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SME Development in Malaysia: Trade Opportunities for Indian SMEs

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1 SME Development in Malaysia: Trade Opportunities for Indian SMEs
Conference on “Trade Opportunities for SMEs among SAARC & ASEAN Countries” SME Development in Malaysia: Trade Opportunities for Indian SMEs Ms. Karunajothi Kandasamy SME Corporation Malaysia 12 December 2009 Chennai, India

2 PRESENTATION OUTLINE Definition and profile of SMEs
Part I: SME Development in Malaysia Definition and profile of SMEs SME development framework SME Corporation Malaysia as the lead agency Policies and strategies going forward Part II: Trade and Investment between Malaysia – India Importance of India as a trading partner Investment between Malaysia-India Investment incentives offered in Malaysia Part III: Way Forward Global economic recovery driven by Asia Role of trade agreements and other initiatives to enhance trade and investment opportunities Collaboration between Malaysia and India in SME development 2

3 SME Development in Malaysia
PART I: SME Development in Malaysia 3

4 Definition of SMEs Annual sales turnover < RM25 mil (USD7.4 mil) OR
Full time employees <150 Manufacturing and Manufacturing Related Services Annual sales turnover < RM5 mil (USD1.5 mil) OR Full time employees < 50 Services, Primary Agriculture, Information and Communication Technology (ICT) 4

5 435,324 (78.7%) 100,333 (18.2%) 12,610 (2.3%) 4,537 (0.8%) Source: Census of Establishments & Enterprises 2005 Total establishments: 552,804 No. of SMEs: 548,267 (99.2%) MICRO SMALL MEDIUM LARGE SMEs account for a large proportion of businesses in Malaysia: - 99.2% of establishments - Majority are micro enterprises, with 5 workers and less Profile of SMEs by Size 5

6 Profile of SMEs by 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 Plantation and horticulture (65.6%) Fishery and its services activities (20.8%) Poultry farming (7%) Manufacturing (7.2 %) Agriculture (6.2 %) Textiles & Apparels (23.4%) Food & Beverages (15%) Metal & metal products (13%) Services (86.6 %) Wholesale & Retail (55.5%) Restaurant & Hotel (15.2%) Transport & Communication (6.5%) Source: Census of Establishments & Enterprises 2005 6

7 National SME Development Council
National SME Development Council... high level body to chart SME policy direction Council established in 2004 Chaired by Prime Minister with members comprising ministers Secretariat: SME Corp. Malaysia (wef 1 Aug 2008, previously Central Bank of Malaysia) Formulate broad policies and strategies and provide direction for comprehensive development of SMEs across all sectors Oversee coordination of and ensure effectiveness in policy implementation Strengthening enabling infrastructure Building capacity & capability of SMEs Enhancing access to financing Roles & Responsibilities 3 key Strategic Thrusts 7

8 SME development framework
Developing progressive and resilient Bumiputera SMEs and entrepreneurs - III. Enhancing access to financing I. Strengthening enabling infrastructure II. Building capacity and capability Promote development of competitive and resilient SMEs in all sectors towards increasing SME contribution to the economy Economic Socio Economic Promoting development of SMEs in knowledge-based industries Enhancing viability of SMEs across all sectors 26 programmes (RM150.8 mil) 129 programmes (RM542.5 mil) 19 programmes (RM2.35 billion) Objectives Strategic Thrusts 2009 programmes 8

9 Implementation of SME programmes more coordinated and cost effective
Enhanced coordination & cost effectiveness due to: better planning; streamlining of programmes; and increased collaboration between Ministries / Agencies Total expenditure on SME development from 2006 – 2009: RM18.7b Outreach to SMEs: 2006: 287,692 2007: 286,755 2008: 597,480 9

