SMEs told to use renminbi, yen instead of euro, US dollar

KUALA LUMPUR: Import-oriented small and medium enterprises (SMEs) are encouraged to diversify into other major currencies such as renminbi and yen, instead of euro and US dollar, in order to reduce their risk exposure on the strengthening currencies.
“For instance, since July 2009, the Chinese government has started to use renminbi for cross-border trade settlement,” the Deputy International Trade and Industry Minister Datuk Ahmad Maslan said at a dialogue on the impact of the ringgit’s decline on SMEs here yesterday.
“Therefore, it is imperative for Malaysian SMEs to take advantage of this policy, and benefit from the option to settle their trade transactions with their Chinese counterparts in renminbi,” he added.
Besides that, Ahmad said, SMEs should undertake better financial planning and cash flow management, by hedging their foreign exchange (forex) commitments and using other financial instruments to curb possible losses in forex.
He said SMEs should build a close relationship with banks in order for them to secure financial assistance, particularly on forward contracts or forex hedging.
“This will help reduce risks and enable them to make good financial projections, and thus manage currency fluctuations,” he noted.
Ahmad advised SMEs to localise their resources via import substitution, in order to mitigate the volatility of the currency exchange rate.
Other than that, he said, SMEs should consider different methods to boost their productivity, cut spending to reduce their costs by using creative and innovative initiatives and improve their marketing strategy by embracing e-commerce.
Ahmad said the government does not expect the ringgit’s depreciation to have a very significant impact on SMEs, as most of them are domestically oriented with relatively small exposure to the external market.
The ringgit has decreased 42% at its current exchange rate of around 4.4550 to the US dollar compared with the 3.13 it was trading at on Sept 1, 2014.