FMM PRESS STATEMENT: FMM Welcomes the Government’s 10 Strategic Initiatives to Empower MSMEs: Strengthening Competitiveness and Supporting Growth
January 7, 2026
Head Office, KL
Kuala Lumpur, January 6, 2026 — The Federation of Malaysian Manufacturing (FMM) commends the announcement by YAB Prime Minister and the Ministry of Entrepreneur and Cooperatives Development (KUSKOP) on the ten strategic initiatives to empower Micro, Small and Medium Enterprises (MSMEs). This is a timely and commendable move that provides immediate relief to SMEs while laying the foundation for long-term competitiveness. The measures, ranging from financing support and tax exemptions to easing compliance requirements are in line with FMM’s aspiration to see Malaysian SMEs go global and move up the value chain.
While FMM welcomes the Government’s targeted relief measures, the FMM reiterates the need to comprehensively review and modernise the definition of SMEs in the manufacturing sector. The current thresholds, annual sales turnover of up to RM50 million or employment of up to 200 workers, are increasingly restrictive and no longer reflect today’s industrial realities, particularly for mid-tier manufacturing companies that sit between traditional SMEs and large corporations. Compared with international benchmarks, Malaysia’s SME definition is relatively narrow. Countries such as Japan, the United States, and Germany apply higher employee and financial thresholds, allowing mid-sized manufacturers to continue accessing targeted support. In contrast, Malaysia’s current framework risks misclassifying mid-tier manufacturers as large firms, potentially excluding them from assistance programmes and subjecting them to regulatory and cost burdens that are disproportionate to their scale. Mid-tier manufacturers play a vital role in Malaysia’s economy, contributing significantly to employment, exports, innovation, and domestic value creation, while acting as key linkages between small suppliers and multinational corporations.
FMM therefore reiterates its long-standing recommendation to expand the SME definition to include companies with annual sales turnover of up to RM100 million and up to 300 employees. Such a revision would better align Malaysia with regional and global standards, reflect economic and currency changes since 2013, encourage scaling and consolidation among firms, and strengthen the overall resilience and competitiveness of Malaysia’s industrial ecosystem.
Key Points on the 10 Strategic Initiatives Welcomed by FMM:
1. RM2.5 billion additional allocation for MSMEs under Budget 2026: FMM views this as a very commendable move. We hope more of the allocation will be channelled in the form of direct monetary assistance such as soft loans, matching grants, and other instruments, in addition to the previously announced loan guarantee schemes.
2. Commitment on Excess Tax Refunds for YA2023 and YA2024: This is very encouraging news for SMEs, as cash flow is most crucial for their survival. FMM urges that this initiative be institutionalised as a continued strategy, with excess taxes refunded to SMEs within 12 months.
3. Increase in Threshold Value for Registration of Leasing/Rental Services and Revision of Rental Service Tax from 8% to 6%: FMM welcomes the waiver of service tax on rental services for SMEs with annual turnover up to RM1.5 million, alongside the reduction of the service tax rate to 6%. The upward revision of the service tax threshold on rental services will help ease cost pressures for SMEs, especially manufacturers and supporting service providers that operate from rented premises due to limited financial capacity to purchase or build their own facilities. For many smaller businesses, rental expenses represent a fixed and unavoidable cost, and relief from additional tax burdens provides much-needed headroom to manage cash flow, invest in productivity improvements, and support business continuity. This is a positive step to enhance SME competitiveness.
FMM further recommends consideration to exempt SME manufacturers of taxable goods from paying SST on input services such as rental and logistics, to prevent compounding tax-on-tax effects that raise business costs. Relief from service tax and targeted sales tax exemptions provide much-needed headroom to manage cash flow, reinvest in productivity improvements, and support business continuity.
4. Postponement of Penalties for e-Invoice Implementation: FMM views this as a pragmatic step that acknowledges the readiness gap among micro and small enterprises, particularly in terms of digital capability, systems integration, and compliance costs. Many SMEs are still in the early stages of digital adoption, with limited resources to invest in new systems or to train staff adequately. By postponing the enforcement timeline, the Government is effectively providing SMEs with critical breathing space to upgrade digital infrastructure and allow SMEs to transition more sustainably into digital compliance.
5. ABCD Strategy: FMM also commends YB Tuan Steven Sim’s ABCD strategy to drive KUSKOP, i.e.. Anjakan Produktiviti (Productivity Shift), Birokrasi Dipermudah (Simplified Bureaucracy), Capaian Modal (Access to Capital), and Daya Akses Pasaran (Market Access Capability), as a holistic framework that aligns with industry aspirations.
With 76% of FMM’s members being SMEs, the FMM stands as the collective voice of Malaysia’s manufacturing and entrepreneurial backbone and strongly supports SME growth and believes that these initiatives, together with the ABCD strategy, will be pivotal in ensuring the sustainability and expansion of the entire MSME ecosystem, while enabling Malaysian SMEs to scale globally and move up the value chain.
Download FMM Press Statement
Mr Jacob Lee Chor Kok
President, Federation of Malaysian Manufacturing
FMM Advocates Transparency, Integrity, Accountability and No Corruption
About FMM
The Federation of Malaysian Manufacturing (FMM) (formerly known as Federation of Malaysian Manufacturers) has been the voice of the Malaysian manufacturing sector since 1968, advocating policies and initiatives that drive industrial growth, competitiveness and workforce development. Representing over 13,300 member companies (4,200 direct and 9,100 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-added services including training, business networking and trade opportunities as well as regular information updates.
