assistance, tax deferments, and supply chain support programmes to help businesses manage immediate operational burdens.
The call reflects increasing concern within Malaysia’s business community over the need for stronger economic support mechanisms as SMEs continue adapting to inflationary pressures, global trade uncertainties, and changing market conditions.
