OCTOBER 31 — Entrepreneurship is often celebrated as a sign of economic strength. Across Malaysia, small businesses operate in neighbourhood shops, morning markets, residential areas and digital marketplaces.

They provide goods, services and income opportunities while contributing to the country’s economic activity.

Behind these businesses are individuals who have learned to navigate changing consumer preferences, rising costs and uncertain market conditions. Their ability to adapt reflects an important form of entrepreneurial resilience.

Yet resilience raises a broader question that deserves attention. Are we building an economy where entrepreneurial activity creates meaningful economic progress, or one where many businesses remain economically active without significantly improving their productivity and livelihoods?

According to the Department of Statistics Malaysia (DOSM), micro, small and medium enterprises (MSMEs) contributed 39.7 per cent of Malaysia’s gross domestic product (GDP) and accounted for 48.7 per cent of employment in 2025.

These figures demonstrate the importance of MSMEs. However, they also invite us to examine what happens beyond business participation.

Economic activity is not always economic progress

Imagine two small food businesses serving similar communities. Both receive regular orders and generate daily sales. However, one has gradually improved its preparation process, reduced material wastage and organised its operations more efficiently. The other continues to accommodate additional orders mainly by extending the owner’s working hours.

Both businesses remain economically active, but their productivity outcomes may differ.

This distinction matters because productivity is not simply about working harder or selling more products. It concerns how effectively available resources are used to generate economic value.

For small businesses, productivity improvements may come from better production methods, improved skills, appropriate technology or more efficient use of time and resources.

These improvements are important not only for individual enterprises but also for Malaysia’s wider economic development. When businesses become more productive, they may be better positioned to improve earnings, strengthen competitiveness and create better employment opportunities.

Nevertheless, productivity gains do not automatically translate into higher household incomes or improved working conditions. How these benefits are distributed matters equally.

When entrepreneurship becomes a livelihood strategy

Entrepreneurship does not begin under the same circumstances for everyone.

Some individuals establish businesses to pursue opportunities, introduce new products or achieve greater financial independence.

Others turn to self-employment because suitable jobs are limited, household responsibilities require flexible working arrangements or additional income is necessary.

Both forms of entrepreneurship contribute to economic activity, but their starting conditions and development opportunities may be different.

For households with limited financial resources, business income may be closely connected to everyday expenses.

The priority may not be expansion, but maintaining sufficient earnings to support family needs.

This raises an important development consideration. An increase in entrepreneurial participation does not necessarily indicate that households are experiencing greater economic security or upward mobility.

We should therefore look beyond the number of businesses operating and consider whether entrepreneurship provides stable earnings, reasonable working conditions and opportunities for economic advancement.

Importantly, not every entrepreneur wishes to operate a larger enterprise. A small business can still represent meaningful economic progress when it provides a secure livelihood and improves household well-being.

A broader development challenge for Malaysia

Malaysia’s Thirteenth Malaysia Plan (RMK13), covering 2026 to 2030, places importance on productivity, competitiveness and higher-value economic activities.

These priorities are relevant to entrepreneurship because the contribution of MSMEs should not be viewed solely through business numbers or their aggregate economic contribution.

Attention must also be given to how smaller enterprises participate in productive economic activities, access emerging opportunities and benefit from improvements in skills and technology.

This requires understanding the differences between businesses that can advance towards higher-value activities and those whose circumstances limit such opportunities.

Entrepreneurial resilience remains a valuable strength within Malaysia’s economy.

However, its contribution to national development becomes more meaningful when accompanied by improvements in productivity, livelihood security and economic mobility.

Ultimately, Malaysia’s development challenge is not simply to encourage more people to participate in entrepreneurship, but to ensure that entrepreneurial participation creates opportunities for better livelihoods and shared economic progress.

* Nik Zirwatul Fatihah is a Research Fellow Post Doctorate at the Ungku Aziz Centre for Development Studies, Universiti Malaya, and can be reached at nikzirwatul@um.edu.my.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.