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New Straits Times
13 hours ago
- Business
- New Straits Times
Malaysian SMEs picking up on AI to drive growth
KUALA LUMPUR: Malaysia's digital ambitions, as outlined in the MyDIGITAL blueprint, aim to position the country as a regional digital economy leader. However, that vision will remain aspirational if local businesses, particularly small and medium enterprises (SMEs), do not accelerate their adoption of artificial intelligence (AI) and other digital technologies. As neighbours such as Indonesia, Vietnam and Singapore continue to advance toward AI-enabled futures, Malaysian SMEs are uniquely positioned to seize this moment and lead a smarter, more inclusive wave of digital transformation. A new study by Lazada, in partnership with Kantar, titled Bridging the AI Gap: Online Seller Perceptions and Adoption Trends in Southeast Asia, reveals a key challenge: Malaysian sellers recognise AI's potential but have yet to fully embrace it. The study, which surveyed 1,214 online sellers across Malaysia, Indonesia, the Philippines, Singapore, Thailand and Vietnam, found that 69 per cent of Malaysian respondents say they are familiar with AI, but only 26 per cent have adopted AI tools, representing a significant gap between awareness and application. This gap is not merely a technology issue. It reflects a broader set of challenges shaped by uneven access to education, infrastructure constraints, generational divides and varying levels of trust and understanding around AI. Beyond that, the findings also reveal that businesses are not standing still. Many are also carefully evaluating AI opportunities that align with their specific capacities and business models. Malaysian SMEs are increasingly aware of tools ranging from generative AI for content creation and marketing to chatbots and predictive analytics. Technologies like ChatGPT have helped bring AI into mainstream business conversations. Today, it is no longer confined to niche technical circles, but has entered boardrooms, marketing meetings and daily operations. Yet, despite growing awareness, adoption remains relatively modest. Many SMEs are in the exploratory phase, testing AI tools but not yet integrating them into core workflows. Why? The report identifies several consistent barriers: perceived high costs, implementation complexity and a longstanding preference for tried-and-tested processes. While 87 per cent of Malaysian sellers acknowledge AI's long-term cost-saving potential, 64 per cent still cite cost and setup hurdles. Only half of the respondents believe AI is truly useful, well below the regional average of 61 per cent. Williams Business Consultancy Sdn Bhd director Dr Geoffrey Williams noted that SMEs tend to delay adoption because the business value of AI is not always immediately apparent. "They focus directly on their existing business model, which is often low tech. However, there are huge possibilities for SMEs in AI adoption, and sharing platforms will likely be one of the main routes to this," he told Business Times. Beyond perception, Malaysia also faces structural issues. The absence of a dedicated national AI governance framework places SMEs in a grey area, particularly under evolving data protection laws such as the Personal Data Protection Act 2010 (Act 709). Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid pointed out that digital adoption among SMEs was sluggish before the Covid-19 pandemic. However, the crisis served as a catalyst, pushing many businesses into "survival mode," where hybrid models combining physical and online operations became the norm. "Even with the digital economy now paramount to SMEs, however, the AI adoption is slower than projected. This is attributed to a lack of knowledge, financial resources and resistance to another change in the business," he said. Add to that infrastructural gaps and talent shortages, and it becomes clearer why some SMEs hesitate to move beyond the experimentation phase. Generational dynamics also play a role. While older business owners may be more resistant to digital disruption, younger entrepreneurs, despite being digitally savvy, often lack access to funding or the technical support needed to deploy AI meaningfully. Still, the picture is far from discouraging. Encouragingly, the Lazada-Kantar report finds that many businesses are already on the path to AI adoption, albeit at different stages of readiness. The study categorises sellers into three distinct groups based on their level of AI adoption across five core areas of business operations, which include logistics, product management, marketing, customer service, and workforce management. At the forefront are the AI Adepts. These businesses have successfully integrated AI across most or all of these five core business functions, and are already reaping tangible benefits. From enhanced operational efficiency and cost savings to smarter decision-making and improved customer engagement. They are well-positioned for sustainable growth and better equipped to scale in a competitive, digital-first market. Behind them are the AI Aspirants, which represent a significant portion of Malaysian sellers. These businesses recognise the value of AI and are keen to adopt it, but have yet to fully embed AI tools into their operations. Many are in early testing or partial implementation phases, and with the right support, training, and access to practical tools, they have strong potential to progress toward becoming AI Adepts. Finally, the study identifies the AI Agnostics. These businesses have minimal or no meaningful AI adoption across the five key operational areas. They tend to rely on traditional processes and may be more cautious or constrained by barriers such as cost concerns, lack of expertise, or uncertainty about