Media Enquiries:
Han Mong Ying, Senior Manager, Corporate Affairs
Tel : 03-6286 7200 | Email: webmaster@fmm.org.my
While FMM welcomes the Government’s targeted relief measures, the FMM reiterates the need to comprehensively review and modernise the definition of SMEs in the manufacturing sector. The current thresholds, annual sales turnover of up to RM50 million or employment of up to 200 workers, are increasingly restrictive and no longer reflect today’s industrial realities, particularly for mid-tier manufacturing companies that sit between traditional SMEs and large corporations. Compared with international benchmarks, Malaysia’s SME definition is relatively narrow. Countries such as Japan, the United States, and Germany apply higher employee and financial thresholds, allowing mid-sized manufacturers to continue accessing targeted support. In contrast, Malaysia’s current framework risks misclassifying mid-tier manufacturers as large firms, potentially excluding them from assistance programmes and subjecting them to regulatory and cost burdens that are disproportionate to their scale. Mid-tier manufacturers play a vital role in Malaysia’s economy, contributing significantly to employment, exports, innovation, and domestic value creation, while acting as key linkages between small suppliers and multinational corporations.
FMM therefore reiterates its long-standing recommendation to expand the SME definition to include companies with annual sales turnover of up to RM100 million and up to 300 employees. Such a revision would better align Malaysia with regional and global standards, reflect economic and currency changes since 2013, encourage scaling and consolidation among firms, and strengthen the overall resilience and competitiveness of Malaysia’s industrial ecosystem.
Key Points on the 10 Strategic Initiatives Welcomed by FMM:
1. RM2.5 billion additional allocation for MSMEs under Budget 2026: FMM views this as a very commendable move. We hope more of the allocation will be channelled in the form of direct monetary assistance such as soft loans, matching grants, and other instruments, in addition to the previously announced loan guarantee schemes.
2. Commitment on Excess Tax Refunds for YA2023 and YA2024: This is very encouraging news for SMEs, as cash flow is most crucial for their survival. FMM urges that this initiative be institutionalised as a continued strategy, with excess taxes refunded to SMEs within 12 months.
3. Increase in Threshold Value for Registration of Leasing/Rental Services and Revision of Rental Service Tax from 8% to 6%: FMM welcomes the waiver of service tax on rental services for SMEs with annual turnover up to RM1.5 million, alongside the reduction of the service tax rate to 6%. The upward revision of the service tax threshold on rental services will help ease cost pressures for SMEs, especially manufacturers and supporting service providers that operate from rented premises due to limited financial capacity to purchase or build their own facilities. For many smaller businesses, rental expenses represent a fixed and unavoidable cost, and relief from additional tax burdens provides much-needed headroom to manage cash flow, invest in productivity improvements, and support business continuity. This is a positive step to enhance SME competitiveness.
FMM further recommends consideration to exempt SME manufacturers of taxable goods from paying SST on input services such as rental and logistics, to prevent compounding tax-on-tax effects that raise business costs. Relief from service tax and targeted sales tax exemptions provide much-needed headroom to manage cash flow, reinvest in productivity improvements, and support business continuity.
4. Postponement of Penalties for e-Invoice Implementation: FMM views this as a pragmatic step that acknowledges the readiness gap among micro and small enterprises, particularly in terms of digital capability, systems integration, and compliance costs. Many SMEs are still in the early stages of digital adoption, with limited resources to invest in new systems or to train staff adequately. By postponing the enforcement timeline, the Government is effectively providing SMEs with critical breathing space to upgrade digital infrastructure and allow SMEs to transition more sustainably into digital compliance.
5. ABCD Strategy: FMM also commends YB Tuan Steven Sim’s ABCD strategy to drive KUSKOP, i.e.. Anjakan Produktiviti (Productivity Shift), Birokrasi Dipermudah (Simplified Bureaucracy), Capaian Modal (Access to Capital), and Daya Akses Pasaran (Market Access Capability), as a holistic framework that aligns with industry aspirations.
With 76% of FMM’s members being SMEs, the FMM stands as the collective voice of Malaysia’s manufacturing and entrepreneurial backbone and strongly supports SME growth and believes that these initiatives, together with the ABCD strategy, will be pivotal in ensuring the sustainability and expansion of the entire MSME ecosystem, while enabling Malaysian SMEs to scale globally and move up the value chain.
Download FMM Press Statement
Mr Jacob Lee Chor Kok
President, Federation of Malaysian Manufacturing
FMM Advocates Transparency, Integrity, Accountability and No Corruption
About FMM
The Federation of Malaysian Manufacturing (FMM) (formerly known as Federation of Malaysian Manufacturers) has been the voice of the Malaysian manufacturing sector since 1968, advocating policies and initiatives that drive industrial growth, competitiveness and workforce development. Representing over 13,300 member companies (4,200 direct and 9,100 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-added services including training, business networking and trade opportunities as well as regular information updates.
Media Enquiries:
Han Mong Ying, Senior Manager, Corporate Affairs
Tel : 03-6286 7200 | Email: webmaster@fmm.org.my
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