10 Key achievements in SME development
Strengthening Infrastructure POLICY Five year policy targets Annual Plan on Programmes (National SME Integrated Plan of Action) SME Central Coordinating Agency STATISTICS Standard SME Definition Census of Establishment and Enterprise 2005 National SME Database Building Capacity & Capability INFORMATION DISSEMINATION SME Annual Report Survey findings Policy Handbook and booklet on Govt Funds and Schemes SMEinfo Portal HRD Training Portal “One Referral Centre” HUMAN CAPITAL, MARKETING & ADVISORY SERVICES Centralised training for SME SME Marketing Committee BNM’s LINK, SME Bank, Banks’ SME Unit, BAS National SME Innovation Council Enhancing Access to Financing NEW PRODUCTS FOR SMES Trade Finance Products Overseas Project Fund Sustainable Microfinance Venture Capital Funds for Agriculture STRENGTHENING FINANCIAL SERVICE PROVIDERs Transformation of SME Bank, CGC & Bank Pertanian Malaysia STRENGTHENING FINANCIAL INFRASTRUCTURE SME Credit Bureau Small Debt Resolution Scheme 10

11 Contribution to the Economy and Policy Targets
SME contribution 32% of GDP, 19% of exports & 56% of employ. Macro targets set by NSDC for 2010 charting the policy direction Important endogenous source of growth & future growth driven by knowledge intensive SMEs Create linkages with large companies Contribution of SMEs to the Economy 11

12 A dedicated agency established in October 2009
VISION The focal point for the development of progressive SMEs to enhance wealth creation and social well-being of the nation MISSION To coordinate and facilitate the growth and development of dynamic, innovative and resilient SMEs through the provision of effective business services 12

13 Expanded roles & functions of SME Corp.
Previous Role SECRETARIAT TO THE COUNCIL THOUGHT LEADERSHIP, POLICY FORMULATION POLICY COORDINATION & PROGRAMME IMPLEMENTATION “ONE REFERRAL CENTRE “ ON INFORMATION & ADVISORY BUSINESS DEVELOPMENT SUPPORT PROGRAMMES CURRENT ROLE & FUNCTIONS OF SME CORP. MALAYSIA 13

14 SME Corp. as intermediary between public and private sector
Programmes Coordination Policy formulation & Research “One-Referral” Information and Advisory SME CORP. MALAYSIA Secretariat to NSDC MINISTRIES AND AGENCIES SMEs PRIVATE SECTOR (national chambers, trade associations & professional bodies) NSDC 14

15 Capacity development programmes by SME Corp
Focusing on facilitating linkages, enhancing skills & entrepreneurship technology innovation, motivation & advisory services 1. INDUSTRIAL LINKAGE PROGRAMME 6. TECHNOLOGY AND INNOVATION PROGRAMME 2. SKILLS UPGRADING PROGRAMME 7. NATIONAL WOMEN ENTREPRENEUR AWARD (NWEA) 8. ENTERPRISE 50 AWARD PROGRAMME 3. BUMIPUTRA ENTREPRENEUR ENHANCEMENT PROGRAMME 4. SME – UNIVERSITY INTERNSHIP PROGRAMME 9. SME EXPERT ADVISORY PANEL (SEAP) 5. SME COMPETITIVE RATING FOR ENHANCEMENT (SCORE) 10. OUTREACH PROGRAMMES 15

16 Financial assistance programmes
Financial assistance covers a spectrum of activities in the business growth cycle and scope be extended to all sectors in 2010 Matching Grant 50% of the approved project cost is borne by the Govt & balance by applicant Manufacturing & Services: Business Start-Up Product & Process Improvement Certification & Quality Management Systems Market Development Development & Enhancing Product Packaging Promotion of Halal Products Advertisement & Promotion Soft Loan Low interest rate Longer repayment period Manufacturing & Services Soft Loan for SMEs (SLSME) Soft Loan for Factory Relocation Soft Loan for ICT Adoption 16

