SME Corp - GMN Workshop Deck 2014

Global Malaysian Network (GMN) Workshop 17th May 2014, San Jose, California

Dato’ Hafsah HashimCEO of SME Corporation Malaysia

by

Pioneering Business Transformation

““Charting the Entrepreneurial Journey”Charting the Entrepreneurial Journey”

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SME Corp. Malaysia journey map since establishment – key milestones & events….

1996

2nd May 1996, Small & Medium Industries Development Corporation (SMIDEC) was former under the MITI to develop SMEs to be competitive in the global market.

2004

National SME Development Council (NSDC) National SME Development Council (NSDC) was formed as the highest governing body. was formed as the highest governing body. Bank Negara was appointed as the Bank Negara was appointed as the secretariat of NSDCsecretariat of NSDC

2007

SMIDEC took over the role of SMIDEC took over the role of NSDC Secretariat from Bank NSDC Secretariat from Bank NegaraNegara

2000 SMI Development PlanSMI Development Plan

3

Cont….

2020

and beyondand beyond

2010

SME Corp. Strategic Plan SME Corp. Strategic Plan 2010-2015 was 2010-2015 was

developeddeveloped

2009

SMIDEC was officially rebranded on 2nd Oct 2009 into Small & Medium Enterprise Corporation Malaysia(SME Corp. Malaysia)

2012

SME Masterplan 2012 – 2020 SME Masterplan 2012 – 2020 was developed as a catalyst to was developed as a catalyst to

drive SME sector to achieve drive SME sector to achieve Vision 2020Vision 2020

Secretariat to NSDC

SME Corp. Malaysia: a dedicated Agency for SME development

NSDC

Ministries & Agencies

SMEs

Chambers & Industry

Associations

4

ROLES & FUNCTIONS OF SME CORP. MALAYSIA

Roles of SME. Corp.

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6

Manufacturing,Manufacturing Related Services and Agro-based Industry

Full time employees < 75

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

Employees Turnover

Annual sales turnover < RM 20 m

Full time employees < 200

Annual sales turnover

< RM50 m

OR

Definition of SMEs

New SME definition was endorsed at the 14th NSDC Meeting in July 2013

A business will be deemed as an SME if it meets either one of the two specified qualifying A business will be deemed as an SME if it meets either one of the two specified qualifying criteria, namely sales turnover or full-time employees, whichever is lower. criteria, namely sales turnover or full-time employees, whichever is lower.

SMEs are the backbone of the economy • SMEs account for large proportion of businesses in Malaysia:

- 98.5% of establishments - Size wise 77% microenterprises, with < 5 workers

Source: Economic/SME Census 2011, Malaysia

662,939 companies

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Distributions of SMEs by Sector...

Agriculture (1%)Crops (70.4%),Livestock (13.4%),Fisheries (11.6%)

Construction (3%)Non-residential Buildings (21.5%),Civil Engineering (21%),Residential Buildings (17.3%)

Services (90%)

Textiles & Apparels (26.5%),Food & Beverages Products (15.9%),Fabricated metal products (10.5%)

Mining & Quarrying (0.1%)Stone quarrying (83.6%),Mineral Mining (16.4%)

Manufacturing (5.9%)Wholesale & Retail (49.9%),Food & Beverages Services (24.6%),Transport & Storage (6.9%)

Source: Economic/SME Census 2011, DOSM, Malaysia 8

SME Masterplan(2012 – 2020)

Manufacturing as leading sector

Shift to industrial-based

Light (textile, F&B) and heavy (automotive, E&E)

Import substitution

Transformation of manufacturing sector

Manufacturing ++

Cluster-based development

Global competitiveness through innovation

Manufacturing & services sectors

Creation of business ecosystem for SMEs

Towards achieving high income economy by 2020

Industrial Masterplan (1986 – 1995)

2nd Industrial Masterplan (1996 – 2005)

3rd Industrial Masterplan (2006 – 2020)

SMI Development Plan (2001 -2005)

Sectoral development

New Economic ModelTransforming Malaysia from middle income to advanced nation by 2020

SME policy has evolved over the years in line with the overall country’s development agenda

5-year Malaysia Plans

1 2 3 4

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Chambers and Business Associations

SMEs

Ministries & Agencies

Think-tanks & researchers

SME Corp.

Top-down

Bottom-up

Development of SME policy is through public – private advocacy…

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High-level endorsement

Private sector

engagement

... and the example is the SME Masterplan that was built from the consensus of all the stakeholders

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12

GDP & SME Growth

Holistic approach to SME development brought positive results…

SME growth outperformed overall GDP growth during 2004 – 2012:• 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)

-4%-2%0%2%4%6%8%

10%12%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP Growth SME Growth

%

Year

Source: DOSM and SME Corp. Malaysia

GDP & SME Growth (yoy change)

6%

32% share of GDP28.6% share

of GDP

National SME Development Council …high level body to chart SME policy direction

Council established in 2004

Chaired by Prime Minister

15 Ministers and 3 key agencies

Secretariat: SME Corp. Malaysia (w.e.f. 1 Aug 2008, previously the

Central Bank) Provides direction for comprehensive development of SMEs across all sectors

