KUALA LUMPUR (Oct 15): The Ministry of Investment, Trade and Industry (Miti) said more horizontal linkages should be established, so that micro, small and medium enterprises (MSMEs) can be included in the global supply chain as a result of foreign direct investment (FDI) into the country.
Deputy Investment, Trade and Industry Minister Liew Chin Tong said FDI related to manufacturing serving the global supply chain may not be felt by MSMEs in the country currently, as local supply chains may be vertically integrated globally but not necessarily horizontally.
“This (establishing horizontal linkages) is a challenge that [Miti] and Mida (the Malaysian Investment Development Authority) will now have to start thinking about, because when you have horizontal linkages, [only] then MSMEs have a place [in the global supply chain],” Liew said in his keynote address officiating the Securities Commission Malaysia (SC)-World Bank Conference 2024 on Tuesday.
“Without horizontal linkages, MSMEs will not be linked to FDI-driven manufacturing in Malaysia,” he added.
In a value chain, vertical linkages between firms at different levels of the value chain serve as channels for the exchange of information, technical, business and other services between firms.
Conversely, horizontal linkages refer to long-term partnerships between firms that rely on interdependence, and shared resources to work together towards achieving common goals.
To establish horizontal linkages, Liew said capital support is required from both the capital market and government-linked investment companies to integrate MSMEs.
This is in line with the National Industrial Master Plan 2030, which highlights the need to improve financing access, strengthen entrepreneurship ecosystems, and foster sustainable practices for MSMEs, he added.
Liew highlighted that the integration of MSMEs into both the manufacturing and technology supply chains will be integral to Malaysia’s prospects in achieving a high economic growth trajectory in the long term.
He noted that as the global supply chain relocates away from China, Malaysia will need to tackle the horizontal linkage issue, in addition to the task of attracting foreign investment.
“We have to rethink where we want to head. In this whole journey, it is important that we become technologically capable, that we become a nation that founded itself on innovation, and not just on land and natural resources,” Liew added.
The fifth iteration of the SC-World Bank Conference is themed “Empowering MSMEs: Cultivating Compassionate Growth through The Capital Market”, highlighting the critical role of MSMEs in driving economic growth and inclusive development.
The SC’s Five-Year Roadmap for Catalysing MSME and MTC (Mid-Tier Company) Access to The Capital Market (2024-2028) launched back in May aims to grow the MSME capital market to RM40 billion by 2028.
The road map outlined 36 initiatives built upon five guiding principles and nine strategies to enhance MSME and MTC access to the capital market.