Looking for a Hero While Ignoring the Foundation: Why Malaysian SMEs Must Rethink Competitiveness

Looking for a Hero While Ignoring the Foundation: Why Malaysian SMEs Must Rethink Competitiveness

Malaysia's small and medium enterprises (SMEs) often raise a familiar concern: the rapid rise of Chinese e-commerce platforms has created an uneven playing field. Companies argue that Chinese firms enjoy massive economies of scale, sophisticated logistics, government support, digital ecosystems, and access to an enormous domestic market. They urge the Malaysian government to introduce stronger protective policies, subsidies, incentives, or regulations to help local businesses survive.

Many of these concerns are legitimate.

But there is another question that deserves equal attention:

How competitive are Malaysian companies from within?

The "Hero" Mentality

There is a recurring tendency in Malaysia to look outward for solutions.

When businesses struggle, many immediately ask:

• Where is the government?
• Why aren't there more grants?
• Why aren't foreign competitors restricted?
• Why isn't someone protecting us?

This reflects a broader expectation that success or failure depends largely on external intervention.

Government policies certainly matter. Every successful economy has benefited from sound industrial policy.

However, government policy can only create opportunities.

Businesses themselves create competitiveness.

China's Rise Was Not Built on Protection Alone

China's manufacturing and technology success was never simply the result of protectionism.

Its competitiveness emerged from decades of:

• relentless investment in technology,
• continuous productivity improvements,
• talent development,
• supply-chain integration,
• fierce domestic competition,
• and an execution culture that rewarded performance.

Chinese companies compete aggressively not only against foreign firms, but also against thousands of domestic competitors.

Survival depends on constant innovation.

Many fail.

The strongest become world-class.

The Often-Ignored Question: How Do Malaysian Companies Treat Talent?

One uncomfortable issue rarely discussed is the relationship between Malaysian businesses and their employees.

Many SMEs complain about losing talent.

Yet many professionals ask a different question:

Do companies genuinely value talent?

Across many industries, employees frequently report experiences such as:

• limited career development,
• salaries that fail to keep pace with productivity,
• expecting long working hours without corresponding rewards,
• little investment in training,
• promotions influenced more by relationships than capability,
• viewing employees as costs rather than strategic assets.

While many Malaysian companies are excellent employers, these concerns are common enough to deserve reflection.

If talented people feel underappreciated, they eventually leave.

Some move overseas.

Some join multinational corporations.

Some build businesses of their own.

Others simply disengage.

The result is a gradual erosion of competitiveness.

Competitiveness Begins Inside the Company

Technology can be purchased.

Machines can be imported.

Capital can be borrowed.

But an organisation's culture cannot be bought.

Companies that consistently attract and retain capable people usually share common characteristics:

• leaders who reward competence,
• willingness to delegate responsibility,
• investment in continuous learning,
• openness to new ideas,
• fair compensation,
• and respect for professional expertise.

These are not merely "human resource" issues.

They are competitive advantages.

Government Cannot Replace Leadership

It is reasonable for businesses to ask the government to improve infrastructure, education, trade policy, financing, and digital ecosystems.

These are legitimate public responsibilities.

However, no government policy can compensate for poor leadership inside a company.

No subsidy can permanently solve:

• weak management,
• resistance to innovation,
• unwillingness to invest in employees,
• or cultures that drive capable people away.

Competitiveness is built one decision at a time, inside each organisation.

A Better National Conversation

Malaysia certainly needs stronger execution of industrial policies and a more coherent long-term strategy to help domestic firms compete globally.

At the same time, Malaysian businesses should also ask themselves difficult questions:

• Are we developing people as seriously as we expect government to develop industries?
• Are we rewarding competence?
• Are we creating workplaces where talented individuals choose to stay?
• Are we investing enough in productivity rather than relying on low labour costs?

If the answer to these questions is "not yet," then the greatest opportunity for improvement may lie within the companies themselves.

Conclusion

Global competition is becoming more intense, especially with the rapid expansion of Chinese e-commerce and manufacturing ecosystems. Government support is important, but it is only one part of the equation.

Long-term competitiveness depends on companies that embrace innovation, invest in people, and build organisations where talent can thrive.

Rather than waiting for a hero to rescue the economy, Malaysia may need thousands of business leaders willing to transform their own companies first.

That transformation begins not with a new policy—but with a new mindset.

China's Ecosystem Strategy vs. Malaysia's GLC Model

China Builds Industrial Ecosystems. Is Malaysia Building GLCs Instead?

Why One Produces Global Champions While the Other Often Struggles to Nurture Private Enterprise

A nation's competitiveness is not determined by how impressive its policy documents appear, but by how effectively those policies are implemented and transformed into a self-sustaining economic ecosystem.