17 SME Competitive Rating for Enhancement (SCORE),
a tool to evaluate SME capabilities & performance 0 – 2 Stars : Very basic operations 3 – 5 Stars : Some degree of sophistication, can be groomed for export market Visit SCORE SME Example of Radar Diagram for 3-Star firm Basis: Identify weaknesses of SMEs to facilitate focused and integrated hand-holding assistance to SMEs Link potential SMEs with large companies/ companies / MNCs Identify & facilitate suitable financial assistance for development of SMEs 17

18 Short-term challenges Basic firm level inherent issues
Long-term challenges Basic firm level inherent issues Arising from the global economic crisis Globalisation and market liberalisation CURRENT ISSUES AND CHALLENGES Access to market Branding and promotion Adoption of technology, ICT & innovation Human capital mgmt Access to financing 18

19 Policies and strategies going forward
Data Management Policy formulation (overall) research and benchmark Coordination of policy & programme implementation Strengthening “One Referral Centre” Business Dev. support Regular SME statistics SME Census in 2011 Company profile for monitoring Align SME development framework to High-Income Economy Enhance coordination to further streamline programmes Implement outcome -based monitoring framework Replicate “One Referral Centre” in all states Nationwide promotion Enhance virtual outreach Develop Entreprenuer-ship Facilitate innovation environment Handholding programme for enhancement Dynamic, innovative and resilient SMEs with higher economic contribution 19

20 PART II: TRADE & INVESTMENT BETWEEN MALAYSIA - INDIA

21 Malaysia’s trade with India has increased since 2002
Trade balance in favour of Malaysia RM24.7b (3.7%) RM bil RM6.7b RM10.1b (1.3%) RM7.3b (1.9%) RM10.3b (2.0%) RM2.7b (0.5%) Imports

22 Malaysia – India: Trade Ranking
2008, India was Malaysia’s 12th largest trading partner 8th largest export destination 12th largest source of imports Largest trading partner/ export destination/ source of import in the South Asian region 2008, Malaysia was India’s 16th largest export destination 15th largest source of imports At ASEAN region 2nd largest export destination 2nd largest source of import

23 Key Products Major Exports to India (Jan – September 2009)
Share of Export (%) Value (RM mil) Crude Petroleum 24.6 3,093.7 Electrical & Electronic Products 17.0 2,139.3 Palm Oil 14.5 1,819.8 Chemicals & Chemical Products 13.3 1,673.2 Saw Logs & Sawn Timber 6.8 854.1 Major Imports from India (Jan – September 2009) Share of Export (%) Value (RM mil) Chemicals & Chemical Products 18.7 1,092.7 Iron & Steel Products 9.7 569.4 Live Animals & Meat 9.5 558.1 Manufacturers of Metal 7.9 463.2 Refined Petroleum Products 7.5 435.7 23

24 Malaysia – India: Investment cross border flows
: Total invest US$1.6 bil. India 9th largest investor in M’sia. 2008: 0.4% of approved invest in mfg is from India (8 projects; RM171 mil). Major areas of investment: ICT; biotechnology; textile; palm oil refining, pharmaceutical; and furniture and rubber products. Apr Mac 2009: Total invest US$214.8 mil. M’sia 24th largest investor in India. Key investment areas: roads & highways; telecommunications; oil & gas; power plants; tourism; and human resources 24

25 Industry specific investment incentives
ICT (MSC status) Pioneer Status or Investment Tax Allowance (up to 10 years) Duty-free on imports of multimedia equipment; IP protection; cyber laws; no internet censorship Consultancy assistance by the Multimedia Development Corporation Biotech (BioNexus Status) 100% income tax exemption for 10 years from the 1st profit year 100% Investment Tax Allowance on capital expenditure incurred within 5 years Exemption of import duty and sales tax, double deduction on expenditure incurred for R&D and promotion of exports 10 Bills of Guarantees 25

26 Other investment incentives
Incentives offered to enhance FDI inflows into the country Pioneer status Investment tax allowance Accelerated capital allowance & other allowances Incentives for operating in promoted areas Export incentives Import duty exemption on raw materials, comp. machinery & equipment Liberalisation of the services sector (2009) 26

