Budget funds for automation, digitalisation could attract startups, says analyst

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PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) and an economist have welcomed initiatives in the 2021 budget geared towards encouraging investments, with the latter saying allocations set aside for automation and digitalisation would attract startups.

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Juita Mohamad of the Institute of Strategic and International Studies said there are big allocations for micro small and medium-sized enterprises (MSMEs) across different sectors.

She told FMT this is in line with the emerging importance of the digital economy in Malaysia, especially since MSMEs make up around 98.5% of businesses in the country, numbering more than 900,000.

She said MSMEs need to be equipped with the proper knowledge, infrastructure and tools in the medium-term, particularly due to the challenges the community faces in securing finances to embrace digitalisation.

“Past experience during the early stages of the movement control order (MCO) in March suggests that digital trade has been essential in creating employment and maintaining the livelihoods of smallholders.

“With more allocations given to the process of automation and digitalisation, this may be very attractive for startups in the region,” she said.

However, Juita said the process of doing business needs to be made easier to attract the right investors, while a supply of skilled labour is needed to draw firms that are ready to automate and digitise.

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Putrajaya has allocated RM150 million in grants for the digitalisation and automation of SMEs, while another RM150 million has been set aside to encourage SMEs to embrace e-commerce, through training and digital equipment.

Juita said the government has also set aside RM230 million to finance SMEs’ automation and upskilling, particularly for working capital and to upgrade automation systems.

FMM president Soh Thian Lai said the establishment of the global trading centre is welcome as it would incentivise companies to utilise Malaysia as a procurement or distribution hub.

He said the extension of the Penjana special tax incentives is bound to attract foreign direct investments (FDIs), but called for it to be extended to existing investors too.

“These ‘captive’ investors can immediately make use of the incentives to deliver the desired results more quickly, especially in terms of multiplier effect on their suppliers,” he told FMT.

Another key measure is the RM500 million to support companies involved in advanced technology and innovation, he said, which would enable firms to stay competitive in the global supply chain.

“The measures introduced in the 2021 budget have provided support towards reviving businesses as well as spurring and accelerating investments, which are crucial in revitalising the economy.

“In addition, measures to ease the access to business and improve competitiveness are lauded and would be most beneficial for SMEs in the new norm of doing business as a result of Covid-19,” he said. – FMT

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