One of the most striking differences between China and Malaysia is not whether they have industrial policies. Both do. The real difference lies in how governments define their role in economic development.

China: Supporting an Ecosystem, Not Just a Company

Over the past two decades, China's approach to developing strategic industries—such as high-speed rail, electric vehicles, semiconductors, artificial intelligence, and renewable energy—has followed a remarkably consistent pattern.

The government initially identifies a small number of promising companies and provides them with financial support, policy incentives, procurement opportunities, research funding, infrastructure, and regulatory facilitation.

However, the government's objective is not to support these companies indefinitely.

Once these firms achieve scale and technological capability, they become the anchor companies of an entire industrial ecosystem.

Around these national champions emerge:

• Thousands of component suppliers;

• Software developers;

• Logistics providers;

• Equipment manufacturers;

• Research institutions;

• Technology start-ups;

• Professional service firms.

Large corporations begin investing in, purchasing from, mentoring, and collaborating with smaller businesses.

The result is not merely the success of several large corporations, but the emergence of an integrated and competitive industrial ecosystem.

The government's role gradually evolves from operating businesses to enabling ecosystems.

Its goal is not simply to create successful companies—it is to create globally competitive industries.

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Malaysia: GLCs Grow Larger While Private Enterprises Struggle

Malaysia also established Government-Linked Companies (GLCs) with the intention of implementing national development policies, accelerating industrialisation, and strengthening strategic sectors.

However, over time, a different pattern has emerged.

Many GLCs have steadily expanded into increasingly broad commercial sectors.

Instead of primarily acting as catalysts for industrial development, they have become dominant competitors in many markets.

This raises several important concerns.

1. Crowding Out Private Enterprise

GLCs often enjoy advantages in access to financing, land, government contracts, and institutional support.

When private businesses are required to compete against government-backed corporations, the competitive landscape may become uneven.

As a result, many entrepreneurs hesitate to enter certain industries because they perceive the barriers to success as being too high.

Innovation inevitably suffers.

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2. Weakening Entrepreneurial Incentives

Every successful economy depends on entrepreneurs believing that hard work and innovation can be rewarded.

If more strategic industries become dominated by GLCs, fewer private companies will have the opportunity to evolve into national champions.

Talented entrepreneurs may choose to invest elsewhere—or even relocate overseas.

Over time, the economy risks becoming increasingly dependent on a relatively small number of government-linked institutions rather than a continuous pipeline of new enterprises.

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3. Failure to Build a Complete Industrial Ecosystem

The true value of a large corporation extends beyond its own profitability.

Its greater contribution lies in its ability to create opportunities for hundreds or even thousands of smaller domestic companies.

If large organisations focus primarily on expanding their own operations rather than developing local suppliers, SMEs, and innovative start-ups, the industrial ecosystem remains shallow.

Economic value and market opportunities become concentrated within a limited number of organisations instead of being widely distributed throughout the economy.

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4. Ultimately, Taxpayers Bear the Risk

GLCs operate using public capital, directly or indirectly.

When investments fail or businesses underperform, the financial burden may ultimately fall upon taxpayers.

Private companies bear the consequences of their own commercial decisions.

Government-linked enterprises, however, often enjoy implicit public backing.

This makes effective governance, accountability, and capital efficiency particularly important.

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China's Greatest Strength Is Its Ecosystem

China's electric vehicle industry provides an excellent illustration.

The success of major manufacturers has stimulated the growth of:

• Battery producers;

• Semiconductor companies;

• Robotics and automation firms;

• Charging infrastructure providers;

• Software developers;

• Precision engineering manufacturers;

• Technology start-ups.

One successful company creates opportunities for hundreds—sometimes thousands—of other businesses.

Ultimately, the country's competitive advantage lies not in a handful of companies, but in the strength of its entire industrial ecosystem.

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Malaysia Needs More National Champions, Not Simply More GLCs

Malaysia does not lack long-term economic visions.

Successive national development plans and industrial master plans have outlined ambitious goals for economic transformation.

The challenge lies in creating an environment where private enterprises can continuously emerge, innovate, and grow into globally competitive companies.

GLCs will continue to play an important role in sectors involving national security, critical infrastructure, public services, and natural monopolies.

However, in competitive industries, their greatest contribution may be to enable private enterprise rather than dominate it.

Imagine if every GLC were evaluated not only by its profitability, but also by how effectively it:

• Developed local suppliers;

• Helped SMEs scale up;

• Enabled Malaysian companies to expand internationally;

• Supported entrepreneurial innovation;

• Attracted private investment into strategic industries.

Such performance indicators would encourage ecosystem building instead of organisational expansion.

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Conclusion

The fundamental difference between China and Malaysia is not whether governments intervene in the economy.

Both governments play active roles in shaping industrial development.

