Propelling Malaysian SMEs into a Higher Economic Contributor

1. Propelling Malaysian SMEs into a Higher Economic Contributor by: Dato’ Hafsah Hashim Saudi International SMEs Forum 2013, 29th May 2013 CEO of SME Corporation Malaysia

2. Definition of SMEs Annual sales turnover < RM25 million(£5.42 million) OR Full time employees <150 Annual sales turnover < RM5 million(£1.08million) OR Full time employees < 50

3. SMEs account for bulk of total businesses in Malaysia … 97.3% • 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%) 90.0% • Manufacturing • Textiles & Wearing Apparel (26.5%) • F&B Products (16%) • Construction • Non residential buildings (21.5%) • Civil Engineering (21.0%) 3.0% • Agriculture • Crops (70.4%) • Livestock (13.4%) • Mining & Quarrying • Stone Quarrying (83.6%) • Mineral Mining (16.4%) 0.1% Source: Economic Census 2011

4. SMEs are the backbone of the economy 97% Total Establishments 32% GDP 59% Employment 19% Exports Source: Economic Census 2011

5. SME Value Added and Overall GDP 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) GDP & SME Growth GDP & SME Growth (yoy change) % Year Source: DOSM and SME Corp. Malaysia

6. 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

7. SME Masterplan takes a new approach in SME development Innovation and productivity-led Public-private partnership Outcome-based Approach ‘Live’ plan

8. New SME Development Framework for innovation-led and productivity-driven growth Globally competitive SMEs across all sectors that enhance wealth creation and contribute to the social well-being Vision SME Development Framework Intensify formalisation Increase business formation Expand number of high growth and innovative firms Raise productivity Goals Innovation & Technology Adoption Human Capital Development Access to Financing Focus Areas Market Access Legal & Regulatory Environment Infrastructure Action Plan Institutional Support Reliable database Monitoring & Evaluation Effective Coordination Effective Business Services 8

9. Plan proposes 32 initiatives across all focus areas, of which 6 are High Impact Programmes 6 High Impact Programmes (HIPs) Measures across 4 Themes • Resource pooling & shared services • Create demand for SME products • Reduce information asymmetry • Building capacity & knowledge • 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% Measures for East Malaysia • Improve connectivity & basic amenities • Review restrictive laws & policies • Ease market access Other Measures Result-based approach with monitoring & evaluation • 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 9

10. Target is to increase contribution to GDP to slightly over 40% by 2020 GDP Growth Economic Contribution in 2020: CAGR (% change) 2010 2020 New SME growth path Quantum leap GDP (8.7%) “Business as usual” growth Employment (6.5%) Exports Projections by SME Corp. Malaysia 10

11. Public – Private Collaboration Malaysia Incorporated initiated in 1983 to recognise importance of private sector in economic growth 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

12. 3 structural mechanisms established to promote intersectoral consultation and cooperation

13. Public-private sector collaboration scaled new heights with establishment of PEMUDAH in February 2007 The Special Taskforce to Facilitate Business or PEMUDAH: High-powered taskforce to address bureaucracy in business-government dealings

14. Way Forward : SME development a shared responsibility... Government • Facilitator • Act as catalyst Private Sector • Associations, chambers & NGOs to develop SMEs • Large firms to mentor SMEs • Participation in design & implementation of progs.

15. ..with private sector assuming a greater role

16. Bling - Business Linkages OBJECTIVES To develop competitive and innovative SMEs “good database” “Pre-evaluated companies” To widen the business opportunity of SMEs in supplying products and services to large companies and Multinational Companies (MNCs) “Good match” “It's efficient” To encourage business networking between SMEs and MNCs & GLCs

17. What is SCORE? SME COMPETITIVENESS RATING FOR ENHANCEMENT (SCORE) • A diagnostic tool to rate and enhance competitiveness of SMEs based on their performances and capabilities. • Developed in August 2007. Example of Radar Diagram for 3-Star company Function • Identify strengths and weaknesses for improvements; and • Facilitate linkages. 7 Parameters • Business Performance • Financial Capability • Management Capability • Production Capability • Technical • capability • Quality System • Innovation Characteristics Analysis: Weak in financial capability Assistance: Requires training in financial management & improvement in quality management • 0 – 2 : Very basic business operation • 3 – 5 : Competitive and export-ready • companies Collaborators • PUNB • CIDB • MINDEF • TPM • MDEC • PSDC • SME Bank • TM • MPC • HDC • NCIA • MTIB

18. 1-INNOCERT Innovation Certification for Enterprise Rating and Transformation Programme I. Innovation Ability II. Commercialization Ability III. Innovation Management IV. Innovation Outcome To date, 115 companies have been certified

19. NATIONAL MARK OF MALAYSIAN BRAND To enhance the visibility of Malaysian products and services in both local and international markets. Operations Management Management Commitment & Capability Quality & Standards of Products/Services ASSESSMENT CRITERIA Financial Capability Management Best Practices Brand Management & Marketing Social Responsibility To date, 59 companies have been certified

20. MOVING forward www.smeinfo.com.my www.smecorp.gov.my SME Annual Report 2011/12 SME Corp. Malaysia 1-300-30-6000 Physical KL Sentral Thank you