SME DEVELOPMENT PROGRAMMES UNDER NEW ECONOMIC MODEL AND 10TH MALAYSIA PLAN

by
Czarif Chai Abdullah Manager SME Corp. Malaysia 25 February 2011

Contents

SMEs in Malaysia Targeted Approach in SME Development SMEs in NEM and RMK10 Initiative for 2011 Way Forward
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SMEs are the backbone of the economy

SMEs account for a large proportion of businesses in Malaysia: - 99.2% of establishments (548,267) - Majority are micro enterprises, with 5 workers and less

Source: Census of Establishments & Enterprises 2005

Currently, SMEs are mainly in the services sector

Services: 87% share, largest subsector is distributive trade Manufacturing: 7% share, mainly in textiles/apparels and F&B industries Agriculture: 6% share, plantation/horticulture and fishing
Manufacturing (7.2 %) Agriculture (6.2 %)

Textiles & Apparels (23.4%) Food & Beverages (15%) Metal & metal products (13%)
Services (86.6 %)

Plantation and horticulture (65.6%) Fishery and its services activities (20.8%) Poultry farming (7%)

Wholesale & Retail (55.5%) Restaurant & Hotel (15.2%) Transport & Communication (6.5%)
Source: Census of Establishments & Enterprises 2005

Performance of SMEs outpaced the overall economy

SME growth outperformed overall economy for the period 2005 2009 mainly due to supporting policy initiatives such as: Establishment of NSDC in 2004; and Other supportive policies (PEMUDAH, Visit Malaysia Year, Government salary increment, RMK9 projects)
GDP Annual Growth (2000 price)

SME Contribution to: GDP Employment Exports 31.2% 56.4% 19%

Going forward, SMEs are important endogenous source of growth towards building a high income nation

Promoting balanced SME development

Quant u innov m leap in G ation & pro DP via ductiv led gr ityowth

New Economic Model: Creation of a high-income nation

Creating national champions that become regional / international players

ome in inc pport ction Redu hrough su e ty t ris ispari icroenterp d for m

SME policies to be aligned to the NEM

Measures related to SMEs

SRI1: Re-energising the private sector Promote SME growth in innovative & technologically advanced areas Facilitate timely access to funding More support & assistance for micro enterprises Creating regional champions Creating ecosystem for entrepreneurship & innovation Upgrading of skills through education & training Reduce dependency on foreign labour through levy system Building entrepreneurship through initiatives to support micro enterprises & start-ups Remove market distortions through removal of price controls & subsidies Social safety net for bottom 40% of households & Transformation Fund for distressed firms Enhance delivery of Government services Social safety net for bottom 40% of households & Transformation Fund for distressed firms Use result-based budgeting & strengthen public finance management i.e GST
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SRI2: Developing a quality workforce & reducing dependency on foreign labour

SRI3: Creating a competitive domestic economy

SRI4: Strengthening the public sector

Measures related to SMEs

SRI5: Transparent and market-friendly affirmative action
Reduce income disparity by focusing on bottom 40% of households & business owners Promote equal & fair access to business opportunities including setting up of Equal Opportunities Commission Social safety net for bottom 40% of households & Transformation Fund for distressed firms Create an eco-system for entrepreneurship through easing of entry/exit of firms & revamping seed & VC funds for budding entrepreneurs Promote environment for innovation through incentives funding and establishment of innovation lending institutions E&E - focus on new niche areas i.e. R&D and design Agriculture - high value activities i.e. large scale, high yields & new technologies Services promote new areas i.e. education, tourism (medical tourism, edu-tourism & eco- tourism), Islamic finance, green technology, biotechnology & creative industries Support innovative SMEs by changing credit assessment from conventional lending to partial guarantees Support green technology investment through VC funds Credit assessment by banks for green investment using noncollateral based criteria
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SRI6: Building knowledge base and infrastructure