Formulates broad policies and strategies

Oversees coordination of programme and ensures effectiveness in policy

implementation

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New products for SMEs• Trade Finance Products• Overseas Project Fund• Venture Capital Funds • Guarantee fundsStrengthening financial service providers• Sustainable Microfinance. • Transformation of SME Bank, CGC & Bank Pertanian

MalaysiaStrengthening financial infrastructure• SME Credit Bureau• Small Debt Resolution Scheme

Information dissemination• SME Annual Report 2005 –

2010/11• Financial Guide for SMEs• Govt. Funds & Schemes• SMEinfo Portal • HRD Training Portal Human capital, marketing & advisory services• Centralised training for SME • BNM’s LINK, SME Bank, Banks’

SME Unit• “One Referral Centre”

In the last 7 years, SME development achieved progress on all fronts…

Policy • Standard SME Definition• 5 – year policy targets (2006 – 2010)• SME Integrated Plan of Action• SME Central Coordinating Agency• SME Masterplan (2012 – 2020)• Outcome-based approach initiatives

at macro, programme and firm levels• SME special unit at Ministries &

AgenciesStatistics• Census of Establishment and

Enterprise 2005 / SME Census 2011• Time series value add data• National SME Database

PROGRESS

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15

MASTERPLANSME2012 - 2020Catalysing Growth and Income

Chart direction until 2

020

SME Masterplan

ETP

RTP

GTP

High-income nation

The SME Masterplan charts direction for SME development till 2020

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4 Goals & 6 Focus Areas

6 High Impact Programmes

National policies

GDP

Employt

Exports

41%

62%

25%

GDP

Employment

Exports

32%

59%

19%

2011

2020

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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Masterplan is evidence-based, addresses gaps and leverages on strengths

%

Source: Schnider (2002)

Share of Informal Sector to GNI

• Material share of informal sector in the economy

10393

8578 76

6555 51

42

15

0

20

40

60

80

100

120

Source: World Bank from various sources

SME Labour Productivity (US$’000)

• SME labour productivity was far below other countries and 1/3 of large firms

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Masterplan is evidence-based, addresses gaps and leverages on strengths

Change in Value Added 2000-2005

• High growth firms main contributors to gains in value added & employment

Source: World Bank based on Economic Census 2001 & 2006 and Census of Establishments & Enterprises 2005, DOSM, Malaysia

Top 1 percentile account for -70% of additional GDP -46% of new jobs

1/ Entry density: no of newly registered companies over working age population (15-64 years)

Source: Development Research Group, World Bank

Average Entry Density1/ (2004-09)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Malaysia East Asia Pacific

Europe & Central Asia

Latin America & Caribbean

Middle East & North Africa

South Asia High Income

• Business formation was robust but lower than high income economies

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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

Action Plan

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

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Through interaction with stakeholders, 6 focus areas were identified where constraints need to be addressed

Constraints to Growth

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

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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Increase business formation

Expand no. of high growth & innovative firms

Raise productivity

Intensify formalisation

Average annual increase of 10%

in high growth & innovative firms

RM47,000

RM91,000

Avg. annual increase

RM/worker

15%

2000 2020

% of GNI

The high impact programmes to contribute significantly towards achieving targets under each

goals

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Breakout Strategy forMicro Enterprises

(MEs)

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5 programmes have been identified, targeting MEs across the various stages of the lifecycle …

GrowthStart-up Expansion / GraduationGraduate to

SME

ME lifecycle

Valley of Death

Firm size & turnover

ME lifecycle stages

≤ 5 employees, ≤ RM300,000

turnover

Programmes Targeting MEs across the ME Lifecycle

Awareness and Outreach

P1

P2

P3

P4

P5

Outcome is measured at 3 levels

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Macro performance (GDP, exportsemployment)

Programme level

Firm level through

SCORE

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Programme

KPIs

Common KPIs set at Programme LevelProgramme Level

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SCORE a diagnostic tool for firm level measurement and to provide targeted assistanceSME Competitiveness Rating for Enhancement (SCORE):

A tool developed in-house in 2007

SCORE evaluation

Choose a model:•Manufacturing•Retail & Distributive Trade•Construction•ICT•Maintenance, Repair & Overhaul•Professional Services

0 – 2 stars:Very basic

business operation

3 – 5 stars:Competitive & export-

ready companies

Capacity building Financing & assistance to go global

Enhanced competitiveness

Improved performance

SCORE re-evaluation

1

23 3

4

SME Competitiveness Rating For Enhancement (SCORE)

• MDEC• PSDC• SME Bank• TM

• MPC• HDC• NCIA• MTIB

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

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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• a comprehensive diagnostic tool to enhance competitiveness of Micro Enterprises

• developed in Feb 2010

• Level 1 : Basic business operations• Level 2 : At average and has a potential• Level 3 : Complete the criteria

•TEKUN•AGROBANK•SME BANK

Example of Radar Diagram for Level 2 Micro Enterprise

Analysis:To measure capabilities of start-ups or existing micro enterprise businesses.

