MASTERPLAN SME

2012 - 2020

High Impact Programmes for SMEs

Biomass Industry Networking Seminar 1 November 2012

by:

Ms. K. Karunajothi SME Corp. Malaysia

SMEs are the backbone of the economy

• SMEs account for large proportion

of businesses in Malaysia:

- 97.3% of establishments (645,136)

- Bulk (77%) microenterprises, with

less than 5 workers

- Mainly in services sector (90%)

SME Contribution to:

GDP 32%

Employment 59%

Exports 19%

Source: Economic/SME Census 2011 , DOSM

Definition of SMEs:

Manufacturing

& MRSs

Services, Agri. &

ICT

Annual

Sales < RM 25 mil < RM 5 mil

OR

Full-time

employees < 150 < 50

2

Significant progress in SME development since establishment of NSDC… high level body

Council established in 2004

Chaired by PM, members 14 Ministers & heads of key agencies

Roles and Responsibility

Provides direction for comprehensive development of SMEs across all sectors

Formulates broad policies and strategies

Oversees coordination and ensures effectiveness in policy implementation

3

• Statistics

• Policy

• Capacity building & advisory

• Information dissemination – AR,

SMEIPA, SMEinfo portal

• New financial products –

microfinance, guarantee

• Financial infrastructure – SME

Credit Bureau, SDRS,

transformation of DFIs

Progress

16%

39%

51%

32%

0%

10%

20%

30%

40%

50%

60%

Low income

countries

Middle income

countries

High income

countries

Malaysia

-5%

0%

5%

10%

15%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GDP Growth SME Growth

%

Year

Source: DOSM and SME Corp. Malaysia

4

GDP & SME Growth

(yoy change)

SME Contribution to GDP

Source: World Bank from various sources

8.4%

Holistic approach has shown results

SME vs Overall GDP Growth (2001 – 2010)

5

Moving forward, SME Masterplan a “game changer”…

“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

Approach

Public-private

partnership

‘Live’ plan

Outcome-based

Innovation and

productivity-led

…adopting a new approach to SME development

6

SME Masterplan is aligned to the New Economic Model and reinforces existing initiatives

National Transformation

Programme

RMK10 & 11

Bumiputera

Development

East Malaysia

Development

• 61 Ministries &

Agencies involved

• 40% of SME dev prog

• 33% of total funding

• Areas: - Entrepreneurship

- Retail, franchise

- Greentech

- Financing

- Poverty reduction

- High performance

• SMEs to benefit from

corridor development: - SCORE

- SDC

SME MASTERPLAN (2012 – 2020)

Co-existence

Cuts across all Economic Sectors & Strategic Areas

Other Corridor

Development

- NCER

- ECER

- IDR

7

Top-down

Bottom-up

Development of SME Masterplan is through a consultative process

8

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

9

14

36

9 13

31

53

0

10

20

30

40

50

60

%

Source: Schnider (2002)

Share of Informal Sector to GNI

• Material share of informal sector

in the economy

103

9385

78 76

6555

5142

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

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

10

Change in Value Added 2000-2005

-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

Ch

ange

in V

alu

e A

dd

ed,

2000

-200

5

Percentiles

• 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

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

Market Access

SME Development Framework

Goals

Increase

business

formation

Intensify

formalisation

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

11

Action Plan

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

Innovation & Technology • Access to national innovation

system • Low commercialisation & R&D • Poor technology uptake

Human Capital Development • Workforce lacks job readiness • Low utilisation of existing

training • Non-competitive rewards &

benefits

Access to Financing • Limited non-banking avenues • Poor creditworthiness • Lack of know-how and

resources

The focus areas identified as growth levers where constraints need to be addressed simultaneously

Market Access • Procurement by Govt/LSIs • Information barrier to exports • Limited focus on marketing &

branding • Low bargaining power

Legal & Regulatory Environment • Licensing / permits • Complying to regulations • Legislations disincentivising

formation & growth

Infrastructure • Trade clearance and facilitation

system • Low and infrequent trade

volume

Constraints to Growth

12

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

Result-based approach with monitoring & evaluation

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

13

HIGH IMPACT PROGRAMMES (HIPs)

14

• Streamline and simplify procedures for opening new businesses

• Reduce costs and time taken to start a business

• Encourage formalisation

• Single window &

ID for whole of

Government

• Business

registration as

pre-requisite for

licensing

Registration

(SSM)

Registration

(East

Malaysia)

National Business

Registration system

i.e. MyCoID

License 1 License 2 License N

National Business

Licensing System

i.e. BLESS

National Single

Business

Registration and

Licensing System

Online Payment

Context

HIP 1: Integration of business registration & licensing to enhance ease of doing business

15

HIP 2: Technology Commercialisation Platform (TCP) to encourage Innovation

• SMEs face issues in accessing the national innovation system

• Many initiatives exist but are fragmented & not interlinked

• Mainly dependent on public funds & not linked to commercial funding

•Designed to remove

market barriers to

innovation

•Provides a range of

services including

financing, technical

assistance, market

information, policy

advice & capacity

building programmes

•Built on the existing

landscape, public or

private.