SRI7: Enhancing sources of growth

SRI8: Ensuring sustainability of growth

 and RMK10 focuses on unlocking growth potential of SMEs

Developing SMEs as the Engine of Growth and Innovation
Support SMEs at early stage & those that have potential to become global players Access to Financing RM3 bil for Working Capital Guarantee Scheme of which half for Bumiputera entrepreneurs RM500 mil Mudharabah Innovation Fund RM150 mil Business Growth Fund Increase financial resources of SME Bank & Agro Bank Adequate financial allocation to SME Corp. Malaysia AIM and TEKUN micro-credit facilities for estate workers Encourage collaboration between foreign and local SMEs, particularly in modern technology Green Lane for Procurement For SMEs that have penetrated international markets, obtained recognition in terms of quality & innovation. Skills Upgrading Expand the scope of the HRDF and SME Corp. grants Skills training for school dropouts Enhancement of technical education and vocational training RM500 million for Skills Development Fund Corp. Bumiputera Development Agenda: New Approach Areas of equity & property ownership, skills & entrepreneurship, A high-level Council Social Justice Policy Raise the income and quality of life of the bottom 40% household Reduce price controls and subsidies in stages Labour Market Efficiency Talent Corporation Streamline foreign worker employment policy
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SMEs to venture into untapped areas with high multiplier effect that raise productivity High value added natural levels resources downstream
Corridors Eco-tourism Green technology Alternative energy generation activities Development of indigenous technology

Commercial agriculture Integrated Tourism E&E (high value add segments, shared services, partnership) Islamic Finance

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Emphasis would be to promote areas with high growth potential under NKEAs
Innovation
Manufacturing Services Agriculture

Creativity
Oil, Gas and Energy Palm Oil and related products Tourism Education Services Electrical & Electronics Greater KL Financial Services Wholesale and Retail Trade

CCI Business Services Healthcare Agriculture

Skilled labour force

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Sectoral focus in creating an advantageous business ecosystem

Opportun Initiative ities s Wholesale & retail Franchise business, direct selling, e- Development Focus
trade New areas in tourism Business & financial services ICT Private healthcare Private education Construction services commerce, specialised SME & activities relating to modern retail outlets the NKEA and Medical tourism, (MICE), eco-tourism Greater KL Professional services on new areas Outsourcing activities Wealth management, insurance & unit trust businesses Creative industry

Services

Manufact uring

Agricultur e

High value added R&D and design activities along Precision machining value chain of E&E Fabrication of oil & gas industry sector equipment Supporting industry Cottage industry to: Downstream resource-based industries tourism sector; oil & gas industry; Green technology and agriculture sector. Large-scale production Swiflet farming, aquaculture, seaweed, sago, ornamental fish,

Strengthening of existing industrial cluster Development of new industrial cluster . e.g downstream activities in palm oil

Centralise procurement or

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INITIATIVES FOR 2011

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SME Corp will continue to develop SMEs as the engine of growth & innovation Programmes to be implemented in 2011 Promote development of competitive and resilient SMEs in all sectors towards increasing SME contribution to the economy
BAP* (for SMEs) and E (for micro enterprises) - Programme-based approach to develop dynamic, competitive & resilient SMEs SCORE as tool to identify capable companies 1- InnoCERT Programme promote and support the development of innovative SMEs The National Mark for Malaysian Brand - to increase awareness on the importance of branding Skills Upgrading provides training to enhance the skills and capabilities of employees of SMEs Soft Loan for SMEs existing programme, channelled through MIDF Bridging Financing
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* To be implemented in collaboration with SME Bank

Programme-based Approach
Reduced funding for grant & loan from average RM239 m / year (RMK9) to RM125 m / year (RMK 10) Large numbers and high expectations of SMEs & Stakeholders Capacity building is still very much required

Programme-based approach

BAP

DYNAMIC, COMPETITIVE & RESILIENT SMEs

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Programme-based approach (cont.)

Diagnose and identify strengths & weaknesses of SMEs Business advisory and recommend action plan to SMEs Capacity building

BAP

E
Provide and facilitate financial support
In collaboration with Bank Rakyat In collaboration with SME Bank
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Conclusion

Towards producing national, regional and global champions

Vision

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One Referral Centre (ORC)

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One Referral Centre (ORC)

Towards producing national, regional and global champions

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One Referral Centre (ORC)

Towards producing national, regional and global champions

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One Referral Centre (ORC)

Towards producing national, regional and global champions

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SME Business Counsellor BUSINESS COUNSELLORS

Provide business advisory & counselling to SMEs through effective coordination and business support, focusing on 5 areas Management Production Marketing

Human Resource

DYNAMIC, COMPETITIVE & RESILIENT SMEs

Financial

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SME BUSINESS CENTRE Business Advisory Services (BAS)

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