He noted that foreign producers are increasingly selling directly into the Malaysian market, bypassing local intermediaries, a trend that is reshaping competitive dynamics.
While acknowledging these challenges, Sim cautioned that Malaysia, as a small and open economy, must be prudent in responding with tariff-style measures.
Instead, he said the government must strengthen local content policies, including prioritising Malaysian products and businesses within government-linked companies (GLCs) and public procurement frameworks, to ensure domestic enterprises can scale up and remain competitive.
"If we do not create a supportive ecosystem for local businesses, they will not be able to improve quality. Without domestic trust, it is impossible to gain global confidence," he said during a recent media dialogue at Wisma Bernama.
Sim added that coordination with the Finance Ministry, financial institutions and economic agencies is being intensified to improve access to capital and reduce bureaucratic bottlenecks.
"Our aspiration is to nurture strong Malaysian companies with their own brands, technology, trademarks and patents and to build an ecosystem that supports long-term growth," he said.
He reiterated that small and medium enterprises (SMEs) remain the backbone of the national economy, accounting for nearly 97 per cent of all registered businesses. In 2024, SMEs contributed about 39 per cent to gross domestic product (GDP), equivalent to RM652.4 billion, underscoring their critical role in driving growth and employment.
However, SMEs continue to grapple with structural challenges, including rising operating costs, high inflation and acute labour and talent shortages. Other persistent hurdles include limited access to financing, slow digital adoption and heavy regulatory compliance burdens.
Sim said SMEs play a vital role in high-impact sectors such as services and manufacturing, supporting domestic demand, strengthening supply chains and enhancing industrial resilience. Recognising their strategic importance, the government has stepped up initiatives to expand SMEs' participation in export markets and improve financing access.
These measures are designed to help SMEs scale up, adopt new technologies and improve competitiveness, positioning them as a key pillar of Malaysia's long-term economic transformation, Sim said.
The government is also intensifying efforts to strengthen micro, small and medium enterprises (MSMEs) through structured training, skill development and broader ecosystem support.
Outlining his ministry's priorities, Sim said the government is focusing on four core areas: boosting productivity, cutting bureaucracy, improving access to capital, and expanding market access.
"One of the ways to help businesses expand is access to the capital market and resources. To penetrate the global markets and become successful, they must be able to compete," he said.
Under the productivity pillar, Sim said SMEs—which make up more than 90 per cent of businesses—must enhance efficiency through greater digitalisation, automation and skills development. On bureaucracy, he stressed that government processes must not become an obstacle to business growth.
Market access is another key priority, with Sim urging large corporations and government-linked companies to source more goods and services from local SMEs, alongside continued efforts to help them expand into export markets.
He acknowledged that access to financing remains a major constraint, particularly for SMEs with viable products, brands and customers but limited cash flow.
MRCA warns of unchecked foreign firms squeezing local SMEs.
Separately, Malaysia Retail Chain Association (MRCA) deputy president Datuk Liew Bin warned that the large-scale influx of foreign businesses has caused unprecedented disruption to local SMEs, pushing the business environment to what he described as the brink of "suffocation.
In a Facebook post, Liew said the core issue lies in the near-total absence of barriers for foreign companies to establish and operate in Malaysia, citing the lack of minimum paid-up capital requirements and the fact that most sectors are fully open without the need for local shareholders.
In many instances, he said, business conditions in Malaysia are even more favourable than in foreign firms' home countries, likening the situation to a military campaign.
Liew said the rapid entry of Chinese e-commerce platforms over the past two years has severely disrupted the local market, describing it as Malaysia "losing air superiority" in the online battlefield as local merchants retreat step by step.
More recently, he said foreign capital has moved beyond online platforms into offline operations, penetrating multiple sectors of the real economy.
"This is no longer an air force; it is a full-scale ground landing of the ground force," he said.
"Renovation, food and beverage, beauty, dentistry, retail, wholesale, printing – industries of all sizes, across every sector you can imagine, are marching south. This is not penetration; it is an encirclement."
Liew stressed that in proposals submitted by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) to the government last year, business groups did not call for higher tariffs. Instead, they sought a fairer, more rational and sustainable institutional framework to give local enterprises the space to survive and grow.
He added that many foreign-funded companies, particularly from China, are backed by state subsidies, policy support and systemic resources, with some resorting to dumping strategies to offload excess capacity from their home markets.
By contrast, Liew said local SMEs rely on hard work, bank loans and personal risk, making it impossible for both sides to compete on equal footing—yet they are forced into direct confrontation.
"To put it bluntly, we have no retreat; we only have self-preservation," he said.
Liew said these concerns were raised several years ago but were largely dismissed at the time.
"Today, those predictions are coming true, and the reality is arriving faster and more fiercely than expected," he said.
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