1. ROHANA RAMLY SME Corporation Malaysia Manila, 6 June 2012
“UNDERSTANDING
SMEs “
ROHANA RAMLY SME Corporation Malaysia Manila, 6 June 2012
Pioneering Business Transformation

2. Corporate Headquarters,
Background of
SME Corporation Malaysia
SME Corp. Malaysia’s
Corporate Headquarters,
Kuala Lumpur

3. SME Corporation Malaysia
2 May 1996
Established as Small and Medium Industries Development Corporation (SMIDEC)
Provide loans & grants for capacity building, start-ups, expansion, branding, certification, etc.
Promote development via linkages, provide skills training
Implement programmes
2 October 2009
Transformed as SME Corporation Malaysia with expanded functions
Central Coordinating Agency
Cental point of reference - One Referral Centre (ORC)
Secretariat to National SME Development Council (NSDC)
Functions of SME Corp. Malaysia
Coordinate, monitor & evaluate implementation of policies, strategies & programmes
Undertake studies related to the development of SMEs across all economic sectors
Cooperate with Ministries & Agencies in the implementation of policies, strategies & programmes
Centre for collection, reference & dissemination of information
Furnish annual reports on SMEs
Secretariat to the National SME Development Council (NSDC)
Undertake promotional activities by encouraging industrial linkages & develop human resource to promote growth of SMEs
National SME Development Council (NSDC)
Highest Policy-making Body to Chart SME Development
Chaired by The Honourable Prime Minister of Malaysia
Comprise SME-related Ministers & Agencies
Secretariat: SME Corp. Malaysia
(effective 1 August 2008, succeeding Central Bank of Malaysia)
Roles & Responsibilities
Formulates broad policies & strategies
Provides direction for comprehensive development of SMEs across all economic sectors
Oversees coordination of policy implementation & ensures its effectiveness

4. Vision | Mission | OUR Vision & Mission
The PREMIER organisation for the development of progressive SMEs to enhance wealth creation and social well-being of the nation
Mission |
Promote the development of competitive, innovative and resilient SMEs through effective coordination and provision of business support

5. Profile of SMEs in Malaysia

6. SMEs ~ Backbone of Economy
99%
Total Establishments
32%
GDP
19%
Exports
59%
Employment
Important domestic source of growth
Foundation & support in supply chain through forward & backward linkages
Balanced growth
Strengthen resilience of the nation's economy
Provide support for growth of new & existing sectors
Promote private sector-led growth
Source: Census of Establishments & Enterprises 2005

7. Distribution of SMEs ~ by Sector
Plantation & horticulture
Fishery & aquaculture
Poultry farming
AGRICULTURE (6.2 %)
MANUFACTURING (7.2 %)
Textiles & apparels
Food & beverages
Metal & metal products
SERVICES (86.6 %)
Services (86.6 %)
Wholesale & retail (55.5%)
Restaurant & hotel (15.2%)
Transport & communication (6.5%)
Manufacturing (7.2 %)
Textiles & apparels (23.4%)
Food & beverages (15%)
Metal & metal products (13%)
Agriculture (6.2 %)
Plantation & horticulture (65.6%)
Fishery & aquaculture (20.8%)
Poultry farming (7%)
Wholesale & retail
Restaurant & hotel
Transport & communication
Source: Census of Establishments & Enterprises 2005

