Propelling Malaysian SMEs into a Higher Economic Contributor by: Dato’ Hafsah Hashim CEO of SME Corporation Malaysia Saudi International SMEs Forum 2013, 29th May 2013

< RM25 million (£5.42 million) < RM5 million (£1.08 million) Definition of SMEs Annual sales turnover < RM25 million (£5.42 million) OR Full time employees <150 Manufacturing, Manufacturing Related Services and Agro-based Industry Services, Primary Agriculture, Information and Communication Technology (ICT) Annual sales turnover < RM5 million (£1.08 million) OR Full time employees < 50

SMEs account for bulk of total businesses in Malaysia … 97.3% 97.3% of total establishments (645,136) versus 548,267 on 2003 Mainly (77%) microenterprises Concentrated in services sector (90%) Services Distributive Trade and Repair of Motor Vehicles and Motorcycles (50%) Restaurants (25%) 90.0% Manufacturing Textiles & Wearing Apparel (26.5%) F&B Products (16%) Construction Non residential buildings (21.5%) Civil Engineering (21.0%) 3.0% Agriculture Crops (70.4%) Livestock (13.4%) Mining & Quarrying Stone Quarrying (83.6%) Mineral Mining (16.4%) 0.1% Source: Economic Census 2011

59% 19% SMEs are the backbone of the economy 97% Total Establishments 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 97% Total Establishments 32% GDP 19% Exports 59% Employment Distribution (%) of SMEs by Sector -Services 90% -Manufacturing 5.9% -Construction 3% -Mining & Quarrying 0.1% Distribution (%) of Total Employment of SMEs by Size and Sector -Micro 36.5% -Small 40.1% -Medium 23.4% Source: Economic Census 2011

SME Value Added and Overall GDP Growth… SME growth outperformed overall GDP growth during 2004 – 2011: 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) GDP & SME Growth GDP & SME Growth (yoy change) % Distribution (%) of SMEs by Sector -Services 90% -Manufacturing 5.9% -Construction 3% -Mining & Quarrying 0.1% Distribution (%) of Total Employment of SMEs by Size and Sector -Micro 36.5% -Small 40.1% -Medium 23.4% Year Source: DOSM and SME Corp. Malaysia

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

Approach Innovation and productivity-led Public-private partnership SME Masterplan takes a new approach in SME development Approach Public-private partnership ‘Live’ plan Outcome-based Innovation and productivity-led

New SME Development Framework for innovation-led and productivity-driven growth Globally competitive SMEs across all sectors that enhance wealth creation and contribute to the social well-being Vision SME Development Framework Increase business formation Expand number of high growth and innovative firms Raise productivity Intensify formalisation Goals Innovation & Technology Adoption Human Capital Development Access to Financing Focus Areas Market Access Legal & Regulatory Environment Infrastructure Action Plan Institutional Support Reliable database Monitoring & Evaluation Effective Coordination Effective Business Services 8

Result-based approach with monitoring & evaluation Plan proposes 32 initiatives across all focus areas, of which 6 are High Impact Programmes 6 High Impact Programmes (HIPs) Measures across 4 Themes Resource pooling & shared services Create demand for SME products Reduce information asymmetry Building capacity & knowledge 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% Measures for East Malaysia Improve connectivity & basic amenities Review restrictive laws & policies Ease market access Other Measures 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 Result-based approach with monitoring & evaluation 9

Economic Contribution in 2020: Target is to increase contribution to GDP to slightly over 40% by 2020 GDP Growth CAGR (% change) New SME growth path Economic Contribution in 2020: GDP Employment Exports 32% 41% 59% 62% 2010 2020 19% 25% Quantum leap (8.7%) “Business as usual” growth (6.5%) Projections by SME Corp. Malaysia 10

Operating Mechanism Public – Private Collaboration Malaysia Incorporated initiated in 1983 to recognise importance of private sector in economic growth Concept: Nation is a corporate or business entity, jointly owned by both sectors and working together in pursuit of a common mission of nation Deregulation of cumbersome bureaucratic rules & regulations Improving delivery system Institutionalising consultative machinery Establishing smart partnership programmes in nation building efforts Pursuing privatisation Operating Mechanism

3 structural mechanisms established to promote intersectoral consultation and cooperation Establishment of consultative panels Structure Dialogue sessions at various levels in public sector Promotion Joint sponsorship of formal or informal activities Funding

Public-private sector collaboration scaled new heights with establishment of PEMUDAH in February 2007 The Special Taskforce to Facilitate Business or PEMUDAH: High-powered taskforce to address bureaucracy in business-government dealings PEMUDAH Ministries / Agencies Industry Associations Chamber of Commerce

Way Forward : SME development a shared responsibility... Facilitator Government Private Sector Facilitator Act as catalyst Associations, chambers & NGOs to develop SMEs Large firms to mentor SMEs Participation in design & implementation of progs.

..with private sector assuming a greater role What needs to be done? Strengthen industry associations Increase range of services provided by associations Build bridges between public and private sectors through shared services (funds, space) Enhance capacity of private training and advisory provider Encourage establishment of private finance providers Develop capacity for private professional services for SMEs

“good database” “Good match” “Pre-evaluated companies” OBJECTIVES Bling - Business Linkages OBJECTIVES “good database” To develop competitive and innovative SMEs “Pre-evaluated companies” To widen the business opportunity of SMEs in supplying products and services to large companies and Multinational Companies (MNCs) “Good match” “It's efficient” To encourage business networking between SMEs and MNCs & GLCs

Example of Radar Diagram for 3-Star company SME COMPETITIVENESS RATING FOR ENHANCEMENT (SCORE) A diagnostic tool to rate and enhance competitiveness of SMEs based on their performances and capabilities. Developed in August 2007. 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 Function Identify strengths and weaknesses for improvements; and Facilitate linkages. 7 Parameters Business Performance Financial Capability Management Capability Production Capability Technical capability Quality System Innovation Characteristics 0 – 2 : Very basic business operation 3 – 5 : Competitive and export-ready companies Collaborators PUNB CIDB MINDEF TPM MDEC PSDC SME Bank TM MPC HDC NCIA MTIB

To date, 115 companies have been certified 1-INNOCERT Innovation Certification for Enterprise Rating and Transformation Programme I. Innovation Ability To identify and certify innovative SMEs and enterprises in Malaysia Mission To foster and support innovative SMEs and enterprises to be global innovative competitive players Objective II. Commercialization Ability III. Innovation Management IV. Innovation Outcome To date, 115 companies have been certified

To date, 59 companies have been certified NATIONAL MARK OF MALAYSIAN BRAND To enhance the visibility of Malaysian products and services in both local and international markets. Operations Management Management Commitment & Capability ASSESSMENT CRITERIA Quality & Standards of Products/Services Financial Capability Management Best Practices Brand Management & Marketing Social Responsibility To date, 59 companies have been certified

MOVING forward Thank you www.smeinfo.com.my www.smecorp.gov.my SME Corp. Malaysia www.smeinfo.com.my www.smecorp.gov.my 1-300-30-6000 SME Annual Report 2011/12 Physical KL Sentral MOVING forward Thank you