PETALING JAYA: Small and medium-sized enterprises have long been the backbone of Malaysia’s economy, contributing nearly 38% to gross domestic product and employing almost half of the workforce.
Yet, their struggles – from limited internationalisation to talent shortages and slow technology adoption – pose a risk to economic stability.
As Malaysia transitions into a high-income economy, the future of SMEs lies in embracing high-value industries, advanced technologies and global expansion, said Exponasia Growth Asia founder Giuseppe Di Lieto.
He said while many Malaysian SMEs have successfully expanded into regional markets such as Singapore, Asean and China, they struggle to scale beyond these familiar territories.
“One of the key factors holding SMEs back is their limited internationalisation efforts. Despite their strong domestic presence, few have a robust global footprint. The challenge is not just about funding but also about mindset, resources and strategic support,” Di Lieto told SunBiz.
He noted that a major obstacle is the reluctance to explore overseas acquisitions as a growth strategy.
“Unlike SMEs in Europe or North America, where acquisitions are a common pathway to scaling, Malaysian businesses tend to prioritise organic growth and domestic expansion. This cautious approach limits their potential to diversify revenue streams and compete globally,” he explained.
Commenting on talent issues, Di Lieto said a critical barrier to SME internationalisation is the lack of skilled decision-makers with global exposure.
“Many SMEs are led by first- or second-generation entrepreneurs with deep operational knowledge but limited experience in international markets. It is not a lack of decision-making skills, but rather a cautious approach that acts as a bottleneck. Without access to the right networks, investors, industry bodies, and consultants, Malaysian SMEs struggle to build effective international strategies.”
Furthermore, Di Lieto noted that the absence of structured leadership with international expertise makes it difficult for SMEs to scale efficiently.
“To compete on a global stage, the next generation of SME leaders must possess a strong educational background, international business experience and a forward-thinking vision,” he said.
Unlike developed countries with well-established systems and advanced infrastructures, he added, Malaysia’s SMEs must rely heavily on human capital to navigate structural inefficiencies and market uncertainties.
“In emerging markets like Malaysia, talent isn’t just a growth driver, it is a survival imperative. Without the right talent, SMEs risk stagnation, losing out to more agile competitors. Investing in skilled, adaptable, and globally minded professionals will be key to driving SME growth in the coming years.”
Malaysia’s SME landscape is dominated by micro and small enterprises, with only 2% qualifying as medium-sized businesses. This lack of scale is a major roadblock to international competitiveness, Di Lieto said.
“Scale enables access to funding, integration into global supply chains and the adoption of new technologies,” he explained, adding that many SMEs remain too small to attract investors or develop the capabilities needed for international expansion.
Additionally, he said product adaptation for foreign markets remains a challenge.
“Despite globalisation, local nuances in demand, regulatory standards and competitive landscapes require SMEs to refine their offerings for each target market. This adaptation process is often overlooked, leading to difficulties in securing a strong foothold abroad.”
As Malaysia advances towards high-income status, Di Lieto said, the SME landscape is set for transformation.
“The focus will shift to high-value industries, advanced technologies, digital transformation, green energy and automation,” he predicted, saying that these trends will drive business consolidation, with some traditional SMEs exiting while new players emerge.
For those willing to adapt and innovate, the future holds immense opportunities. “To remain competitive, Malaysian SMEs must embrace change, adopt cutting-edge technologies, and position themselves as global players in an increasingly interconnected world,” Di Lieto said.
Exponasia Growth Asia is a consulting firm dedicated to bridging the expertise and resource gaps faced by small and medium-sized businesses.
