1. Chapter 10 Challenges and Opportunities of SMEs in Malaysia

2. Definitions of SMEs

3. Unique Features of SMEs
have an owner/manager with few generic business skills or a particular technical expertise
have personal assets committed as security for the business
operate flexibly rather than on a strict observance of regulations
have a vision and outlook that is bounded by the skills and experience of the founder/owner and tight resource constraints
operate in provincial areas, be a key part of the social fabric of the community

4. Importance of SMEs
The significance of SMEs is associated primarily with their role in stimulating economic growth.
Other significant contributions of SMEs:
Because they are labour-intensive, SMEs create employment opportunities.
SMEs enhance regional development and create more equitable income distribution due to their location and ongoing expansion throughout the broader community.

5. Importance of SMEs
SMEs play a vital complementary role in relation to larger firms--as suppliers and distributors.
SMEs serve as a training ground for developing the skills of workers and entrepreneurs.
The presence of SMEs curbs the monopoly power of larger firms and provides the structure of the economy with greater flexibility.
Thus, a country can reduce its vulnerability to financial crises by strengthening its SMEs.

6. Some Facts and Figures
A total of 99.2% (552,849 companies in operation) of all manufacturing and service businesses are SMEs and the majority of SMEs (86.6%) are in the services sector.
Employment- SMEs accounted for 56.4% of the total workforce.
GDP-SMEs contributed 33% of the total output.
Total Export-SMEs contributed 19%.
(Ref: SMIDEC 2009)

7. Contribution of SMEs to Gross Domestic Product, Employment, and Export by Sector in 2005

8. Composition of SMEs in Malaysia
Based on Census on Establishments and Enterprise 2005, out of 99.2% of SMEs, the services sector comprise 474,706 (86.6 per cent), followed by 39,376 (7.2 per cent) in the manufacturing sector and 34,225 (6.2%) in the agriculture sector.

9. Contribution of SMEs in Services Sector, 2005
*Health include hospital, medical, dental and veterinary services, herbalist, homeopathy and foot reflexology

10. Contribution of SMEs in Manufacturing Sector, 2005

11. Contribution of SMEs in Agriculture Sector, 2005

12. Towards SME Sustainability: A Transdisciplinary Agenda
Need to solve the equation between economic growth and SME competitiveness on one hand, and social and environmental issues on the other hand.
HOW???
Encourage fusion between sciences and arts to meet the economic, social, environmental agenda of SMEs— the principle of “THE TRIPLE BOTTOM LINE”.

13. Triple Bottom Line Agenda of SMEs
A concept that acknowledges the importance of economic, social, and environmental agenda (Colbert & Kurucz, 2008).
ECONOMIC
Transdisciplinary research to generate successful and sustainable SMEs
SOCIAL
ENVIRONMENTAL

14. SME Development Framework 2006 - 2010
Promote development of competitive and resilient SMEs in all sectors
towards increasing SME contribution to the economy
Economic
Socio
Economic
Developing progressive and resilient Bumiputera SMEs and entrepreneurs
Enhancing viability of SMEs across all sectors
Promoting development of SMEs in knowledge-based industries
Objectives -
Key Message: The implementation of SME development programmes is guided by two economic objectives and one socio-economic objective to achieve an ultimate target of “promoting development of competitive and resilient SMEs in all sectors towards increasing their contribution to the economy”.
The two (2) Economic objectives are:
Enhancing viability of SMEs across all sectors; and
Promoting development of SMEs in knowledge based industries.
These objectives are aimed at developing viable SMEs in all sectors to ensure the achievement of broad-based and sustainable economic growth. Emphasis is given in promoting knowledge-based SMEs, being one of the key strategies in SME development.  
In addition, in line with the aim of the Government to achieve a sustainable and balanced economic growth, socio-economic objective has also been set to develop progressive and resilient Bumiputera SMEs and entrepreneurs.
Three objectives are supported by three strategic thrusts, namely:
Strengthening Enabling Infrastructure for SME Development;
Building Capacity and Capability of SMEs; and
Enhancing Access to Financing by SMEs.
In addition, NSDC endorsed a set of key macro performance indicators and targets for 2006 – 2010 to provide the direction for the development of SMEs and to monitor SME performance for the next 5 years.
The targets are based on data obtained from SME Census on Establishments and Enterprises 2005 (the important key indicators include SMEs’ contribution to GDP, employment and exports). I.
Strengthening enabling
infrastructure
II.
Building capacity and
capability
III.
Enhancing access
to financing
Strategic Thrusts 14

