Ms. Karunajothi KandasamySME Corporation Malaysia

12 December 2009Chennai, India

SME Development in Malaysia: Trade Opportunities for Indian SMEs

Conference on “Trade Opportunities for SMEs among SAARC & ASEAN Countries”

PRESENTATION OUTLINEPRESENTATION OUTLINE

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PART I: SME Development in Malaysia

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Services, Primary Agriculture, Information and Communication Technology

(ICT)

Annual sales turnover

< RM5 mil (USD1.5 mil)

OR

Full time employees

< 50

Manufacturing and Manufacturing Related

Services

Annual sales turnover < RM25 mil (USD7.4 mil)

OR

Full time employees

<150

Definition of SMEs

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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%)

MICROSMALLMEDIUMLARGE

• 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

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Services(86.6 %)

Agriculture(6.2 %)

Manufacturing(7.2 %)

Source: Census of Establishments & Enterprises 2005

Wholesale & Retail (55.5%)Restaurant & Hotel (15.2%)Transport & Communication (6.5%)

Plantation and horticulture (65.6%)Fishery and its services activities (20.8%)Poultry farming (7%)

Textiles & Apparels (23.4%)Food & Beverages (15%)Metal & metal products (13%)

• 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

Profile of SMEs by Sector

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– 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

National SME Development Council... high level body to chart SME policy direction

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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

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• 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: 287,6922007: 286,7552008: 597,480

Implementation of SME programmes more coordinated and cost effective

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Key achievements in SME development

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Contribution of SMEs to the Economy

Contribution to the Economy and Policy Targets

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A dedicated agency established in October 2009

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CURRENT ROLE & FUNCTIONS OF SME CORP. MALAYSIA

Expanded Roles

Expanded roles & functions of SME Corp.

Previous Role

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ProgrammesCoordination

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

SME Corp. as intermediary between public and private sector

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1. INDUSTRIAL LINKAGE PROGRAMME

2. SKILLS UPGRADING PROGRAMME

10. OUTREACH PROGRAMMES

8. ENTERPRISE 50 AWARD PROGRAMME

Focusing on facilitating linkages, enhancing skills & entrepreneurship technology innovation, motivation & advisory services

7. NATIONAL WOMEN ENTREPRENEUR AWARD (NWEA)

6. TECHNOLOGY AND INNOVATION PROGRAMME

9. SME EXPERT ADVISORY PANEL (SEAP)

3. BUMIPUTRA ENTREPRENEUR ENHANCEMENT PROGRAMME

4. SME – UNIVERSITY INTERNSHIP PROGRAMME

5. SME COMPETITIVE RATING FOR ENHANCEMENT (SCORE)

Capacity development programmes by SME Corp

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Manufacturing & Services:• Business Start-Up • Product & Process Improvement• Certification & Quality Management

Systems• Market Development• Development & Enhancing Product

Packaging Promotion of Halal Products

• Advertisement & Promotion

Manufacturing & Services• Soft Loan for SMEs (SLSME)• Soft Loan for Factory Relocation• Soft Loan for ICT Adoption

Financial assistance covers a spectrum of activities in the business growth cycle and scope be extended to all sectors in 2010

Financial assistance programmes

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

SME

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SME Competitive Rating for Enhancement (SCORE), a tool to evaluate SME capabilities & performance

Visit SCORE

• 0 – 2 Stars : Very basic operations• 3 – 5 Stars : Some degree of

sophistication, can be groomed for export market

Example of Radar Diagram for 3-Star firm

CURRENT ISSUES AND

CHALLENGES

Arising from the global economic

crisis

Globalisation and market

liberalisation

• Access to market• Branding and promotion• Adoption of technology, ICT & innovation

• Human capital mgmt• Access to financing

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Dynamic, innovative and resilient SMEs with higher economic contribution

• Regular SME statistics

• SME Census in 2011

• Company profile for monitoring

• Replicate “One Referral Centre” in all states

• Nationwide promotion

• Enhance virtual outreach

Business Dev. support

Policies and strategies going forward

Data Management

Coordination of policy &

programme implementation

Policy formulation (overall) research

and benchmark

Strengthening “One Referral

Centre”

• Enhance coordination to further streamline programmes

• Implement outcome -based monitoring framework

• Develop Entreprenuer-ship

• Facilitate innovation environment

• Handholding programme for enhancement

• Align SME development framework to High-Income Economy

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PART II: TRADE & INVESTMENT BETWEEN MALAYSIA - INDIA

Malaysia’s trade with India has increased since 2002Malaysia’s trade with India has increased since 2002

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan-Sept 2009

Total Trade

Exports

Trade Balance

RM35b (3%)

RM4.6b

Imports

RM bil

Malaysia’s Trade with India (2000 – 2009)

RM10.3b (2.0%)

RM6.7bRM10.1b (1.3%)

RM2.7b (0.5%)

• Trade balance in favour of Malaysia

RM24.7b (3.7%)

RM7.3b (1.9%)

Malaysia – India: Trade RankingMalaysia – India: Trade Ranking

Key ProductsKey Products

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 Exports to India (Jan – September 2009)

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 7.5 435.723

Malaysia – India: Investment cross border flowsMalaysia – India: Investment cross border flows

• 1980 - 2007: 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 2000 - 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

MALAYSIA

INDIA

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Industry specific investment incentivesIndustry specific investment incentives

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10 Bills of Guarantees

Other investment incentivesOther investment incentives

Incentives offered to enhance FDI inflows into the country

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Liberalisation of the services sector (2009)

Areas for trade and investment opportunitiesAreas for trade and investment opportunities

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Manufacturing AgricultureServices

•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

Malaysia an attractive investment destinationMalaysia an attractive investment destination

PART III: WAY FORWARD

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Global economic recovery to be led by Asia…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

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  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 2.5 0.6 -4.2 1.2 2.3

United States 3.2 2.9 2.0 1.1 -3.0 1.8 2.5

Euro Area 1.3 2.8 2.7 0.6 -4.5 0.5 1.9

Japan 2.6 2.4 2.3 -0.7 -6.8 1.0 2.0

Developing countries 6.7 7.6 8.1 5.9 1.2 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 9.0 6.5 7.5 8.5

South Asia 8.7 9.0 8.4 6.1 4.6 7.0 7.8

India 9.2 9.7 9.0 6.1 5.1 8.0 8.5

Pakistan 7.8 6.9 6.0 5.8 1.0 2.5 4.5

Bangladesh 6.0 6.6 6.4 6.2 5.0 4.5 5.0

Latin America and Carribbean 4.7 5.6 5.8 4.2 -2.2 2.0 3.3

Asia key driver of growth...Asia key driver of growth...

Source: World Bank 31

Free trade agreements in place…Free trade agreements in place…

• 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.

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

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Regional and bilateral cooperation …Regional and bilateral cooperation …

• 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

SME Corp. is Malaysia’s focal point for:•ASEAN SME Working Group•APEC SME Working Group

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

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Prospects of Collaboration between Malaysia IndiaProspects of Collaboration between Malaysia India

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jothi@smecorp.gov.my

+603 6207 6264

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