The more important question is what government intervention ultimately creates.

Does it create an ecosystem that continuously produces entrepreneurs, innovators, and globally competitive companies?

Or does it gradually concentrate economic opportunity within a relatively small number of government-linked institutions?

China's experience demonstrates that government support can serve as a powerful catalyst for building vibrant industrial ecosystems capable of generating thousands of competitive private enterprises.

Malaysia's experience suggests that when state-linked companies become dominant participants in competitive markets, private-sector dynamism may be constrained.

The question, therefore, is not whether governments should intervene.

It is whether government intervention ultimately creates more entrepreneurs, more innovation, and more globally competitive Malaysian companies—or merely larger government-linked corporations.

 

Beyond Policy: The Real Difference Between China and Malaysia Is Execution

Every government has a vision for the future. Governments publish policy papers, national development plans, and economic blueprints outlining ambitious goals for industrial transformation, technological innovation, sustainability, and economic growth. On paper, many countries appear to be moving in the right direction.

However, history has shown that a country's success is determined not by the quality of its policies, but by its ability to execute them consistently over many years.

One of the clearest differences between China and Malaysia lies not in vision, but in execution.

China: From Vision to Reality

China's economic transformation did not happen overnight. Its rise was built upon decades of long-term planning and disciplined implementation. While individual policies have evolved, the country's strategic priorities have generally remained consistent despite changing economic conditions.

This long-term commitment has allowed China to build globally competitive industries in high-speed rail, electric vehicles, renewable energy, e-commerce, advanced manufacturing, artificial intelligence, and increasingly, semiconductors.

These achievements were not created by a single policy announcement. They resulted from sustained government support, infrastructure investment, talent development, research funding, and continuous refinement of implementation over many years.

Perhaps more importantly, businesses have confidence that national priorities will continue beyond a single political cycle. This encourages companies to make long-term investments, knowing that government support and strategic direction are unlikely to disappear suddenly.

Execution, rather than policy alone, has become one of China's greatest competitive strengths.

Malaysia: No Shortage of Plans

Malaysia, on the other hand, has never lacked ambitious national plans. Successive governments have introduced comprehensive blueprints covering industrial upgrading, digital transformation, renewable energy, infrastructure development, and economic competitiveness.

Many of these policy documents are professionally prepared and identify the right challenges facing the country.

The issue is often not what is written.

The issue is what happens after the launch.

Implementation has frequently been slowed by administrative complexity, coordination challenges between agencies, changing political priorities, and inconsistent follow-through. Some initiatives lose momentum before reaching maturity, while others are revised or replaced before their intended outcomes can be realised.

For businesses, uncertainty is costly. Companies invest for the next ten or twenty years, not just for the next budget announcement. When long-term policy direction becomes less predictable, businesses naturally become more cautious.

Why Execution Matters

Execution creates credibility.

A government that consistently delivers on its promises builds confidence among investors, businesses, and citizens. Predictability reduces risk, encouraging long-term investment, innovation, and entrepreneurship.

Conversely, when implementation is inconsistent, even excellent policies lose their impact. Businesses hesitate to commit capital, skilled professionals may look elsewhere, and investors demand higher returns to compensate for uncertainty.

In today's global economy, countries are competing not only on labour costs or natural resources but also on the reliability of their institutions.

Execution is therefore an economic asset.

Beyond Government

Execution is not solely the responsibility of government.

Private companies, universities, financial institutions, and industry associations all play essential roles in translating national policies into tangible economic outcomes.

China's industrial development illustrates this ecosystem approach. Government policies often provide the initial direction, but success depends on enterprises investing, universities developing talent, research institutions generating innovation, and supply chains growing together.

A strong ecosystem reinforces policy objectives.

Malaysia can also strengthen this partnership by encouraging greater collaboration between government agencies, universities, local enterprises, multinational corporations, and investors.

Policies become meaningful only when every stakeholder contributes to implementation.

The Long-Term Test

The true value of any national policy cannot be measured during its launch ceremony.

It can only be measured ten or fifteen years later.

Did it create globally competitive companies?

Did it generate high-value jobs?

Did it improve productivity?

Did it strengthen the country's economic resilience?

These are the questions that determine whether a policy has truly succeeded.

Conclusion

Both China and Malaysia possess capable policymakers and ambitious national aspirations.

The difference lies less in the ability to design policies than in the ability to sustain their implementation over the long term.

Vision provides direction.

Execution delivers results.

Countries that consistently implement their long-term strategies create confidence, attract investment, and build globally competitive industries. Those that struggle with execution risk leaving even the best ideas confined to official documents.

In the end, national competitiveness is not defined by the number of policies a country announces. It is defined by how many of those policies become reality.

The lesson is simple but powerful: policies create possibilities, but execution creates prosperity.