8. SMEs ~ OUTPACED OVERALL ECONOMY
SME growth outperformed overall economy (2005 – 2009)
GDP Annual Growth (2000 price)
GDP & SME Growth
GDP Growth of SMEs Outpaced the Overall Economy since 2004
The new set of data compiled by the Department of Statistics (DOS) showed that GDP growth of SMEs outpaced that of the overall GDP growth since The data which is based on 2000 prices shows a clear break in the trend from the period , whereby SME growth was almost similar to the overall economy. SMEs registered an average growth of 7.8% in the period ( : 4.9%). While the SME contribution to GDP remained relatively unchanged at 29% during the period , SME contribution to GDP rose from 29.4% in 2005 to 31.4% in 2008.
The key contributory factor for the higher growth trajectory of SMEs was attributed to policy initiatives. The meeting noted that the setting up of the NSDC in 2004 and the consequent comprehensive approach taken through the SME Development Framework which coordinates the policies and programmes across more than 15 Ministries and 60 agencies had yielded positive results. The initiatives undertaken by the Council had improved the overall efficiency in policy implementation.
Other supportive policies that attributed to higher growth of SMEs were:
• Improved Government delivery by PEMUDAH; • Visit Malaysia Year 2007 and increment in emoluments of Government servants benefiting consumption-related services sub- sectors; • RMKe9 infrastructure projects supported growth of small contractors; and • Renewed policy focus on the agriculture sector, particularly food crops benefited the farming community.
The analysis showed that SMEs play a critical role in stabilising the Malaysian economy during economic shocks and in some sectors, SMEs remain resilient and agile during the economic downturn.
The services sector was the main contributor to the growth of SMEs in the period In 2008, the services sector formed about 60% share of the SME GDP, followed by the manufacturing sector (30%), agriculture (7%) as well as construction and mining (3%). The key growth drivers in the services sector were distributive trade; real estate and business services; as well as finance and insurance, while resource-based products such as petroleum, chemicals, rubber and food and beverages led growth in the manufacturing sector. Palm oil and food crops were the growth drivers in the agriculture sector, and civil engineering activities supported growth in the construction sector.
GDP growth of SMEs peaked at 10.3% in 2007 before slowing down thereafter, weighed down by the impact from the global economic and financial crisis. SMEs experienced the effects since the last quarter of 2008 and further intensified in Thus far, SME Corp. Malaysia has undertaken three surveys on the impact of the global crisis on SMEs and the last survey in July/August 2009 showed signs of bottoming out of the effects on SMEs. The stimulus packages have begun to show positive results as 53% of the funds from the USD5.2 billion applicable for SMEs have been disbursed benefiting over 56,000 SMEs as at end-December During the period, about 76% of the funds have been approved.

9. SMEs ~ THEIR MAJOR CHALLENGES
Limited access to advisory services
Limited marketing & promotion strategies
Limited access to domestic & global markets
Management & technology capability constraint
Low value-add & lacking in competitiveness
Inadequate training
Limited capability in R&D & technology
Difficulty in retaining manpower
Difficulty in obtaining financing
Lack of international certification for export
Limited use of e-commerce & internet marketing
Access to capital
Lack of awareness of financial assistances provided
Limited support by Government (grants, financial institutions)
Access to markets
1) Lack of understanding of e-commerce (including payment options)
Limited capacity and knowledge by the SMEs
Limited access to capital
Improve import-export procedures
Amendmends of rules and regulations to support the opening of markets
Revise export and Customs procedures
Banks reluctant to Finance newly-developed products due to uncertainty of market
Problem in providing business documentation
Unclear products justification
Costly certification costs
Lack of awareness on the importance of professional certification
Collateralised loan is still priority
Banks need compensation for bad debts
Lack of government consideration in introducing guarantee – based scheme to entice banks to provide loans to SMEs and understand better underlying risks of SME lending
Significant level of impaired loans (High NPLs)
1) Lack of providing guarantee on co-sharing risk with banks
2) Insufficient introduction on soft loan schemes
Skilled employees
Brain drain issues
Lack of training provided

10. Development Programmes
for SMEs

11. SME Development Programmes ~ 2012
FOCUS AREAS
NO. OF PROGRAMMES
FINANCIAL ALLOCATION
(USD MIL)
Access to
financing 42
3,970.9
Human capital development 32
78.8
Market access 31
56.5
Technology & innovation 28
777.7
Infrastructure 11
36.0
Access to financing ~ 80.7%
Technology & innovation ~ 15.8%
TOTAL
144
4,919.9

