Iskandar Malaysia WIEF 2015 SME & Internationalism
Iskandar Malaysia
WIEF 2015
SME & Internationalism
1.Iskandar Malaysia Macroeconomic Landscape
Iskandar Malaysia Macroeconomic Landscape
9.2%
3.39 3.43
2005 2006 2007 2008 2009 2010
Summary
Population, Johor, 2005-2010(mil)
Johor is the 5th largest state by land area in Malaysia withtotal land area of 19,210 km²
Johor has witnessed an increasing population from 2005 to2010. On 2010, Johor population is at 3.45 million with 2.2%population growth rate annually
Iskandar Malaysia has approximately 1.6 million residence in2010
37.1%
Indian
43.8%
54.1%
6.5%
30.9
%
0.4%
61.8%22.5%
6.7%
0.8%8.1%
BumiputraOthers
Johor:
Malaysia:
ChineseForeigners
0.5%
9.4%
2010
8.1%
2010
2010
3.313.24
3.173.10 Iskandar
Malaysia:
Iskandar Malaysia Macroeconomic Landscape
48,651
Summary
15,440 16,18118,726 19,930
18,45820,911 22,116
23,503
2005 2006 2007 2008 2009 2010 2011 2012
Johor GDP per Capita
GDP per Capita RM
10.2%
34.8%
3.4%
51.5%
Agriculture Mining and Quarrying
Construction
0.1%
Manufacturing
Services
44,276 46,608 48,448 53,197 56,264 59,791
2005 2006 2007 2008 2009 2010 2011 2012
Johor Gross Domestic Product(GDP)
50,687
Johor state’s GDP size of RM53.2 billion is the thirdbiggest contributor to Malaysia GDP (9.3%-9.8% eachyear) with 60% of it coming from Iskandar Malaysia
The Johor economy is largely dependent on the servicessectors which contributed 51.5% to the state GDP in2011
Contribution of the services sector to the GDP isincreasing steadily due to the economy becoming moreknowledge driven
GDP RM (million)
Johor Sectoral Shares in GDP 2011
Iskandar Malaysia Macroeconomic Landscape
Population (million)
GDP (RM billion)
Employment (m persons)
0
20
40
60
80
100
120
140
160
20052010
2025
Population (million)
GDP (RM billion)
Employment (m persons)
1.3
0
31.6
0.710.62
160
31.9
1.4
Increment in terms of employment rate and GDPshows that SME in Iskandar Malaysia hassignificantly growing in align with thedevelopment of the region
Iskandar Malaysia constitutes 45.6% of the Johorpopulation and half of the total employment.
Iskandar Malaysia Macroeconomic Landscape
Total Large SME
No of Establishments
70,522 2,390 68,132
Gross Output(RM billion)
175.9 116.5 59.4
Value Added(RMbillion)
42.1 24.3 17.8
Persons Engaged 812,117 357,770 444,347
(Percentage) %
No of Establishments
100 3.4 96.6
Gross Output 100 66.2 33.8
Value Added 100 57.7 42.3
Persons Engaged 100 44.6 55.4
of Gross Domestic Product in 2010
Constitutes 59.9% of Johor’s GDP in 2010
RM53.2
1.6 million3.43 million
Constitutes 46.6% of Johor’s Population in 2010
billionRM31.9
billion
Johor Iskandar Malaysia
Population in 2010
70,522operating in 2010
companies
companies estimated to be operating in IM in 2010 which constitutes 70% of Johor’s total
441,700employed in 2010
estimated to be employed in IM in 2010 which constitutes 40% of Johor’s total
GD
PP
op
ula
tio
nN
o. o
f C
om
pan
ies
Emp
loym
en
t
• 97% of all establishments in Johor are SMEs• Large establishments contributed more towards
total Gross Output and Value Added• SMEs provide more employment than large
establishments
49,365
176,680
As with Malaysia, 97% of
Companies
are SMEs
97% of establishments in Johor are SMEs, mostly in Services sector
2,390
68,132
Large
SME
Total70,522
88%4%
7%
1%
0%
Services
Manufacturing
Construction
Agriculture
Mining & Quarrying
Total68,132
Out of which, 88% of SMEs are in the Services sector
7% in
Manufacturing
Note: Services* excludes distributive trade, utilities and financial services
97.0 98.3 93.275.5
90.3
3.0 1.7 6.824.5
9.7
41.3
58.7
Distributive
Trade
(30,200)
Services*
(31,113)
Manufacturing
(5,181)
Agriculture
(1,316)
Construction
(2,666)
Mining &
Quarrying
(46)
Distribution of Number of Establishments in Johor, SME vs LARGE
83.6
45.2
45.2
54.9
34.1
34.4
45.9
1.714.7 9.5 11.0
19.7
55.6
25.9
18.5
DistributiveTrade
(29,300)
Services*(30,784) (4,666)
Manufacturing Agriculture(999)
Construction(2,407)
Mining &Quarrying
(27)
Distribution of Number of Establishments in Johor SMEs by Size
Medium
Small
Micro
Within SMEs in Johor, Services sector engaged 62% of the employment workforce
