Local small and medium enterprises (SMEs) will be able to contribute at least 37 per cent to the nation's gross domestic product (GDP) this year.

SME Association of Malaysia President, Datuk Kang Hua Keong, said this could be achieved if they capitalised on development projects, such as the China's Belt and Road (B&R) initiative and digital economy in the country.

He said local SMEs contributed 35.9 per cent of the country's GDP in 2015, and he was confident this would be higher for 2016.

Kang said the B&R had identified 65 nations to connect with China and the SMEs should grab the investment opportunities in the international market.

"Since the implementation of the B&R initiative in 2015, China has been seeing Malaysia as a gateway into Association of South-East Asian Nations and Middle Eastern markets," he told Bernama on the sidelines of the Malaysian Economic Outlook Forum 2017 recently.

He said the SMEs would also benefit from the spillover effects from the B&R innitiative, such as the East Coast Railway project.

"Since Prime Minister Datuk Seri Najib Tun Razak's official visit to China last year, China had agreed to source raw materials locally on the projects secured in Malaysia," he said.

Hence, he said, the move was one of the ways to enhance local consumption and boost SMEs' contributions to GDP growth.

He said the government's aspiration to boost digital economy in the country would certainly support the local businessmen.

"Founder/Executive Chairman of China's Alibaba Group, Jack Ma, is expected to arrive in Malaysia soon to launch the Digital Free-Trade Zone.

"There will be a lot of e-commerce-related business activities and the SMEs should embrace that and take it as a stepping stone to penetrate international market," he said.

Currently, he said, only 20 per cent of the SME Association's 10,000 members

were adopting e-commerce.

"With all the facilities and opportunities provided here, we hope to see more embrace online business platfrom jump to 30 per cent this year.

"This would help increase SMEs' export contribution to 18.5 per cent this year," he said.

The SMEs accounted for 98.5 per cent of the business entities in Malaysia and contributed 17.8 per cent of the nation's total exports worth RM779.95 billion in 2016.

On the Trans-Pacific Partnership Agreement (TPPA) following the US withdrawal, Kang said, the impact would be minimal as 85 per cent of the SMEs were involved in local businesses.

"Without the TPPA, they can still tap into other huge markets such as Asean, China and India," he said.

For example, he said, as Malaysia was renowned for the halal industry, local entrepreneurs could expand the halal business into India with its 280 million Muslim population.

On the impact of the US Federal Reserve's (Fed) interest rate that the investors had anticipated to be raised at least three times within this year, Kang said, it would be offset by the efforts made by the government.

"Global markets, including Malaysia, which is an export-oriented country, would be inevitably affected by the Fed rate decision.

"However, efforts made by the government, such as emphasising on digital economy, and implementing policies to require foreign investors to source local raw materials, would offset the negative impact from the US interest rate increase," he said.

-- BERNAMA