12. Focus Areas vs SME Development Programmes
1-Innovation Certification for Enterprise Rating & Transformation Programme (1-InnoCERT)
Innovation & Technology
Skills Upgrading & Entrepreneurship Programme
SME University Internship Programme
Human Capital Development
Shari’ah-compliant SME Financing Scheme(SSFS)
Commercialisation Innovation Fund (CIF)
Business Accelerator Programme (BAP)
Enrichment and Enhancement Programme (E2)
Soft Loans
Access to Financing
Market Access
National Mark of Malaysian Brand
Branding Innovation Centre (BIC)
Mobile Gallery
Infrastructure

13. Implementation Channel (Existing Collaborators)
What is SCORE?
Example of Radar Diagram for 3-Star company
Analysis:
Weak in financial capability
Assistance:
Requires training in financial management & improvement in quality management
What is SCORE?
a comprehensive diagnostic tool to rate and enhance competitiveness of SMEs based on their performances and capabilities.
developed in August 2007.
Function
identify strengths and weaknesses for improvements; and
facilitate linkages.
Parameter
Business Performance
Financial Capability
Management Capability
Production Capability
Technical capability
Quality System
Innovation
Characteristics
0 – 2 Stars : Very basic business operation
3 – 5 Stars : Some degree of sophistication and can be groomed for export
Implementation Channel (Existing Collaborators)
Retail & Distributive Trade (PUNB)
Construction (CIDB)
ICT (MDeC)
Maintenance, Repair & Overhaul (MINDEF)
Professional Services
(PSDC)

14. What is M-CORE? What is M-CORE? Functions Parameters Characteristics
a comprehensive diagnostic tool to enhance competitiveness of Micro Enterprises
developed in Feb 2010
Example of Radar Diagram for Level 2 Micro Enterprise
Analysis:
Need to improve on business capability, including quality management
Assistance:
To identify relevant training programmes & quality management system for entrepreneur
Functions
identifies strengths and weaknesses for improvements;
Parameters
Business Capabilities;
Financial Capabilities;
Operations; and
Management.
Characteristics
Level 1 : Basic business operations
Level 2 : At average and has a potential
Level 3 : Complete the criteria
Proposed Implementation Channel
TEKUN
AGROBANK
SME BANK
BSN
AIM
ICU, JPM

15. SME Masterplan (2012-2020) SME Masterplan (2012-2020)
The Government has introduced the SME Masterplan for the development of SMEs with the New Economic Model (NEM) to elevate the role of SME as the key source of endogenous growth in the New Economic Model (NEM), and to ensure their growth is synchronised with NEM.
The SME Masterplan will help provide a “holistic development and growth approach” for SMEs by looking into needs like funding, capacity building and logistics support as well as to help them explore export markets.
The aim of the SME Masterplan is to help SMEs grow from just small companies to those that were successful not only domestically but also able to break into the regional and global markets.
The SME Masterplan will look at the growth and development of SMEs through a concept focusing on innovations as well as new technology and business processes and other aspects.
NSDC decided on the need for the SME Masterplan after seeing that SMEs made a 32% contribution to the GDP with the sector recording an annual growth of 9.2%, which was higher than the growth of the national GDP.
The services sector had proven to be most successful among SMEs, while other areas like agriculture and manufacturing will be given more attention under the SME Masterplan.
The SME Masterplan would propose bold measures for SMEs to make a quantum leap in GDP growth and for Malaysia to produce domestic, regional and global champions that can spearhead the growth in the economy.