the relevance of AI to their business model. Only 15 per cent of Malaysian sellers fall into the AI Adept category, below the regional average of 24 per cent. However, 43 per cent are identified as AI Aspirants, businesses open to AI but still in need of better tools, training, and support to move forward. This group presents a major growth opportunity. With the right guidance and accessible platforms, Malaysia can quickly expand its base of AI-ready SMEs. Platforms like Lazada are playing a vital role in closing the gap by offering embedded AI features that are easy to adopt and designed for day-to-day operations. Lazada is no longer just a digital marketplace; it is becoming a strategic AI partner that helps SMEs transition into the digital economy with minimal friction. By integrating AI directly into the seller experience, Lazada offers SMEs a low-risk, high-impact opportunity to test and scale intelligent technologies without needing large budgets or advanced technical skills. For example, Lazada IM Shop Assistant (LISA) enables sellers to provide 24/7 customer support by allowing them to program automated responses to common buyer inquiries, such as questions about delivery, returns or product details. Lazzie, a chatbot powered by generative AI technology, serves as a personal shopping assistant for buyers by offering real-time product information, recommendations and guidance during their shopping journey. Meanwhile, the Lazada Business Advisor dashboard helps sellers make smarter decisions by giving them real-time insights on pricing, promotions and inventory. It is like having a built-in guide to spot opportunities and fine-tune strategies as the business grows. For SMEs, these are not just fancy tools — they are practical stepping stones that make AI part of everyday business. Williams acknowledges this approach and stresses that AI adoption will be market-driven, and there is only a limited role for government. "Government agencies such as Malaysia Digital Economy Corporation already provide infrastructure for platforms with significant potential for gross domestic product and employment," said Williams. Aimi adds that while workshops and training sessions are available through government and trade associations, they often lack scale and sustained funding. "Many SMEs are not aware of the availability of online e-commerce platforms due to limited exposure. They may know the word 'AI' but do not understand what it is or how to apply it in their business operations," added Aimi. The stakes are real, but so is the opportunity. While Malaysia may trail some of its neighbours in AI adoption today, the ecosystem for progress is growing. Tools, platforms and support networks are becoming more accessible, and awareness is steadily rising. AI is no longer a futuristic ideal — it is a practical, powerful resource that businesses of any size can begin leveraging now to work smarter, grow faster and compete more effectively. With the right mindset and continued support from platforms like Lazada, Malaysian SMEs are not just capable of catching up — they have the potential to lead. The question is no longer whether AI will be adopted. It is how inclusively, confidently and strategically we embrace it. And for many Malaysian businesses, that journey is already well underway.
Free Malaysia Today
3 days ago
- Business
- Free Malaysia Today
SST revision won't hurt govt's RM10bil collection target, says economist
On Friday, the government announced that imported apples, oranges, mandarin oranges and dates will be exempted from the SST. (Envato Elements pic) PETALING JAYA : The revision of the sales and service tax's (SST) expansion to exempt several goods and services will not jeopardise the government's target of collecting up to RM10 billion a year, says an economist. Geoffrey Williams said the government has been responsive to views from the relevant stakeholders, and is committed to reducing financial burdens without harming the country's fiscal capability. Geoffrey Williams. 'The revision is minor and will not greatly affect overall collections. 'The government should still be able to hit its RM5 billion collection target for the last six months of 2025 and RM10 billion for next year,' he told FMT, adding the revision will also help control inflation and consumer spending patterns. On Friday, the government announced that imported apples, oranges, mandarin oranges and dates will be exempted from the SST. Also exempted are beauty services such as manicures, pedicures, facials and hairdressing. The finance ministry also said the threshold for service tax registration for leasing or rental and financial services had been raised from RM500,000 to RM1 million, to reduce the number of small businesses that would be affected. Williams said the revision is in line with the government's long-term goal to increase national revenue and strengthen basic health, education and social protection services without unduly burdening consumers. 'This is not just a question of tax collection, but of responsible and fair fiscal policy implementation,' he said. Carmelo Ferlito. However, Center for Market Education CEO Carmelo Ferlito said the government must address potential weaknesses and leakages arising from confusion over the tax's implementation, especially in relation to the newly-exempted goods and services. He said the tax must be simple and fair, warning that making it overly complex would only cause more problems. Ferlito also called for the government to control its own spending to avoid the inflationary risks associated with SST. 'Taxes do not cause inflation, government spending does. 'If the government is truly serious about implementing reforms to reduce the burden of the cost of living on the people, it must impose limits on its own expenditure,' he said.
