The Impact of the Asian Financial Crisis on Small and Medium Enterprises in Malaysia: Policy Responses

Abstract

The emergence of the Asian financial crisis in mid-1997 has redirected many governments in Asia to strengthen their small and medium enterprises and Malaysia is not exceptional. The existence and presence, role, and contributions of SMEs have been well recognized in Malaysia even before the crisis, assuming important strategies in deepening the industrial structure through backward and forward activities. This recognition has been overwhelmed and reemphasized during and after the recent economic downturn. Recent Asian financial crisis and economic downturn, nonetheless, resulted in a number of implications on their sustainable growth and development, leading to some of them left without alternative source of meeting short-term financial needs and hence had to close down their operations. This article examine the impact of the recent Asian financial crisis and Malaysia's economic downturn on SMEs. In view of the severe impact on SMEs, the objective of the article is also to discuss the role of SMEs and to evaluate the evolution of SMEs' policies during the crisis and beyond, as well as prospects for Malaysia's SMEs especially in view of a globalized economy.