62% in Services
62%
28%
Persons engaged by SMEs inJohor 2% 0%
8%
Services
Manufacturing
Construction
Agriculture
Mining &Quarrying
Total441,700
84.3 83.0
20.237.1 39.7
26.4
15.7 17.0
79.862.9 60.3
73.6
DistributiveTrade
(155,000)
Service*(170,117)
Manufacturing(50,802)
Agriculture(332,372)
Construction(90,070)
Mining &Quarrying
(2,808)
Distributionof Persons Engaged in Johor, SME vs LARGE
52.237.6
32.5
46.1
6.7
21.6
30.9
13.310.8
12.0
15.2
47.2 40.855.9
77.2
DistributiveTrade
(130,600)
Service*(135,304)
Manufacturing(128,102)
Agriculture(10,494)
Construction(35,775)
Mining &Quarrying e
(742)
Medium
Small
Micro
Distribution of Persons Engaged in SMEs in Johor
Note: Services* excludes distributive trade, utilities and financial services
3 10 40
115
4 28
136
Micro Small Medium Large
Manufacturing
540
Average persons engagedper enterprise in Johor
Non-manufacturing
In line with the SME definition
for Manufacturing ….
Manufacturing SMEs contributed the majority of Gross Output, Service sector SMEs accord the majority of Value Added among SME
60%
TotalRM 59.4 bn
Gross Output of SMEs in Johor1% 0%
5%
34%
58%34%
Services
Manufacturing
Construction
Agricultural
Mining and Quarrying
TotalRM 17.8bn
Value Added of SMEs in Johor
2% 0%6%
Contribution to Gross Output and
Value Added of both agricultural and
mining & quarrying SMEs are
relatively negligible
Majority from
Services
Majority from
Manufacturing
77.166.2
29.08.3
34.119.5
22.933.8
71.0
91.7
65.980.5
DistributiveTrade
(RM 7.0 bn)
Services*(RM 7.4 bn)
Manufacturing(RM 21.0 bn)
Agriculture(RM 3.8 bn)
Construction(RM 3.08 bn)
Mining &Quarrying
(RM 169 mil)
Distribution of Value Added of Establishments in Johor, SME vs LARGE
Note: Services* excludes distributive trade, utilities and financial services
79.967.3
27.411.6
33.0 24.9
20.132.7
72.688.4
67.075.1
DistributiveTrade
(RM 12.2 bn)
Services* Manufacturing Agriculture(RM 16.0 bn) (RM 131.5 bn) (RM 6.8 bn)
Construction(RM 8.9 bn)
Mining &Quarrying
(RM 493 mil)
Distribution of Value Added of Establishments in Johor, SME vs LARGE
2.Internationalism
The significance of SMEs towards the growth of economies are increasinglygaining attention in countries across the world. Governments have put inplace various interventions in aspects such as human capital, infrastructure,finance, market access to accelerate the growth of SMEs.
With the increasing adoption of such initiatives, there is now a broad rangeof examples and best practices to learn from as a base for developingimpactful interventions for the development of SMEs in Iskandar Malaysia.
The section covers examples of what other countries have adopted in SMEdevelopment in three sections. It includes the most common and currenttrends in SME development in broadly six key areas – getting finance,supply of human capital, access to domestic and export markets, basicinnovation, technology adoption and infrastructure.
Internationalization of the Iskandar Malaysia SME Landscape
SME Development Common Practices and Trends
Common SME Challenges
Common SME Support Practices
Low hanging fruits Programs
Internationalization of the Iskandar Malaysia SME Landscape
Strengthening and highlighting the attractiveness of IM as the investment location forinternational operating SMEs forms a major component of the first phase of theinternationalization of the Iskandar Malaysia SME landscape. Attracting internationalSMEs to establish their presence in Iskandar Malaysia will be a formidable challengebut one that IRDA is well positioned to overcome.
The first major issue that has to be addressed is ensuring that the image of IskandarMalaysia is in line with the needs and wants of prospective SMEs from outside ofMalaysia. The positioning of Iskandar Malaysia as The SME Investment Destination willbe the centrepiece of the internationalization campaign that is set to align IMambitions and regionally and globally operating SMEs’ needs and wants. IskandarMalaysia is to portray itself as welcoming SMEs in all sectors. Parallel to this a focusedapproach towards attracting SMEs operating in the 9 growth areas is to spur IskandarMalaysia’s appeal to high-growth SMEs.