16. 6 High Impact Programmes
Charting Future Direction ~ SME Masterplan
High-income Nation
4 Goals & 6 Focus Areas
Chart direction until 2020
6 High Impact Programmes
GTP
SME Masterplan
ETP
The SME Masterplan will create an ecosystem to accelerate the growth of SMEs towards achieving a high income economy.
In line with this, the Government will ensure that the implementation of the Plan will be a part of the Rural Transformation Programme (RTP), which the main objective is to modernise the rural area, increase the infrastructure, income level and the rural population economy.
As a result of this implementation, rural area integration with the economic main stream, rural entrepreneur involvement in the global supply chain and economic activities that directly involve in inclusive innovation can be achieved.
The SME Masterplan is an inclusive plan for all SMEs, across sectors, regions (i.e. East Malaysia and rural) and strategic areas (i.e. Bumiputra and women). The Plan proposes bold measures not only to develop champions but also to develop microenterprises to ensure balanced growth.  
The Government Transformation Programme (GTP) is an ambitious, broad based initiative aimed at addressing key areas of concern to the rakyat while supporting Malaysia’s transformation into a developed and high-income nation as per Vision 2020.
The Prime Minister identified 7 National Key Results Areas (NKRAs) following months of evaluating the people’s demands of the Government and the most pressing issues were selected to develop the NKRAs. A focused list of projects and initiatives for each NKRA was developed to ensure that big fast results for specific targets are achieved in the interest of the people.
The Economic Transformation Programme (ETP) is a comprehensive effort that will transform Malaysia into a high-income nation by 2020.
It will lift Malaysia's gross national income (GNI) per capita from USD6,700 or RM23,700 in 2009 to more than USD15,000 or RM48,000 in 2020, propelling the nation to the level of other high income nations. This GNI growth of six per cent per annum will allow us to achieve the targets set under Vision 2020.
Successful implementation of the ETP will see Malaysia's economy undergo significant changes to resemble other developed nations. We will continue our shift towards a service-based economy, with the services sector contribution growing from 58 percent to 65 percent in the same period. More than 3.3 million new jobs will be created by 2020, spread across the country in urban and rural areas. The nature of these new jobs will result in a shift towards middle and high-income salary brackets. Greater Kuala Lumpur/Klang Valley will be transformed into a world-class city. Finally, growth will be achieved in a sustainable manner, without cost to future generations, through initiatives such as building alternative energy generation capacity and conserving our environment to promote eco-tourism.
Year 2010
Year 2020
rTP
GDP
Employment
Exports
32%
59%
19%
41%
62%
25%
RTP
ETP
National Policies
GTP

17. SME Masterplan ~ 4 Goals To increase BUSINESS FORMATION
To expand no. of HIGH GROWTH
& INNOVATIVE FIRMS
To raise LABOUR PRODUCTIVITY
SME Masterplan ( )
The SME Masterplan focuses on creating an enabling ecosystem to accelerate the growth of SMEs through productivity gains and innovation and to bring them to the next level of development. The diagnosis of the current status of SMEs revealed several positive developments. Since a more structured framework for SME development was put in place in 2004 following the establishment of the NSDC, SMEs outperformed the overall economy in terms of growth in value added, employment and productivity. The analysis also showed that high growth SMEs existed across all subsectors and were the major contributor to the increase in value-added and employment of SMEs.
Over the years, Government assistance to SMEs has been significant and has yielded positive impact. In the 9th Malaysia Plan period, SME development amounted to USD8.7 billion or almost 12% of the development expenditure focusing on enhancing access to financing, building capacity and capability, and strengthening enabling infrastructure. A pilot study on impact assessment by the World Bank on 15 SME programmes showed that these programmes produced net positive impact on SMEs and the economy, particularly on investment, output and value added, but little impact on labour productivity and wages. It was also found that productivity level of SMEs in Malaysia was relatively low at USD15,667 per worker, about one-third that of the large companies (USD47,667 per worker) and also lagged behind other countries.
Going forward in line with the aspirations of the NEM, the Plan focuses on developing high growth SMEs to become homegrown champions that spearhead the economy as well as formalising and developing microenterprises that make up the bottom 40% to achieve the socio-economic objective of balanced growth. In addition to assuming a driver role, SMEs would also be an enabler of growth through creation of effective value chain that links with the global supply network.
The vision of creating globally competitive SMEs is crystallised through the four strategic goals, namely:
To increase business formation to facilitate business dynamism through a constant stream of new entrants into the market (target of 6% per year increase in registration of new companies)
To expand the number of high growth and innovative firms (10% per year) as they generate bulk of employment and output in the country as well as having the scale to be globally competitive
  To raise labour productivity of SMEs from RM15,667 in 2010 to RM30,333 in 2020 to boost incomes and raise standards of living
To intensify formalisation to promote growth and fair competition (informal sector reduced from 31% of GNI to 15% in 2020)
To intensify FORMALISATION

