Preparedness for ASEAN Economic Community (AEC): a case study of Malaysian SME manufacturing sector

The ASEAN Economic Community (AEC) initiative poses both significant opportunities and difficult challenges to the Malaysian SME communities. This study aims to investigate the preparedness of the local SMEs to compete and exploit opportunities in a post-AEC era. The aim is to contribute to existing literature and knowledge base on SMEs’ practices in the ASEAN region. The manufacturing sector has been selected for study, and the research efforts focus on procurement competencies. SME procurement practices in the two largest manufacturing sub-sectors in Malaysia – resource-based (RB) and electrical and electronics (E&E) – are explored.

Preparedness for AEC is gauged from four key performance areas summarized from literature review. Six key research activities are also identified for each performance area from the findings of previous works. Data were collected using a survey instrument and face-to-face interviews. Research methodology is primarily qualitative with quantitative data for robustness check.

The findings reveal peculiar procurement practices in Malaysian SME manufacturers that have significant implications on their preparedness to compete effectively post-AEC. The findings also highlighted the key influences that have contributed to variations in Malaysian SMEs’ attitude toward trade liberalization challenges and business process improvements in comparison with practices in foreign firms and more advanced economies.

Theoretical models have been adopted across business settings and environments by managers. This study reveals managerial practices in Malaysian SME manufacturers run counter to developed theories. The peculiarities and business attitudes of this resilient economic sector can be an important input to managerial decision-making when analyzing business activities in the region.