Assistance:To provide hand holding assistance

•BSN•AIM•ICU, JPM

M-CORE for the micro enterprises…

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Simple assessment process…

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Success stories…

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0.00

2.00

4.00

6.00

BusinessPerformance

FinancialCapability

TechnicalCapability

ProductionCapabilityInnovation

QualitySystem

ManagementCapability

2008

2011

Significant Improvements in:- •Financial Capability•Technical Capability • Innovation• Management Capability• Quality System

Moderate Improvements in:-•Business Performance•Production Capability

Success story A

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0.00

2.00

4.00

6.00

BusinessPerformance

FinancialCapability

TechnicalCapability

ProductionCapabilityInnovation

QualitySystem

ManagementCapability

2008

2011

Significant Improvements in:-Quality SystemTechnical Capability Innovation

Moderate Improvements in:-Management CapabilityBusiness PerformanceFinancial CapabilityProduction Capability

Success story B

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1-INNOCERT

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Innovation Certification Innovation Certification for Enterprise Rating and for Enterprise Rating and

TransformationTransformationNATIONAL INNOVATION AGENDA

NATIONAL INNOVATION COUNCIL

JTPIN

Market

Institution

Technology

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THE KOREAN SUCCESS STORY

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Impact Analysis Framework on SME Development Programmes

(IAFSP)

WEIGHTAGE

RANGE OF ACHIEVEMENTS

1.Exceed Target (ET):

80% - 100%2.On Target (OT): 70% - 79%3.Below Target (BT):

60% - 69%4.Unsatisfactory (US):

59% and belowNote:•Outcome-based that emulates the Guideline of Sistem Pemantauan Projek (SPP) by EPU

Impact Analysis Framework on SME

Development Programmes

(IAFSP)

Monitoring & Evaluation Mechanism

Newly Reported 20 RM508.5m

Deferred / Cancelled 18 RM864.9m

Implemented 157 RM11.6b63%101%

Programme “Report Card” for 2013

Planned ImplementedNo. of Programmes 155 157Financial Commitment (RM ‘mil) 18,396.27 11,586.87SMEs benefitted 467,838 884,911

Programmes Implemented in 2013 by Focus Area

(15 progs)

(59 progs)

(21 progs)

(28 progs)

(34 progs)157 progs @

RM11.6b

Benefitted 884,911

SMEs (189%)

PERFORMANCE:

82.9%EXCEED TARGET (ET)

Business Sustainability

(BS)

Increase Formation and Formalisation of

Businesses (IBF)

Increase Profitability

(IP)

New Employment Created (NEC)

High Growth and Innovative Firms

(HGIF)

Increase Productivity and

Efficiency(IPE)

Overall Performance 2013 for Ministries / Agencies (M&As)

Performance 2013 by Funds Allocation: Govt vs Private

EXAMPLE OF HIGH PERFORMANCE PROGRAMMES

Overall REPORT CARD for 2013

WEIGHTAGE KPIs Measured

27.3%• Beneficiaries• Sessions implemented• Training(s) conducted

• % increase in sales• % increase in knowledge• % of Non Performing Loan

RESULT

34%

23% 84% Overall Achievement for SME

Development Programmes

Programmes Planned for Programmes Planned for 20142014

• 131 SME programmes

• Total allocation: RM13.2b

GOVERNMENT FUNDING111 progs RM6.8b

PRIVATE SECTOR FUNDING20 progsRM6.4b

RM

In 2014, planned programmes In 2014, planned programmes cut across cut across 5 focus areas5 focus areas……

To benefitRM13.2 billion 526,359 SMEs

Focus AreasFinancial Allocation(RM mil)

No. of Programmes

13,172.9131TOTAL

Kick-OffKick-Off of Initiatives in 2014of Initiatives in 2014

Industrial Linkages

48

Facilitating access to market by integrating SMEs into the supply chain of the large companies

Concentration on high value-add portion of the supply chain…

RETAILRETAILMANUFACTURINGMANUFACTURING

INTE

RNAT

ION

ALIN

TERN

ATIO

NAL

LOCA

LLO

CAL

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Integrating into global supply chain…

49

Composites Technology

Research Malaysia

Aero Composites

Spirit AeroSystems Malaysia Sdn

Bhd

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Way forward

Government

Private Sector

• Facilitator• Act as catalyst

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

SME development a shared responsibility...

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What needs to be done?

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Strengthen industry

association

1

Increase range of services

provided by associations

2

Build bridges between public

and private sectors

through shared services

(funds, space)

3

Enhance capacity of

private training and

advisory provider

4

Encourage establishment

of private finance

providers

5

Develop capacity for

private professional services for

SMEs

6

…with private sector assuming a greater role

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

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It’s the little pieces that make up the big picture,Generating wealth of no small measure,The collective strength of our nation’s economy,Providing employment, driving demand, creating opportunities.

Being small is more and the more the better,It’s in our interest to see them prosper,We’ve transformed to serve their needsWe’ve striving to ensure they succeed.

SMEs are the building blocks of our nation’s economic growth.

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Thank youThank youwww.smecorp.gov.mywww.smeinfo.com.my 1-300-30-6000

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