WHILE the Government's newly-launched Green Lane facility to spur innovation among small and medium enterprises (SMEs) is a good move, industry observers feel more is needed to ensure its success.

Under this facility, innovative SMEs will now enjoy incentives, including a 2% interest rebate for loans approved by developmental financial institutions. Stamp duties on loan agreement documents will also be exempted.

 Dr Umasuthan says the Green Lane facility is no more than a package of sweeteners.

SMEs which incurred expenses to acquire the 1-InnoCERT certification (which assessed the innovation level of enterprises, such as site audit, certification and logistic costs) could also enjoy tax deductions.

Managing director of Innosol (M) Sdn Bhd, Dr Umasuthan Kaloo, who is also the author of Managing Small Enterprises, feels the Green Lane facility is no more than a package of sweeteners, and will not be the cause for innovation.

“For example, is there any company which has been waiting for a 2% interest rebate, or a tax reduction on expenses incurred in achieving certification, or a faster route to e-Commerce registration, before committing to innovation in its products or processes?” he asked.He says a similar question came up more than 20 years ago when a tax incentive for double deduction on research and development (R&D) expenditure was announced, adding that the level of R&D activity did not increase after the announcement as the numbers do not justify it.

Umasuthan says to create an innovative society covering both the public and private sectors, one needs to examine the process of innovation and its drivers.The problem, he says with SMEs is not the need but sorting through possibly thousands of relevant discoveries and the time and the resources to digest and apply these discoveries.

At the macro level, he adds for SMEs to be innovative, two other obstacles have to be overcome. He says the first refers to the education system where school leavers and graduates are unable to think out of the box' even when there is an urgent need to do so. The second obstacle has to do with the example set by the large enterprises.

“It is the successes of these large enterprises which is celebrated and publicised the most. Yet most of these large enterprises survive and some prosper by competing in established business sectors using size and influence to win, while unashamedly pursuing me too' policies and strategies.”

“What kind of a lesson are these large enterprises presenting to SMEs, and to students who will one day enter the job market or even be the owners or managers of SMEs,” he asked.

SMI Association of Malaysia national president, Chua Tiam Wee on the other hand says the number of SMEs that have successfully obtained the 1-InnoCert to date is still relatively small.

 Chua says the long-term target is to enable SMEs to compete with neighbouring countries.

For example, to date only 169 companies have taken the online assessment and 37 have successfully acquired the 1-InnoCERT. By making companies more aware of this program and its benefits, he says they hope more SMEs will come forward to apply.

Chua says the RM5000 audit fees for the 1-InnoCERT (excluding transport and accommodation cost for site audit) should also be reviewed to make the exercise more business friendly and encourage SMEs to participate.

He adds the real long-term target of innovation of SMEs will be to enable them to compete effectively with neighbouring countries, and especially with countries where production cost is lower.

At the same time, he stresses innovation in the government machineries will also be needed to make Malaysia more competitive. Faster approval, less bureaucracy, less costly processes and more business friendly environments will prove to be attractive.

At the same time, he says there must be a concerted effort to instill an innovative culture in our business and community (from an early age) as most countries are using innovation to leapfrog towards a new wealth as in Hong Kong, South Korea, Japan, Singapore, China and Taiwan.

Associated Chinese Chambers of Commerce and Industry Malaysia SMEs deputy chairman Koong Lin Loong says the current measures and incentives are not sufficient to boost innovation among SMEs.

In order to accelerate the innovation, Koong says the relevant government agencies should study and analyse the needs of SMEs so as to have a closer cooperation with these SMEs, as well as be able to continuously promote relevant measures to foster a culture of innovation.

Apart from fiscal measures, the government should organise more awareness programmes such as seminars or trainings in order to promote the relevant measures that can boost innovation and create an innovation culture.

Public and private sector partnerships should also work towards the commercialisation of innovative products and services, he says, adding that the move will enhance innovation.