15. FUNCTIONS OF SME CORP. MALAYSIA
To Coordinate Policies Formulation and Programmes Implementation
Formulate broad SME policies across all sectors
Point of reference for Government Agencies on SME related issues
Monitor and evaluate effectiveness of policies and programmes
To be ‘One-Stop’ Information
and Advisory Services
Channel to obtain feedback on SME issues
‘One Referral Centre’ of reference for SMEs
To Disseminate Information
and Research
Liaise with domestic and international organisations to share best practices and relevant programmes on SMEs
Manage National SME Database
Publish SME related publications and statistics
Undertake research on SME environment
Secretariat to National SME Development Council (NSDC)
Provide support and administrative services to NSDC
Ensure decisions from the NSDC are communicated to all relevant stakeholders
Notes:
The functions is expected to accelerate the development and promotion of SMEs. 15 15 15

16. ORGANISATION STRUCTURE OF SME CORP. MALAYSIA
NSDC
MITI
Legal Unit
Media and Public Relation Unit
Secretariat
- Project Management Officer
- Transformation Management Officer
Members of the Corporation
Internal Audit Unit
CEO
Deputy CEO I
Coordination & Development
Deputy CEO II
Implementation
Chief Operating Officer
Strategic Planning Division
Programme Coordination Division
Corporate Communication Division
Business Development Division
Economic Division
12 State Offices
Financing and Monitoring Division
Information Technology Division
Corporate Management Division 16

17. STATE OFFICES 17 17

18. PERFORMANCE OF SME DEVELOPMENT
PROGRAMMES

19. Development Programmes
STRENGTHENING ENABLING
INFRASTRUCTURE
Involves developing and enhancing physical infrastructure
and information management, as well as creating conducive regulations and operation requirements for SMEs.
Programmes available:
Soft Loan Scheme for Programmes available:Factory Relocation – MITI
Furniture Promotion Centre – MPIC
Provision of Business Premises – MRRD
Incubation Centre – MOSTI
Urban Development and Growth Centre – MRRD
Upgrade basic amenities and relevant infrastructure in kampungs – MOTOUR
Landscape Industry Resource Centre – MHLG
Halal Park Development – HDC
Provision of Marketing infrastructure; Product Packaging Centre (PUSPRO); Distribution Centre; and Agricultural Marketing Centres - MOA

20. Development Programmes
Programmes available:
Matching Grant for Business Start-ups - MITI
Computer Application in Business – MOE
Train and Work Programme - MDTCC
Matching Grant for Product and Process Improvement - MITI
Quality Palm Oil Seeds Assistance Scheme for Smallholders in Sabah and Sarawak - MPIC
Production of Specialty Pepper Programme - MPIC
Produk Malaysia Citarasa Kita - MDTCC
SME Brand Development Programme - MITI
Training Programme for Budget Hotel Operators – MOTOUR
Train the Trainer Programme - MOHR
TUNAS (Tunjuk Nasihat Sawit) - MPIC
Skills Upgrading Programme - MITI
Biotechnology Entrepreneur Programme - MOSTI
Commercialisation of R&D Fund - MOSTI
Bumiputera Manufacturing Incubator - MRRD
Franchise Development Promotion Programme – MOF
Bumiputera Exporters Development Programme - MITI
BUILDING CAPACITY AND CAPABILITY
Includes entrepreneurship
development, human capital development,
marketing and promotion, advisory services, awareness and outreach,
technology enhancement as well as product development.

21. CAPACITY DEVELOPMENT PROGRAMMES BY SME CORP
INDUSTRIAL LINKAGE PROGRAMME
2. SKILLS UPGRADING PROGRAMME
3. SME COMPETITIVE RATING FOR ENHANCEMENT (SCORE)
4. ENTERPRISE 50 AWARD PROGRAMME
5. NATIONAL WOMEN ENTREPRENEUR AWARD (NWEA)

22. SME DEVELOPMENT PROGRAMMES
6. BUMIPUTRA ENTREPRENEUR ENHANCEMENT PROGRAMME ( BEEP)
7. SME – UNIVERSITIY INTERNSHIP PROGRAMME
8. TECHNOLOGY AND INNOVATION PROGRAMME
9. SME EXPERT ADVISORY PANEL (SEAP)
10. OUTREACH PROGRAMMES