27 Areas for trade and investment opportunities
Manufacturing Agriculture Services Medical devices Aerospace and defense-related Biotechnology R&D and D&D Renewable energy (solar, biofuel, biomass) Automotive Islamic finance ICT Shared services & outsourcing Private health Private education Eco-tourism Franchising Agro-based including food and halal Herbal products Agriculture biotechnology MALAYSIA INDIA Construction Professional services (engineering, architecture, HR dev.) Higher Education Resource-based industries Pharmaceuticals Financial services 27

28 Malaysia an attractive investment destination
Diversified economic structure Products complement and not compete Gateway for ASEAN Liberalisation of services sector Cultural, commercial & political similarities Market opportunities with AFTA Coordinated SME development with a centralised agency

29 PART III: WAY FORWARD 29

30 Global economic recovery to be led by Asia…
IMF: Global economy to expand 3.1% in 2010 (1.1%: 2009) Asia expected to lead the recovery process, driven by China, India, and other emerging economies strong fiscal stimulus and improving trade and financial conditions supported Important to strengthen regional trade 30

31 Asia key driver of growth...
2005 2006 2007 2008e 2009f 2010f 2011f World growth 3.5 4.0 3.8 1.9 -2.9 2.0 3.2 OECD Countries 2.5 2.9 0.6 -4.2 1.2 2.3 United States 1.1 -3.0 1.8 Euro Area 1.3 2.8 2.7 -4.5 0.5 Japan 2.6 2.4 -0.7 -6.8 1.0 Developing countries 6.7 7.6 8.1 5.9 4.4 5.7 East Asia and Pacific 9.0 9.7 11.4 8.0 5.0 6.6 7.8 China 10.2 11.1 13.0 6.5 7.5 8.5 South Asia 8.7 8.4 6.1 4.6 7.0 India 9.2 5.1 Pakistan 6.9 6.0 5.8 4.5 Bangladesh 6.4 6.2 Latin America and Carribbean 4.7 5.6 4.2 -2.2 3.3 Source: World Bank 31

32 Free trade agreements in place…
Concluded: Malaysia-Japan Malaysia-Pakistan ASEAN-China ASEAN-Japan ASEAN-Korea ASEAN-India ASEAN-Australia and New Zealand Under negotiation: Malaysia-India Comprehensive Economic Cooperation Agreement (CECA) Enhance exports of goods & services through preferential market access Strengthen collaboration in biotech software develop., science & education Able to tap huge Indian market in construction related activities and infrastructure development By 2012, bilateral exports between Malaysia & India to increase 1.3 times to US$11.85 billion, for Malaysia; and 2.5 times to US$4.63 billion, for India Better market access by addressing tariffs and non-tariff measures Facilitate & promote trade, investment & economic development Enhance competitiveness of Malaysian exporters Build capacity in specific targeted areas through technical cooperation and collaboration. 32 32

33 Regional and bilateral cooperation …
SME Corp. is Malaysia’s focal point for: ASEAN SME Working Group APEC SME Working Group Exchange information on SME policies & best practices Facilitate warm leads to SMEs to establish business contracts linkages and networking Exchange of visits for study training & sharing of expertise Facilitate cooperation in the strategic areas Collaboration in the field of innovation & implement joint research and development in the areas of SMEs development Bilateral MOUs: Small Industries & Industrial Parks Organization of Iran Office of SMEs Promotion of Thailand Small Business Corporation of Korea Organization for Small & Medium Enterprises and Regional Innovation, Japan Syrian Enterprise and Business Center 33

34 Prospects of Collaboration between Malaysia India
Exchange of information Market opportunities New business trends Exchange of visits Study and training Exchange of best practices and expertise Facilitate cooperation Research and development (R&D) Technology Exchange Facilitate market access and collaboration Automotive, Halal, Solar, oil and gas, solar, ICT, biotech, education, franchising, medical Co-organise programmes Joint seminars / workshops / exhibitions in Malaysia or India countries 34

35 THANK YOU 35


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