Internationalization of the Iskandar Malaysia SME Landscape
GOAL
Iskandar Malaysia as the SME Investment
Destination
2025 SME Iskandar Malaysia
Landscape Vision
Promoted SME Industry
Acceleration Plan
Iskandar Malaysia: The friendliest SME
Investment Destination Promotion Campaign
Facilitating International
SMEs arrival in Iskandar Malaysia
Enhancing market access for
international SMEs operating in Iskandar
MalaysiaKey Strategic Levers
Strengthening and highlightingthe attractiveness of IM as theinvestment location forinternational operating SMEs
Enhancing closer collaborationbetween Iskandar MalaysiaSMEs and foreign-based SMEs
Facilitating the arrival andgrowth of foreign SMEs inIskandar Malaysia
Common SME Challenges to Internationalize
Getting Finance Quality/Supply of Human Capital Access to Domestic and Export Markets
Infrastructure & SecurityAdoption of Innovation Mechanization and Adopting Technology
1) Lack of Avenues Financing (soft loan,venture capitalist)
2) Poor Credit History (no financial recordor have a history of bad debts)
3) Failure of Awareness Mechanism(lackof awareness of financing options)
1) Lack Capacity to Pay Competitively (ascompared to large companies, SMEsare less able to pay as much as largecompanies to retain employees)
2) Little Emphasis on Training (SMEs aretypically resource strained and unableto give sufficient employee training)
1) Low Bargaining Power(to commandhigher prices due to low volumes)
2) Exports Information Barrier(not know-how to access export markets)
3) Lack of Branding and Marketing (SMEshave little focus on marketing andbranding)
1) Limited Access to National ResearchOutputs(KPIs of research institutes arelargely white paper based leading tolimited collaboration with SMEs)
2) Low Emphasis on R&D(SMEs typicallyhave low focus on research andinnovation)
1) Low Adoption ofMechanization/Automation (smallercompanies typically have less capacityto mechanize processes and adoptautomation)
1) Lack of Product CollationInfrastructure for SMEs(SMEs typicallyhave smaller volume and thus needsinfrastructure that collates inputs frommultiple SMEs to be sold as one largebulk)
Getting Finance
1) Lack of Avenues Financing (soft loan, venture capitalist)2) Poor Credit History (no financial record or have a history of bad debts)3) Failure of Awareness Mechanism (lack of awareness of financing options)
Basic Financing Equity Based and Grants
Guidance/Information Mechanism
SME support is
going beyond the
provision of basic
financing
instruments to the
improving uptake
through guidance
and accountability
through matching
grants systems
Which Reduces Cost and Provides Non
Asset Based Collaterals
Soft Loans, Credit Guarantee
For All Sizes of Establishments
Micro, Small, Medium
For Various Stages of Growth
Seed, Startup, Growth
Which Provides Promising Firms Cost
Free FinancingVenture Capitalist, Grants
For High Growth or Innovative Businesses
In Companies Investing in New Technologies or Promoted Industries
To Inform SMEs of the Existence of Financing
Options and Good Book Keeping
Road Shows, Online Portals, News Letters, Through Association
Quality/Supply of Human Capital
1) Lack Capacity to Pay Competitively (as compared to large companies, SMEs
are less able to pay as much as large companies to retain employees)
2) Little Emphasis on Training (SMEs are typically resource strained and unable
to give sufficient employee training)
Basic/Secondary
EducationTertiary
Skills Enhancement
and Raising Wages
The development
of human capital
at basic and
tertiary education
levels takes time.
immediate
interventions exist
to encourage
training of existing
workforce and
raising wages
Reduce Proportion of
Unskilled Workforce
Through Vocational
Training
Through a Balanced
Approach Towards
Mainstream and
Vocational Training
Develop Vocational
Training as a Field of
Excellence e.g. Germany
Promote Training
With the Setup of
Training Centers and
Incentivizing the
Uptake of Training
Ensure Industry
Readiness of
Graduates
To Create Ready to
Work Individuals for
Businesses
Through Greater
Involvement of
the Industry
Industry Attachment
and Involvement of
Industry in
Development of
Syllabus
Access to Domestic and Export Markets
17
1) Low Bargaining Power (to command higher prices due to low volumes)2) Exports Information Barrier (not know-how to access export markets)3) Lack of Branding and Marketing (SMEs have little focus on marketing and branding)
Start-up Expansion Maturity
SMEs challenges atdifferent levels ofdevelopmentvaries and requiresa different form ofintervention andeach level
• Young, small enterprises
• Simple organisational structures
• Little functional specialisation
• Focus on product development
• High growth
• Slightly older and larger enterprises
• More complex organisational structures
• Functional specialisation generally adopted
• Focus on product commercialisation
• Very high growth
• Medium sized enterprise
• Divisional structure
• Highly centralized
• Highest functional specialization level
• Moderate growth
Diversification
• Size on average two times expansion stage enterprise
• Complex organizational structure
• Highly functional specialization with increasing decentralization
• High growth
Adoption of Innovation
18
1) Limited Access to National Research Outputs (KPIs of research institutes are
largely white paper based leading to limited collaboration with SMEs)
2) Low Emphasis on R&D (SMEs typically have low focus on research and
innovation)
Range of ServiceCommercial
Oriented
SMEs typically
have limited
access to the
output from
research
institutions. There
are programs on
overcoming the
barrier and to have
greater focus on
inclusive research
• Provides a Range of
Services including
Financing, Technical
Assistance, Market
Information, for SMEs to
Access the Innovation
System
• Introduce Commercial
Orientated KPI to
Researchers e.g.
