Propelling Malaysian SMEs into a Higher Economic Contributor

Saudi International SMEs Forum 2013, 29th May 2013

by:

Dato’ Hafsah HashimCEO of SME Corporation Malaysia

Definition of SMEs

Annual sales turnover

< RM25 million(£5.42 million)

OR Full time employees

<150

Annual sales turnover

< RM5 million (£1.08 million)

OR Full time employees

< 50

Manufacturing,Manufacturing Related Services and Agro-based Industry

Services, Primary Agriculture, Information and Communication Technology (ICT)

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Total:645,136 SMEs

MicroSmallMedium

3%

77%

20%

5.9%

1.0%

SMEs account for bulk of total businesses in Malaysia … 97.3%

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• 97.3% of total establishments (645,136) versus 548,267 on 2003

• Mainly (77%) microenterprises• Concentrated in services sector (90%)

Services• Distributive Trade and Repair

of Motor Vehicles and Motorcycles (50%)

• Restaurants (25%)

Manufacturing• Textiles & Wearing Apparel

(26.5%)• F&B Products (16%)

Construction• Non residential buildings

(21.5%)• Civil Engineering (21.0%)

Agriculture• Crops (70.4%)• Livestock (13.4%)

Mining & Quarrying• Stone Quarrying (83.6%)• Mineral Mining (16.4%)

90.0%

3.0%

0.1%

Source: Economic Census 2011

SMEs are the backbone of the economy

Important domestic source of growth

Foundation & support in supply chain through forward & backward linkages

Balanced growth

Strengthen resilience of the nation's economy

Provide support for growth of new & existing sectors

Promote private sector-led growth

Source: Economic Census 2011 4

97% Total Establishments

32% GDP

19% Exports

59% Employment

SME Value Added and Overall GDP Growth…

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GDP & SME Growth

SME growth outperformed overall GDP growth during 2004 – 2011:

• NSDC was set up and SME development accorded national agenda

• Other supportive policies (improvement in government delivery, higher domestic demand and tourism, focus on farmers and small contractors)

SME: 5.5 - 6%

GDP: 5-5.5%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

GDP Growth SME Growth

%

Year

Source: DOSM and SME Corp. Malaysia

GDP & SME Growth (yoy change)

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Moving forward, SME development to be innovation-led and productivity-driven through the SME Masterplan

“Unless we introduce a ‘game changer’, we will be caught in a middle-income trap, and no longer as competitive on cost...”

“… the Government would adopt a differentiated approach to accelerate the growth of SMEs and to provide the impetus for growth led by the private sector.”

“ … an innovation-led economy demands a new breed of SMEs that can help foster market and technology-driven innovation to create more high-skilled jobs in all economic sectors.”

Prime Minister of Malaysia /Chairman of National SME Development Council

Approach

Public-private partnership

‘Live’ plan

Outcome-based

Innovation and

productivity-led

SME Masterplan takes a new approach in SME development

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New SME Development Framework for innovation-led and productivity-driven growth

Market Access

SME Development Framework

GoalsIncrease business formation

Intensifyformalisation

Expand number of high growth and innovative

firms

Raise productivity

Reliable database

Monitoring & Evaluation

Effective Coordination

Effective Business Services

Innovation & Technology Adoption

Human Capital Development

Legal & Regulatory Environment

Access to Financing

Infrastructure

Globally competitive SMEs across all sectors that enhance wealth creation and contribute to the social well-being

Vision

Focus Areas

Institutional Support

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Action Plan

Plan proposes 32 initiatives across all focus areas, of which 6 are High Impact Programmes

Result-based approach with monitoring & evaluation

6 High Impact Programmes (HIPs)

Measures across 4 Themes

Measures for East Malaysia

Other Measures

• Integration of business registration & licensing to enhance ease of doing business

• Technology Commercialisation Platform (TCP) to encourage innovation

• SME Investment Programme (SIP) to provide early stage financing

• Going Export (GoEx) Programme to expedite internationalisation of SMEs

• Catalyst Programme to promote more homegrown champions

• Inclusive Innovation to empower the bottom 40%

• Resource pooling & shared services• Create demand for SME products• Reduce information asymmetry • Building capacity & knowledge

• Improve connectivity & basic amenities• Review restrictive laws & policies• Ease market access