New Straits Times
6 days ago
- Business
- New Straits Times
13MP review crucial to avoid policy pitfalls, say economists
KUALA LUMPUR: Finance Minister II Datuk Seri Amir Hamzah's main duty of finalising the 13th Malaysia Plan (13MP) will improve policy coordination between the Finance Ministry and the Economy Ministry, say economists. Economist Professor Geoffrey Williams said it is essential for the 13MP to be a robust framework and, as such, it should undergo a comprehensive final review. He said that increased external and independent scrutiny of the process would enhance the quality of the final document. "Although there are no details on the exact content, it is important that each proposal is evaluated by independent experts to ensure there are no unintended consequences or obvious issues that need to be addressed. "There is only a short time for the final review, but it is worth undertaking this exercise to avoid the risk of presenting a document that may attract criticism from the outset," he said. He said the move would improve policy coordination between the Finance Ministry and the Economy Ministry, and also help in understanding the long-term financial implications and funding strategies. Yesterday, Chief Secretary to the Government Tan Sri Shamsul Azhar Abbas announced that Amir Hamzah would assume the duties and functions of the Economy Minister with immediate effect. He said Amir Hamzah's primary responsibility is to revise and reformulate the contents of the 13MP document, which will be tabled in parliament on July 31. The portfolio became vacant after Datuk Seri Rafizi Ramli resigned from the post on May 28, following his defeat in the PKR central leadership election, where he failed to retain the party's deputy president post. However, Rafizi, in a statement, expressed concern over the move to revise and reformulate the document, warning that a last-minute decision could undermine public confidence in the national policy document. Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the review could improve policy coordination, as there would be greater connectivity between the Finance Ministry and the Economy Ministry. "I'm sure the 13MP will reflect budget constraints and aim for a higher multiplier effect on growth, while at the same time remaining disciplined in managing government finances," he said. He said Amir Hamzah, as a technocrat, would take a pragmatic approach to reviewing the document. "In addition, the plans are being prepared by government machinery that is highly competent, so I suppose the changes would take into consideration the country's long-term growth interests," he said.
The Star
6 days ago
- Business
- The Star
Muted impact on firms
PETALING JAYA: The mandatory Employees Provident Fund (EPF) contribution for foreign workers will have little impact on most businesses for now, except for those with heavy reliance on foreign labour. The impact will be greater if such companies also operate in price-sensitive markets where cost pass-through is limited. Sectors that would be most affected are plantation, gloves, technology and construction, according to CIMB Securities Research. 'Overall, we view the mandatory 2% EPF contribution as mildly negative for corporate earnings. 'We expect the earnings impact from higher labour costs – alongside the recent expansion of the sales and service tax – to be reflected progressively in the results for the second half of 2025, with a more pronounced full-year effect in 2026,' stated the research house. Starting with October's wage, foreign workers and their employers must each contribute 2% of the monthly pay to the EPF. CIMB Research foresees the initial cost impact to likely be manageable. 'However, pressure may build if the contribution rate for foreign workers is gradually increased in line with that of Malaysian workers,' it said in a note. The advantage of this EPF plan, according to economist Geoffrey Williams, is that it is being rolled out at a 'very low rate and very low cost'. This avoids imposing substantial additional cost pressures on businesses, at a time when many industry players are complaining about margin compressions. On the flip side, however, the 2% EPF contribution will hardly benefit the foreign workers, said Williams. 'The employees will save virtually nothing, the EPF will have millions of extra members but most will have virtually no savings and employers will have minimal extra costs. 'For example, for a foreign worker on a minimum wage of RM1,700, the new scheme will cost RM34 per month (employer's portion). For employers complaining of higher costs due to this, they need a reality check. If they cannot afford RM34 per month, they do not have a viable business model.' As for those with large numbers of foreign workers, Williams urged them to reduce dependency on low-wage workers if such employers feel that the cumulative cost of 2% contribution is too high. 'Employ Malaysians or invest in technology,' he said. The EPF announced that this mandatory contribution will apply to all foreign workers in Malaysia – excluding domestic helpers – who possess valid passports and work permits issued by the Immigration Department. Previously, the EPF contributions for foreign workers were voluntary. This policy change should not come as a surprise to the market, as it was first announced in Budget 2025. Under the revised framework, foreign workers will be allowed to withdraw their EPF savings upon returning to their home countries, provided their work permits have expired and there is evidence that their permanent employment has ended. With the new mandatory policy, CIMB Research said the EPF stands to benefit from higher annual contributions. 'Based on an estimated 2.5 million foreign workers earning an average monthly salary of RM2,000, the combined 4% contribution from employers and employees could generate approximately RM2.4bil in additional annual contributions to the EPF.' Meanwhile, the Small and Medium Enterprises Association of Malaysia (Samenta) national president Datuk William Ng described a 2% contribution as 'reasonable' and not something that Samenta would object to. He also told StarBiz that most SMEs which engaged foreign workers did not have a large number of such workers. 'In fact, we are more concerned over the availability of these funds to the workers upon them ceasing to work in Malaysia. 'Ideally, they should be able to withdraw the fund in its entirety upon termination of their employment and such funds allowed to be repatriated to their home country to repay loans, build houses and any other uses they may deem fit,' he said.
