Amid global inflation and geopolitical uncertainties, small- and medium- sized firms in the country have found digitalization and AI-adoption a challenge
Integrating AI into business operations has become a pivotal strategy for enhancing productivity and competitiveness. However, many small- and medium- sized enterprises (SMEs) in Malaysia have remained hesitant to embrace the technology due to persistent cash flow issues and limited financial flexibility.
Aside from these common business constraints, significant skills gaps within Malaysia’s workforce have posed another hurdle for SMEs fighting for IT talent with the big corporations.
As Malaysia continues to develop its digital economy, overcoming these barriers will be essential for the country’s SMEs to leverage AI and technology to enhance their competitiveness locally and abroad, according to Admir Masin, AI Product Expert, Infobip, who noted: “Many Malaysian SMEs struggle with persistent cash flow issues and limited financial flexibility, which restricts their ability to invest in advanced technologies like AI.
This financial strain not only hampers their investment in AI but also prevents them from fully capitalizing on its potential to enhance operations and customer experience. The competitive pressure from larger firms further exacerbates these challenges, as they are better equipped to leverage AI technologies to their advantage.”
Common AI myths also problematic
Misunderstandings surrounding AI have also played a significant role in deterring AI adoption among Malaysian SMEs. According to Masin, many business owners perceive AI as a complex solution only viable for large corporations “due to its perceived complexity and high costs. Additionally, fears of job displacement contribute to resistance from both employees and management. To combat these misconceptions, there is a pressing need for accessible information and case studies that demonstrate the scalability and affordability of AI solutions.”
The lack of in-house AI expertise is the other elephant in the room. Masin noted: “This gap forces many SMEs to rely on costly external consultants, thereby increasing the total cost of ownership and investment. While government initiatives like those from the Malaysia Digital Economy Corporation (MDEC) aim to bridge this skills gap, broader participation from SMEs is essential for these efforts to succeed. Also, a limited level of digital literacy among SME employees slows the adoption and effective utilization of AI tools.”
Even in countries with higher AI adoption rates, employees can be found struggling with the operational changes necessitated by the introduction of by AI, leading to resistance or inefficiencies.
Help is on the way
Recent government initiatives, including the launch of the National AI Office (NAIO), are focused on enhancing digital literacy through targeted training programs.
Masin commented: “By fostering collaboration between the government, businesses, and tech leaders, Malaysia is setting the stage to become a digital powerhouse. However, there is caution against over-regulation that could stifle innovation.”
Other avenues of help are increasingly coming online. Firms such as Infobip affordable and scalable AI solutions tailored specifically for SMEs while providing support to bridge skill gaps. “By addressing financial, technical, and skill-related challenges, we can make AI adoptions more attainable for SMEs,” Masin noted.
Helpful solutions available include easily implemented AI-powered chatbots to enabled SMEs to automate customer service and personalize communications. Other genres of AI tools include AI-powered marketing solutions, business productivity platforms for various business functions, and AI-powered content generation software
On the financial front, the country’s Budget 2025 offers a slew of grants (such as the Malaysia Digital Catalyst Grant) and related incentives, with more public-private initiatives on the horizon as the national AI momentum picks up.
As Malaysia’s SMEs navigate the complexities of AI adoption, overcoming financial constraints, bridging skills gaps, dispelling misconceptions, and enhancing digital literacy are critical steps forward. With government initiatives and support from tech firms paving the way, there is hope that Malaysian SMEs can harness AI to drive growth and innovation. As Masin put it: “AI should not be seen as an autonomous black box solution but rather as a tool that can be leveraged to perform specific tasks.”
This mindset will be the key to unlocking a new era of competitiveness for Malaysian SMEs in the digital age.
