Dato’ Hafsah Hashim, CEO SME Corp. Malaysia

SME DEVELOPMENT FRAMEWORK: THE MALAYSIAN CASE

Cairo AMC-CBE-WBG SME Conference, 14 - 15 January 2015

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97.3% (645,136) business establishments in the country are SMEs

SMEs cut across all sectors of the economy

90%: Services

5.9%

3%

1%

0.1%

Manufacturing

Construction

Agriculture

Mining & Quarrying

GDP Employment Exports

33.1% 57.5% 19%

SMEs contribution to the economy

Source: Department of

Statistics Malaysia and

SME Corp. Malaysia

SMEs an important contributor to the development in Malaysia

Micro: 77%

Small: 20%

Medium: 3%

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New definition of SMEs beginning 2014

• Manufacturing: Sales turnover

≤ USD14.10 mil. OR full-time

employees ≤ 200 workers

• Services & other sectors:

Sales turnover ≤ USD 5.60 mil.

OR full-time employees ≤ 75

workers

• Locally incorporated under

Companies Act 1965; or

• Registered under ROBA (1956)

or (LLP) Act 2012; or

• Registered under respective

authorities in Sabah & Sarawak; or

• Registered under respective

statutory bodies for professional

service providers.

Not public-listed company in main

board in Malaysia or other countries

Not a subsidiary of public-listed

company in main board in Malaysia

or other countries

Not a subsidiary of large firms,

MNCs, GLCs, Syarikat Menteri

Kewangan Diperbadankan (MKDs)

and State-owned enterprises

1

3

2

4

5

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Details by size

Micro

Small

Medium

Manufacturing Services and Other sectors

Sales turnover:

< USD84,700

OR

Employees: < 5

Sales turnover :

< USD84,700

OR

Employees: < 5

Sales turnover:

USD84,700 < USD4.24 mil

OR

Employees: From 5 to < 75

Sales turnover:

USD84,700 < USD847,000

OR

Employees: From 5 to < 30

Sales turnover:

USD4.24 mil ≤ USD14.10 mil

OR

Employees: From 75 to ≤ 200

Sales turnover:

USD847,000 ≤ USD5.65 mil

OR

Employees: From 30 to ≤ 75

*USD1=RM3.54

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SME Definition

Statistics

SME Development Framework

SME Masterplan

Centralisation of training

programmes, Advisory

Information – Annual

Report, SMEIPA,

SMEinfo portal

New financial products –

microfinance, guarantee

Financial infrastructure –

SME Credit Bureau, SDRS,

transformation of DFIs NSDC: National SME Development Council

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

National SME Development Council

(NSDC)

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Formulate

policy & undertake

economic

assessment

One Referral

Centre

Secretariat to NSDC

Coordinate

programmes &

policies

Including establishment of SME Corp., a dedicated Agency for SME development

NSDC

Ministries &

Agencies

SMEs

Chambers &

Industry

Associations

• Outcome of policies by NSDC

• Other supportive policies (improvement in government delivery, higher domestic

demand and tourism, focus on farmers and small contractors)

Outcome … SME growth performance impressive but still a long way to achieve a high income nation

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Contribution of SMEs to GDP

0

10

20

30

40

50

60

Lowincome

countries

Middleincome

countries

Highincome

countries

Malaysia

(%)

16%

39%

51%

33%

-2

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e

(%)

SME GDP Overall GDP

6.3%

4.7%

6.5-7%

5.5 -6%

SME vs Overall GDP Growth

Malaysian economy continues on a steady growth with domestic demand as the key pillar

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Robust expansion in private investment

and improvement in external demand

Consolidation of

Public sector

Private consumption is expected to be underpinned by

healthy labour market

Malaysian Economy is expanding at 5.5-6.0% (2014)

Forecasted by MOF at 5-6% (2015)

• SME Development : Domestic demand gains momentum, as countries focus on

inclusive growth for long-term prosperity and social being of the nation

Doing Business Report 2014 by the World Bank • Malaysia has been ranked number one for six consecutive years for ‘getting credit’

since 2007 which mirrors a strong financing ecosystem in Malaysia

• Financial Institutions play an important source of external funding for SMEs contribute

about 95% (BIs: 90%, DFI: 5%)

How did we do it?

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Standard format for financing and loan forms across all financial institutions (BIs and DFIs).

