SME DEVELOPMENT PROGRAMMES UNDER NEW

ECONOMIC MODEL AND 10TH MALAYSIA PLAN

by

Czarif Chai AbdullahManager

SME Corp. Malaysia

25 February 2011

SMEs in Malaysia

Targeted Approach in SME Development

SMEs in NEM and RMK10

Initiative for 2011

Way Forward

ORC / Business Counselors

Contents

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• 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

SMEs are the backbone of the economy

3Source: Census of Establishments & Enterprises 2005

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Services(86.6 %)

Agriculture(6.2 %)

Manufacturing(7.2 %)

Source: Census of Establishments & Enterprises 2005

Wholesale & Retail (55.5%)Restaurant & Hotel (15.2%)Transport & Communication (6.5%)

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

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

• 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

Currently, SMEs are mainly in the services sector

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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)

SME Contribution to:

GDP 31.2%

Employment 56.4%

Exports 19%

GDP Annual Growth (2000 price)

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

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Promoting balanced SME development

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New Economic Model:

Creation of a high-income

nation

Creating national champions that

become regional /

international players

Reduction in income

disparity through support

for microenterprise

Quantum leap in GDP via innovation & productivity-led growth

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SME policies to be aligned to the NEM

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

SRI2: Developing a quality workforce &

reducing dependency on foreign labour

• Upgrading of skills through education & training• Reduce dependency on foreign labour through levy

system

SRI3: Creating a competitive domestic

economy

• 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

SRI4: Strengthening the public sector

• 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 GST9

Measures related to SMEs

• 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 non-

collateral based criteria

SRI5: Transparent and market-friendly

affirmative action

SRI6: Building knowledge base and

infrastructure

SRI7: Enhancing sources of growth

SRI8: Ensuring sustainability of growth

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Measures related to SMEs

 Developing SMEs as the Engine of Growth and Innovation

Encourage collaboration between foreign and local SMEs, particularly in

modern technology

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

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 drop-

outs• Enhancement of technical

education and vocational training

• RM500 million for Skills Development Fund Corp.

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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… and RMK10 focuses on unlocking growth potential of SMEs

Bumiputera Development Agenda: New Approach• Areas of equity & property

ownership, skills & entrepreneurship,

• A high-level Council

• High value added natural resources downstream activities

• Development of indigenous technology

• Corridors• Eco-tourism• Green technology• Alternative energy

generation

• E&E (high value add segments, shared services, partnership)

• Islamic Finance

• Commercial agriculture • Integrated Tourism

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SMEs to venture into untapped areas with highmultiplier effect that raise productivity levels

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Emphasis would be to promote areas with high growth potential under NKEAs

Manufacturing Services Agriculture

Oil, Gas and Energy

Palm Oil and related

products

Financial Services

Wholesale and Retail

Trade

Tourism CCI

Education Services

Electrical & Electronics

Business Services

Agriculture

Greater KL Healthcare

Innovation

Skilled labour force

Creativity

• Wholesale & retail trade• New areas in tourism• Business & financial

services• ICT• Private healthcare • Private education• Construction services

• Franchise business, direct selling, e-commerce, specialised SME & modern retail outlets

• Medical tourism, (MICE), eco-tourism• Professional services on new areas• Outsourcing activities• Wealth management, insurance & unit trust

businesses• Creative industry

Development activities relating to the NKEA and Greater KL

• High value added activities along value chain of E&E sector

• Supporting industry to: − tourism sector; − oil & gas industry; and− agriculture sector.

• R&D and design• Precision machining• Fabrication of oil & gas industry equipment• Cottage industry• Downstream resource-based industries• Green technology

• Strengthening of existing industrial cluster

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

• Large-scale production • Good agriculture

practices• Agronomic management

and mechanisation

Swiflet farming, aquaculture, seaweed, sago, ornamental fish, herbs and spices, organic fruits, vegetables, mushroom and floriculture.

• Centralise procurement or bulk purchase of agriculture inputs to reduce input costs

• Collaborative R&D with established agriculture institutes

Sectoral focus in creating an advantageous business ecosystem

ServicesServices

ManufacturingManufacturing

AgricultureAgriculture

FocusFocus InitiativesInitiativesOpportunitiesOpportunities

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INITIATIVES FOR 2011

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Programmes to be implemented in 2011

SME Corp will continue to develop SMEs as the engine of growth & innovation…

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Promote development of competitive and resilient SMEs in all sectors towards increasing SME contribution to the economy

• BAP* (for SMEs) and E² (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

* To be implemented in collaboration with SME Bank

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Programme-based Approach

Programme-based approach

BAP E²

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

DYNAMIC, COMPETITIVE & RESILIENT SMEs

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BAP

E²

Programme-based approach (cont.)

Diagnose and identify strengths & weaknesses of SMEs

Business advisory and recommend action plan to SMEs

Capacity building

Provide and facilitate financial support

In collaboration with SME Bank

In collaboration with Bank Rakyat

Conclusion

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Towards producing national, regional and global champions

Vision

One Referral Centre (ORC)

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One Referral Centre (ORC)

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Towards producing national, regional and global champions

One Referral Centre (ORC)

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Towards producing national, regional and global champions

One Referral Centre (ORC)

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Towards producing national, regional and global champions

SME Business Counsellor

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

BUSINESS COUNSELLORS

Managem

ent

Production

Marketing

Financial

Hum

an Resource

DYNAMIC, COMPETITIVE & RESILIENT SMEs

SMECORP STATUS [Ref. No]

SMECORP BORANG [alamat emeil]

SME BUSINESS CENTRE

Business Advisory Services (BAS)

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www.smecorp.gov.my

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