Context

Technical

Experts

Management

Experts

Financiers

(VC)

Labs Testing

services

Advisory

services

Incubation

Facilities Proof of

concept

(POC)

Stage

Commer-

cialisation

Funding

for POC

16

HIP 3: SME Investment Programme (SIP) to provide early stage financing

Equity

Private Investors Government Loan

through SIP

• Limited avenues for early stage financing • VC industry lacks vibrancy; highly dependent on public funds (51%)

• Govt. provide long term

capital into licensed

investment companies

• Investment companies to

provide debt, equity or

hybrid investments in

promising SMEs

SMEs

Context

RM1 RM1

debt capital

Characteristics

• Debt in addition to equity

• Has monitoring &

evaluation

• Managers are mainly from

industry

17

HIP 4: Going Export (GoEx) Programme to expedite internationalisation of SMEs

• Constraints on new market entry

• High upfront cost of market entry

Required

services

Partial payment for

required services

• Customised assistance

on steps to export

• Link to expertise

• Link to buyers

Emerging

SME

Exporters

Programme

Management Team

Preparation &

Execution of Export

Sales Plan

• Targets:

- New Exporters

- Existing Exporters (new

product / market)

• Matching grant

- Cost of Export Sales Plan

(ESP) if needed

- Other support in ESP after

proof of export

arrangement

•Market driven after initial

success

Context

18

HIP 5: Catalyst Programme to promote more homegrown champions

• Top high growth companies generate bulk of additional GDP & jobs

• Popular strategy worldwide to develop a select group

Time

Rev

enu

e

Ideas

Incubation

Start up

Technology

Commercia-

lisation

Platform

SMEs

Select

potential

high growth

firms

Provide

comprehensive

support over a

period of time

Homegrown

champions • Targeted

approach with

total support: - Bank guarantee

- Govt. procurement

- Talent from abroad

- Mentoring

•Transparency in: - Selection & exit

criteria

Context

19

HIP 6: Inclusive Innovation to empower the bottom 40%

• Promote rural transformation

• Improve business environment for SMEs especially in rural areas

• Increase the innovation pool

Commercialised

Products &

Services to mass

markets (incl. Govt.

procurement)

Incentives

Innovation

targeted at

masses (e.g. Mobile

payment)

Innovation from

grassroots

(e.g. Cycle

powered machine)

Technical + Mgmt.

Advisory

Support Facilities

Promotional Support

Linkage - Financing

Inclusive Innovation Programme

Context

20

Theme 1: Resource pooling & shared services to overcome scale disadvantages

Encourage Consortiums / Aggregation Service

Providers

Establish Logistics Consolidation Centres

Enhance HR / Organisational Development Support – as a

shared service

Theme 2: Create demand for SME products

Specific policy on Govt. procurement

Encourage MNCs to procure from SMEs through vendor development programme

Financial support for market compliance (standards &

certification)

1

2

3

4

5

6

Other initiatives include thematic programmes to address specific challenges

21

Theme 3:Reduce information asymmetry for enhancing opportunities

Build further on credit information system (Govt. funds)

Foster greater IP adoption- awareness & outreach

Independent Panel of Experts to assist financial institutions

Effective outreach to enhance financial inclusion

Theme 4: Building capacity through knowledge acquisition & skills upgrade

Ensure industry readiness of new entrants into workforce

Transform polytechnic & technical fields into a career of

choice

Tap-on talent from abroad to address skills shortage among

SMEs

Intensify training programmes to meet specialised needs

7

8

9

10

11

12

13

14

Other initiatives include thematic programmes to address specific challenges

22 IPE to assist FI to evaluate new technology projects incl.biomass

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

23

Target is to increase contribution to GDP to slightly

over 40% by 2020

Projections by SME Corp. Malaysia

Economic Contribution

in 2020:

GDP

Employment

Exports

32% 41%

59% 62%

2010 2020

19% 25% 3

4

5

6

7

8

9

2000 - 05 2006 - 10 2011 - 20

GDP Growth

Quantum

leap

“Business

as usual”

growth

New SME growth path

CAGR (% change)

(6.5%)

(8.7%)

24

25

SME Masterplan focuses on recalibration of activities towards high value activities, including biomass

New growth Opportunities for SMEs

SMEs contribute to the biomass value chain

Optimising economic potential and moving towards higher value chain

26

SMEs as suppliers of renewable organic

matter e.g. oil palm, sugar cane & timber

waste, rice husk,, etc.

R&D and engineering in renewable energy

Value-added eco-products (e.g. bio-plastics

& fertilizers) & generate renewable energy

(e.g. solid biofuel pellets)

Innovative SMEs in the biomass industry can avail to the 1-InnoCERT assessment by SME Corp.

Objective • Foster and support innovative

SMEs to be globally innovative and competitive players

Benefits

• Participate in the SME Innovation Award which offers RM1 mil to the Top Most Innovative SME

• Enjoy Green Lane Policy

Recipients • 114 companies

(12 undertaking biomass activities)

27

Procurement

Tax Deduction

Financing Priority to

participate in Offset

Programme and

Government

procurement

(including MOF-

owned companies)

2% interest rate

rebate a year

subject to maximum

RM200,000 per

year; Stamp duty

exemption on loan

agreement

Expenses incurred

to obtain the 1-

InnoCERT for the

first time

28

These innovative SMEs are eligible for the incentives under the Green Lane Policy

Thank you

www.smecorp.gov.my

www.smeinfo.com.my

jothi@smecorp.gov.my 03 – 2775 6287