18. Constraints to Growth ~ need to be addressed simultaneously
SME Masterplan ~ 6 Focus Areas
Constraints to Growth ~ need to be addressed simultaneously
Innovation & Technology
Limited participation in national innovation system
Low product commercialisation and R&D spending
Poor technology uptake
Human Capital Development
Workforce lacks job readiness
Low utilisation of existing training
Non-competitive rewards & benefits
Access to Financing
Early stage financing
Poor creditworthiness
Lack of know-how and resources
Market Access
Low bargaining power
Information barrier for exports
Limited focus on marketing & branding
Legal & Regulatory Framework
Ease of obtaining licenses
Bankruptcy law limits entrepreneurs
SME taxation
Infrastructure & Security
Low and infrequent trade volume
Inefficient trade facilitation system
Six focus areas were identified to support the strategic goals:
Encourage greater innovation and technology adoption among SMEs
Enhance human capital and entrepreneurship development among SMEs
Ensure that creditworthy SMEs have access to financing for working capital and investment
Expand the market for goods and services produced by SMEs
Ensure legal and regulatory environment is conducive to the formation and growth of SMEs, while protecting the broader interest of society
Improve the infrastructure needed by SMEs to operate effectively 18

19. SME Masterplan ~ 6 High Impact Programmes
HIP 1:  
Integration of registration and licensing of business establishments
HIP 4:  
Going Export
(GoEx)
Programme
HIP 2:  
Technology Commercialisation Platform (TCP)
HIP 5:   
Catalyst
Programme
HIP 1:   Integration of registration and licensing of business establishments aims to create a single registration point through interfacing of the current National Business Registration System (MyCOID) and the National Business Licensing System (BLESS). The initiative is to simplify procedures to reduce the lag time and costs involved in starting a new business. The initiative will also enhance formalisation as registration will be mandated as pre-requisite to licensing
HIP 2:  Technology Commercialisation Platform (TCP) is to provide a national network of privately-managed platform to promote innovative ideas right through from proof of concept (POC) to the commercialisation stage. TCP will be designed to remove market barriers to innovation by providing linkage to a range of services including infrastructure support, financing, technical assistance, market information and capacity building
HIP 3:  SME Investment Programme (SIP) is to provide early stage financing through the development of investment companies which would invest in potential SMEs in the form debt, equity or a hybrid of both. This will expedite the growth of the venture capital industry in the country that can support innovative SMEs and start-ups
HIP 4: Going Export (GoEx) Programme offers customised assistance to new exporters and SMEs venturing into new markets. Export-ready firms can avail to comprehensive support which among others include linkage to market expertise and buyers, and compliance to standards to expedite internationalisation of services and products
 HIP 5:   Catalyst Programme is to create homegrown champions through a targeted approach with support in the area of financing, market access and human capital development. Participants of the Programme will be selected through a transparent selection criteria and exit mechanism
HIP 6:   Inclusive Innovation is specifically designed to empower the bottom 40% of the income group to leverage on innovation to promote transformation of communities including microenterprise in the rural areas through handholding and technical and management support
HIP 3:  
SME Investment Programme (SIP)
HIP 6:  
Inclusive
Innovation