KUALA LUMPUR, Jan 5 — Small and medium-sized enterprises (SMEs) in Malaysia are facing a critical year ahead as a wave of new regulatory and compliance requirements takes effect, prompting warnings that many businesses could struggle to survive without urgent government intervention.
In a statement issued today, the Small and Medium Enterprises Association Malaysia (Samenta) said SMEs were entering a “survival zone” in 2026, as the cumulative cost of compliance reaches what it described as a breaking point.
“While 2025 saw the emergence of the compliance economy, 2026 will see the full roll-out of many of these regulatory burdens,” the association said, pointing to a cluster of new rules that came into force from January 1.
Among them are the Stamp Duty Self-Assessment System, the Multi-Tier Levy System for foreign workers, preparations for sector-specific carbon taxes, mandatory e-invoicing for SMEs with annual revenue above RM1 million, and new operational requirements tied to business licensing.
Additional obligations linked to environmental, social and governance (ESG) standards are also expected to intensify, particularly for firms connected to multinational or export-oriented supply chains.
Samenta’s national president, Datuk William Ng, warned that many SMEs lack the financial capacity and in-house expertise to manage the overlapping timelines and technical demands imposed by these rules.
“This will leave SMEs who are unprepared in a limbo — caught between the inability to fund necessary transitions and the risk of being excluded from the formal economy and global supply chains entirely,” he said.
The association said the pressure comes on top of existing challenges, including tight liquidity, low productivity and shrinking margins.
SMEs typically operate on net margins of between 10 and 15 per cent, Samenta noted, but much of that is now being eroded by what it described as defensive spending on compliance rather than investment for growth.
“These are monies that could have been spent offensively to grow their businesses,” the statement said.
Samenta also highlighted that while SMEs are not directly required under Malaysia’s National Sustainability Reporting Framework to track carbon emissions, many are effectively compelled to do so because of reporting demands imposed by larger corporations and multinational clients.
Calling for a change in regulatory approach, the association urged the government to move away from rigid, rule-based enforcement towards incentive-driven facilitation.
Among its proposals are a 24-month moratorium on new regulatory costs, funding for AI-powered ESG reporting tools, and industry-led training programmes to help SMEs develop in-house compliance capabilities.
“For SMEs to survive beyond 2026, the gap between government policies and reality on the ground must be closed,” Ng said, adding that the government should act as “a strategic partner in this transition.”
Without such measures, Samenta warned, compliance risks becoming not a pathway to competitiveness, but a barrier to business survival.