Working together with financial institutions associations and maintain good relationship with banking fraternity

Manage to keep lower NPL among SMEs by using SCORE : Setting a mandatory requirement for all financing applicants to undergo financing training management for non-financial managers

Role of Credit Guarantee as a financial tool

ME Breakout Strategy

Relationship

of FIs and

SMEs

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

Growth Start-up Expansion / Graduation

Graduate 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

StartMEUp P1

GrowME P2

MarketME P3

FastTrackME P4

ME MoneyMatters P5

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• Increase market penetration of MEs to grow their customer base:

Enhance physical channels Access to online markets Distribution support

• Develop successful ME start-ups by providing a conducive start-up environment:

Simplify business registration process Provide start-up support

• Support increase in productivity and drive growth of MEs: Improve front- and back-office operations Leverage on ICT Upskill human capital Incentivise use of automation and services to drive

productivity

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… with specific objectives under each programme

• Graduate MEs to SMEs through: Dedicated support Structured fast-track programme Results based assistance

• Create financial savvy MEs and increase MEs awareness and access to financial support:

Raise awareness on financing options Provide institutional support

Awareness and Outreach

Increase MEs awareness of the support resources available to them Strengthen SME Corp’s positioning as a one-stop entity for all ME-related support

StartMEUp P1

GrowME P2

MarketME P3

FastTrackME P4

ME MoneyMatters

P5

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SMEs need to increase contribution

to GDP Contribution of SMEs to GDP in Malaysia

is much lower (33%) than:

• other middle-income nations (average

of 39%); and

• high income-nations (average of 51%)

… and to move up the value

chain SMEs currently concentrated in

low value-added activities

Why the SME Masterplan?

Going forward, SMEs important to achieve growth targets and socio-economic agenda of the country

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SME Masterplan to chart development of SMEs through 2020 …

SME Masterplan (2012 – 2020)

Vision 4

Goals Macro

Targets

Globally competitive SMEs

across all sectors that enhance

wealth creation and contribute

to the social well-being

• Increase business formation

• Intensify formalisation

• Raise productivity

• Expand number of innovative

& high growth firms

GDP: 41%

Employment: 62%

Exports: 21%

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…adopting a new approach to SME development

Approach

Public-private

partnership

‘Live’ plan

Outcome-based

Innovation and

productivity-led

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

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

Action Plan

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

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

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

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

Integration of business

registration & licensing

to enhance ease of

doing business

SME Investment

Partner (SIP) to provide

early stage financing

Technology

Commercialisation

Platform (TCP) to

encourage innovation

Going Export (GoEx)

Programme to expedite

internationalisation of

SMEs

Inclusive Innovation to

empower the bottom

40%

Catalyst Programme to

promote more

homegrown champions

Resource pooling &

shared services

Reduce information

asymmetry

Create demand for

SME products

Building capacity &

knowledge

Improve connectivity &

basic amenities Ease market access

Review restrictive laws &

policies

Completion of integrated trade clearance and facilitation system (single window)

Synchronise measures on productivity enhancement

technologies with other relevant labour policies

Bankruptcy Law to give entrepreneurs a second

chance

High Impact Programmes

(HIPs

Measures across 4 Themes

Measures for East Malaysia

Other Measures

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Outcome is measured at 3 levels

Macro

performance Programme

level

Firm level

GDP

Exports

Empl

OUTCOME

SCORE

1-

InnoCERT

SMEIPA

Masterplan

M&E

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Target is to increase contribution to GDP to slightly over 40% by 2020

Economic Contribution

in 2020:

GDP

Employment

Exports

33% 41%

57% 62%

2013 2020

17% 25%

Projections by SME Corp. Malaysia

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4

5

6

7

8

9

2000 - 05 2006 - 10 2011 - 20

GDP Growth

Quantum

leap

“Business

as usual”

growth

(6.2%)

New growth path

(9.3%)

CAGR (% change)

2014 - 20 2006- 13

Previous growth

path (8.7%)

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Moving forward into 2020….

GDP

Exports

Focus will be towards:

Implementation of HIPs

Monitoring & evaluation on the programmes and impacts of SME

Masterplan’s initiatives

Undertake mid-term review in 2017 with

reference to progress of SME

Masterplan implementation

MALAYSIA

welcomes you…

to the

ASEAN SME Showcase & Conference 2015

21/12/2014 ASEAN SME Showcase 2015

Page 21

THANK YOU

www.smecorp.gov.my www.smeinfo.com.my 1-300-30-6000

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