• Completion of Integrated trade clearance and facilitation system

(single window)• Bankruptcy Law to give entrepreneurs a

second chance• Synchronise measures on productivity

enhancement technologies with other relevant labour policies

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Target is to increase contribution to GDP to slightly over 40% by 2020

Projections by SME Corp. Malaysia

Economic Contribution in 2020:

GDP

Employment

Exports

32% 41%

59% 62%

2010 2020

19% 25%3

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5

6

7

8

9

2000 - 05 2006 - 10 2011 - 20

GDP Growth

Quantum leap

“Business as usual” growth

New SME growth path

CAGR (% change)

(6.5%)

(8.7%)

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Public – Private Collaboration

Malaysia Incorporated initiated in 1983 to recognise importance of private sector in economic growth

Deregulation of cumbersome bureaucratic rules & regulations

Improving delivery system

Institutionalising consultative machinery

Establishing smart partnership programmes in nation building efforts

Pursuing privatisation

Concept: Nation is a corporate or business entity, jointly owned by both sectors and working together in pursuit of a common mission of nation

Operating Mechanism

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3 structural mechanisms established to promote intersectoral consultation and cooperation

• Establishment of consultative panels

Structure

• Dialogue sessions at various levels in public sector

Promotion

• Joint sponsorship of formal or informal activitiesFunding

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Public-private sector collaboration scaled new heights with establishment of PEMUDAH in February 2007

PEMUDAH

Ministries / Agencies

Industry Associations

Chamber of Commerce

The Special Taskforce to Facilitate Business or PEMUDAH: High-powered taskforce to address bureaucracy in business-government

dealings

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SME development a shared responsibility...

Government

Private Sector

• Facilitator• Act as catalyst

• Associations, chambers & NGOs to develop SMEs• Large firms to mentor SMEs • Participation in design & implementation of progs.

Way Forward :

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..with private sector assuming a greater role

What needs to be done?

Strengthen industry

associationsIncrease range

of services provided by associations

Build bridges between public

and private sectors through shared services (funds, space)

Enhance capacity of

private training and advisory

provider

Encourage establishment of private finance

providers

Develop capacity for

private professional services for

SMEs

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Bling - Business Linkages

To develop competitive and innovative SMEs

To widen the business opportunity of SMEs in supplying products and services to large companies and

Multinational Companies (MNCs)

To encourage business networking between SMEs and MNCs & GLCs

OBJECTIVES

“It's efficient”

“good database”“Pre-evaluated

companies”“Good match”

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SME COMPETITIVENESS RATING FOR ENHANCEMENT (SCORE)

• PUNB• CIDB• MINDEF• TPM

• MDEC• PSDC• SME Bank• TM

• MPC• HDC• NCIA• MTIB

• A diagnostic tool to rate and enhance competitiveness of SMEs based on their performances and capabilities.

• Developed in August 2007.

What is SCORE?

• Identify strengths and weaknesses for improvements; and

• Facilitate linkages.Function

• Business Performance• Financial Capability• Management Capability• Production Capability

7 Parameters

• 0 – 2 : Very basic business operation• 3 – 5 : Competitive and export-ready companies

Characteristics

Collaborators

Example of Radar Diagram for 3-Star company

Analysis: Weak in financial capability

Assistance: Requires training in financial management & improvement in quality management

• Technical capability• Quality System• Innovation

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1-INNOCERT

IV. InnovationOutcome

III. Innovation

Management

II. Commercialization

Ability

I. Innovation

Ability• To identify and certify innovative

SMEs and enterprises in MalaysiaMission

• To foster and support innovative SMEs and enterprises to be global innovative competitive players

Objective

To date, 115 companies have been certified

Innovation Certification for Enterprise Rating and Transformation Programme

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NATIONAL MARK OF MALAYSIAN BRAND

To enhance the visibility of Malaysian products and services in both local and

international markets.

To date, 59 companies have been certified

ASSESSMENT CRITERIA

Management Commitment & Capability

Financial Capability

Brand Management & Marketing

Operations Management

Quality & Standards of Products/Services

Management Best Practices

Social Responsibility

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SME Corp. Malaysia

www.smeinfo.com.my

www.smecorp.gov.my

1-300-30-6000

SME Annual Report 2011/12

Physical KL Sentral

MOVING FORWARD

Thank you