The Star
24-06-2025
- Business
- The Star
Cautious spending likely in 2H
PETALING JAYA: The inflation rate, which hit a 51-month low of 1.2% last month, will certainly raise the question of whether the time is ripe for the central bank to cut interest rates in the near future. However, it is also important to consider if lower inflation rates might continue into the rest of the year, particularly as the expanded sales and service tax (SST) takes effect next month. Economist Geoffrey Williams said he expects inflation to come out broadly at or below 2%, adding, however, that there are still risks due to subsidy rationalisation, the impending SST and ongoing geopolitical uncertainties. 'While I expect the domestic factors to affect inflation only modestly, the geopolitical impact on supply chains and oil prices is difficult to predict. Nonetheless, with domestic inflation holding low and steady, it provides the green light for the RON95 subsidy rationalisation,' he told StarBiz. Tradeview Research senior analyst Tan Jia Hui, meanwhile, said that core inflation, which doesn't include volatile items like fuel and food, is slightly elevated. 'This is mainly because wages have gone up and some businesses, especially in services, are passing on the higher cost to consumers. As the economy gradually recovers, this trend is likely to continue,' she said. However, Tan cautioned that overall domestic demand is not too strong, noting that the government is still subsidising essentials like fuel and selected food items, which helps keep overall inflation in check. 'Some of the key risks to this outlook include the potential weakening of the ringgit in the second half of this year (2H25) if global risk aversion spikes. Weather-related disruptions could push up food and commodity prices and higher prices from key trade partners could also lead to more imported inflation,' Tan said. According to the Statistics Department, the consumer price index (CPI) stood at 134.4 last month, compared with 132.8 a year ago. It said the food and beverage group, which contributes 29.8% to the CPI, rose more slowly at 2.1% in May 2025 versus 2.3% in April 2025. While the food-at-home subgroup did not register any changes for May 2025 compared to April 2025, the food-away-from-home subgroup was up 4.4% versus 4.3% in the preceding month. A number of other groups had recorded a higher increase in May compared to the month before, including restaurant and accommodation services, health and furnishings, household equipment and routine household maintenance. The information and communication and the clothing and footwear groups remained in negative territory, registering 5.2% and 0.2% declines, respectively. As the SST deadline draws closer, Williams said the impact of the tax regime will be very moderate and most people will be unaffected. Tan, who expects some impact, said consumers, especially in the M40 group, will reduce their discretionary spending, leading to a more cautious consumption pattern in 2H25. She added cost pressures are likely to grow, diminishing purchasing power and discretionary spending. 'However, essentials remain largely unaffected, so the broad-based impact on cost of living is expected to be modest. For businesses, firms in the services and logistics sectors may experience higher operating costs like higher rental or leasing, especially those with limited ability to pass through these costs,' Tan explained. For small and medium enterprises, she said, the cost of compliance and potential loss of competitiveness could be a concern. 'On the positive side, clearer tax treatment and improved government revenue could enhance fiscal consolidation credibility, indirectly supporting business sentiment,' she said. With rising geopolitical and trade uncertainties, disruptions in raw materials or intermediary goods may also increase input costs, higher freight and shipping costs. Tan said a potential rise in commodity prices like oil, palm oil and metals due to conflict-related supply constraints can further add inflationary pressures. 'The ringgit could come under pressure if global risk sentiment deteriorates, making imports costlier. Consumers may face higher prices on imported goods and imported inflation via the weak ringgit. Businesses may face margin pressures, particularly export-reliant sectors sensitive to US-China dynamics. On the flip side, trade diversion could benefit Malaysia in select sectors such as semiconductors, and electrical and electronics if it attracts more supply chain relocations.' Meanwhile, with inflation rates at a much lower level, it is safe to say that there is less pressure on Bank Negara to cut rates as it sees more stability. Kenanga Investment Bank Bhd said while market consensus has implied that the central bank might impose one or two rate cuts in 2H25, it maintains that interest rates will remain unchanged. In a report, the research house said inflation is expected to rise gradually on the back of structural reforms, while economic growth remains resilient. 'The current rate level continues to attract foreign capital into the bond market. That said, should growth fall below 3.5% and sequential quarter-on-quarter gross domestic product (GDP) prints turn negative, the case for a rate cut would strengthen,' it noted. Separately, CIMB Investment Bank Bhd said it expects the Overnight Policy Rate (OPR) to be cut in July, as Malaysia's exports contracted 1.1% in May 2025, falling short of expectations and reflecting intensifying external headwinds. 'Given subdued inflation trends, coupled with weak external trade, we maintain our call for Bank Negara to cut the OPR by 25 basis points to 2.75% at the upcoming Monetary Policy Committee meeting to support growth. 'However, Bank Negara may prefer to assess additional key upcoming data. This would be consistent with the central bank's data-dependent approach to monetary policy.'