23. 23 23

24. SME COMPETITIVE RATING FOR ENHANCEMENT
(SCORE)
Total SCORED - 1,183 SMEs

25. SME – UNIVERSITIY INTERNSHIP PROGRAMME25 25

26. INNOVATION FOR SMEs INITIATIVES TO DEVELOP INNOVATION-LED
TECHNOLOGY AND INNOVATION PROGRAMME
INITIATIVES TO DEVELOP INNOVATION-LED
TECHNOLOGY-DRIVEN SMEs
NATIONAL SME INNOVATION FOCAL POINT
UNDER IMP3
INNOVATION FOR SMEs
STRATEGIC THRUST 4 – SME / TECHNOPRENEUR
UNDER JTPIN 26

27. TECHNOLOGY AND INNOVATION PROGRAMME (Cont)
MEMBERS OF THE INNOVATION FOR SME COMMITTEE

28. TECHNOLOGY AND INNOVATION PROGRAMME (Cont)
Technology Database
(in collaboration with MASTIC)
TECHMART
in SMIDEC’s
Website
- 270 technologies available for commercialisation
- 18,413 researchers’ profile available
Technology Roadmap
- Completed Roadmaps → Electrical & Electronics
→ ICT
→ Biotech industry
- Work In Progress → Automotive Sector
→ Plastics & Rubber
Wood and wood-based

29. SME EXPERT ADVISORY PANEL (SEAP)
Total Experts : 62
Total SMEs Participated : 59 29 29

30. Convention, Seminars/Workshops/ Technical Briefings
OUTREACH PROGRAMMES
Convention, Seminars/Workshops/ Technical Briefings 30 30

31. Business Advisory Services31 31

32. Enquiries through E-mails
Note :
Officiated during SMIDEX 2003 32 32

33. Toll Free Line / Info Line (1-300-18-1801)
Note :
Officiated during SMIDEX 2003. 33 33

34. Publications 34 34

35. THE NATIONAL MARK OF MALAYSIAN BRAND
The Mark of Quality

36. Development Programmes
ENHANCING ACCESS TO FINANCING
Involves the
development and strengthening of institutional arrangements to
support SME financing needs.
Financial assistance is provided based on three stages of business cycles:
early stage financing
business expansion financing
rehabilitation

37. FINANCIAL ASSISTANCE FOR SMES BUSINESS EXPANSION FINANCING
EARLY STAGE FINANCING
FINANCIAL ASSISTANCE FOR SMES
BUSINESS EXPANSION FINANCING
REHABILITATION

38. Financial Assistance (cont’…)
EARLY STAGE FINANCING
Examples:
• Venture Capital Funds - MOSTI & MAVCAP
• Business Effort Group Economic (TEKUN) - MOA
• PROSPER, Retail and Graduate PROSPER - PUNB
• DAGS Start-up - CGC

39. Financial Assistance (cont’…)
BUSINESS EXPANSION FINANCING
• Microfinance Scheme - BNM and participating
Financial Institutions
• Soft Loans for SMEs - MITI
• Japan Bank for International Cooperation (JBIC)
United Loan for ICT Fund - MOF
• Special Fund for Tourism - MOTOUR
• TNB Vendor Financing Programme - MEWC
• Pemborong PROSPER - PUNB
• Skim PKS - PUNB
• Rural Economy Funding Scheme (SPED) - MRRD
• Bank Rakyat Business Financing Scheme - MOF
• PNS Franchise Financing Scheme - MOF
• MARA Business Financing Scheme - MRRD
• Co-operative Financing Fund - MDTCC
• Rural Economic Assistance - MRRD
• Overseas Project Fund – Exim Bank
• Multi Currency Trade Finance (MCTF) and Indirect Exporter Financing Scheme (IEFS) – Exim Bank

40. Financial Assistance (cont’…)
REHABILITATION
Small Debt Resolution
Scheme (SDRS)
- BNM and participating financial Institutions

41. CONCLUSION
The Government can play a vital and strategic role in supporting SMEs
The roles should focus on capacity and capability development in terms of providing good infrastructure, information, coordination and some financial support
The roles should complement private sector and be market friendly in its implementation
The Government’s intervention must involved all relevant stakeholders
The Government’s intervention can be permanent but must be flexible and responsive to new requirements of the business world 41 41

42. THANK YOU… 42