Number of
Collaborations with
SMEs/Businesses to
increases awareness
level among SMEs
Mechanization and Adopting Technology
1) Low Adoption of Mechanization/Automation (smaller companies
typically have less capacity to mechanize processes and adopt
automation)
IssuesCommon
Solutions
The provision of shared
facilities in logistics and
incentives to automate are
common approaches to
support SMEs in areas of
infrastructure and
mechanization/automation
It is not economically viable for
SMEs with low trade volume to
utilize the distribution/logistics
networks
• Establish LogisticsConsolidation Network
• Encourage Consortiums /Aggregation ServiceProviders
SMEs lack the financial
capacity to invest in technology
and mechanization
• Matching grant for
adopting technology
Infrastructure & Security
1) Lack of Product Collation Infrastructure for SMEs (SMEs typically have
smaller volume and thus needs infrastructure that collates inputs from
multiple SMEs to be sold as one large bulk)
IssuesCommon
Solutions
Streamlining regulatory
processes and adopting
online license application
and approval systems
are common approaches
to reduce the regulatory
burden on SMEs
Excessive Regulatory Procedures is
a Common Problem for SMEs and
this Increases the Cost of Doing
Business which is Burdensome to
SMEs with Limited Financial
Capacity
• Establish an Agency to Identify andStreamline Regulatory Processes
• Establish Coordination mechanismswith SME Associations
• Get Feedback from the BusinessCommunity through SMEAssociations on Areas whereBusiness Processes can beImproved e.g. Netherlands
Time taken to Prepare and Get
Approval for Permits is Cost to
SMEs
• Online Licensing System
Singapore and New Zealand
adopts online filing for a vast
array of licenses
Entrepreneurial Development Plans for Internationalization(Low hanging fruits)
New Market Access
(Internationalisation)
Facilitate entry into ASEAN markets
Multi-market alliances amongst business
associations
G2G collaborations and media interventions for enhanced marketing
3. BUSINESS OPPORTUNITIES OFFER
Business Opportunities for SMEs
Current SMEs are not in the right business or lack information to benefit extensively fromanchor projects. Gaps to be filled with new SMEs and greater transparency of projectopportunities
Dir
ect
Inte
ract
ion
Ind
irec
t In
tera
ctio
nInvestments
Suppliers (Factors of Production and Maintenance)
Project Involvement
Population Growth Driven Demand
Branding of the Sector Internationally
•Maintenance Services (Cleaning)•Materials Supply•Equipment Supply•Management Services•Security Services
•Joint Implementation through partnership or collaboration
•Short Term Accommodation•Retail Sector•Transportation•Tourism•Food and Beverage
No
ne
Utilization of Local Resource
•Storage facilities
•Presence of big names such as Legoland, Pinewood Studios, and Kerry Food puts Iskandar Malaysia on the global map which is beneficial to local businesses
Business Opportunities for SMEs
SMEs are poised to benefit from population growth driven demand for services , maintenance andsupporting activities catering to major investments in Iskandar Malaysia
Po
pu
lati
on
Gro
wth
Dri
ven
De
man
d
Dir
ect
De
man
d f
rom
Op
era
tio
ns
of
An
cho
r P
roje
cts
Food and beverage
Tourism
Housing
Hotel and resorts
Car rental
Retail laundry services
Beauty and aesthetic care
Vehicle maintenance service
Education
Entertainment
Construction
Pest control
Furniture/Home decoration
Laundry services
Transportation/Logistics
Construction
IT Services/Solutions provider
Paper products
Security
Retail laundry services
Machinery repair
Fleet car services
Legal advisory services
Head hunting services
Secretarial service
Landscaping services
Building maintenance services
Advertising/Media