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MASTERPLAN SME
2012 - 2020
High Impact Programmes for SMEs
Biomass Industry Networking Seminar 1 November 2012
by:
Ms. K. Karunajothi SME Corp. Malaysia
SMEs are the backbone of the economy
• SMEs account for large proportion
of businesses in Malaysia:
- 97.3% of establishments (645,136)
- Bulk (77%) microenterprises, with
less than 5 workers
- Mainly in services sector (90%)
SME Contribution to:
GDP 32%
Employment 59%
Exports 19%
Source: Economic/SME Census 2011 , DOSM
Definition of SMEs:
Manufacturing
& MRSs
Services, Agri. &
ICT
Annual
Sales < RM 25 mil < RM 5 mil
OR
Full-time
employees < 150 < 50
2
Significant progress in SME development since establishment of NSDC… high level body
Council established in 2004
Chaired by PM, members 14 Ministers & heads of key agencies
Roles and Responsibility
Provides direction for comprehensive development of SMEs across all sectors
Formulates broad policies and strategies
Oversees coordination and ensures effectiveness in policy implementation
3
• Statistics
• Policy
• Capacity building & advisory
• Information dissemination – AR,
SMEIPA, SMEinfo portal
• New financial products –
microfinance, guarantee
• Financial infrastructure – SME
Credit Bureau, SDRS,
transformation of DFIs
Progress
16%
39%
51%
32%
0%
10%
20%
30%
40%
50%
60%
Low income
countries
Middle income
countries
High income
countries
Malaysia
-5%
0%
5%
10%
15%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
GDP Growth SME Growth
%
Year
Source: DOSM and SME Corp. Malaysia
4
GDP & SME Growth
(yoy change)
SME Contribution to GDP
Source: World Bank from various sources
8.4%
Holistic approach has shown results
SME vs Overall GDP Growth (2001 – 2010)
5
Moving forward, SME Masterplan a “game changer”…
“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
Public-private
partnership
‘Live’ plan
Outcome-based
Innovation and
productivity-led
…adopting a new approach to SME development
6
SME Masterplan is aligned to the New Economic Model and reinforces existing initiatives
National Transformation
Programme
RMK10 & 11
Bumiputera
Development
East Malaysia
Development
• 61 Ministries &
Agencies involved
• 40% of SME dev prog
• 33% of total funding
• Areas: - Entrepreneurship
- Retail, franchise
- Greentech
- Financing
- Poverty reduction
- High performance
• SMEs to benefit from
corridor development: - SCORE
- SDC
SME MASTERPLAN (2012 – 2020)
Co-existence
Cuts across all Economic Sectors & Strategic Areas
Other Corridor
Development
- NCER
- ECER
- IDR
7
Top-down
Bottom-up
Development of SME Masterplan is through a consultative process
8
Masterplan is evidence-based, addresses gaps and leverages on strengths
9
14
36
9 13
31
53
0
10
20
30
40
50
60
%
Source: Schnider (2002)
Share of Informal Sector to GNI
• Material share of informal sector
in the economy
103
9385
78 76
6555
5142
15
0
20
40
60
80
100
120
Source: World Bank from various sources
SME Labour Productivity (US$’000)
• SME labour productivity was far below
other countries and 1/3 of large firms
Masterplan is evidence-based, addresses gaps and leverages on strengths
10
Change in Value Added 2000-2005
-20000
-10000
0
10000
20000
30000
40000
50000
60000
70000
Ch
ange
in V
alu
e A
dd
ed,
2000
-200
5
Percentiles
• High growth firms main contributors
to gains in value added & employment
Source: World Bank based on Economic Census 2001 & 2006
and Census of Establishments & Enterprises 2005, DOSM
Top 1 percentile account for
- 70% of additional GDP
- 46% of new jobs
1/ Entry density: no of newly registered companies over
working age population (15-64 years)
Source: Development Research Group, World Bank
Average Entry Density1/ (2004-09)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Malaysia East Asia Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
South Asia High Income
• Business formation was robust but
lower than high income economies
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
11
Action Plan
New SME Development Framework for innovation-led and productivity-driven growth
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
The focus areas identified as growth levers where constraints need to be addressed simultaneously
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
12
Plan proposes 32 initiatives across all focus areas, of which 6 are High Impact Programmes
Result-based approach with monitoring & evaluation
6 High Impact Programmes
(HIPs) Measures across 4 Themes
Measures for East Malaysia
Other Measures
• 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%
• Resource pooling & shared services
• Create demand for SME products
• Reduce information asymmetry
• Building capacity & knowledge
• Improve connectivity & basic amenities
• Review restrictive laws & policies
• Ease market access
• 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
13
HIGH IMPACT PROGRAMMES (HIPs)
14
• Streamline and simplify procedures for opening new businesses
• Reduce costs and time taken to start a business
• Encourage formalisation
• Single window &
ID for whole of
Government
• Business
registration as
pre-requisite for
licensing
Registration
(SSM)
Registration
(East
Malaysia)
National Business
Registration system
i.e. MyCoID
License 1 License 2 License N
National Business
Licensing System
i.e. BLESS
National Single
Business
Registration and
Licensing System
Online Payment
Context
HIP 1: Integration of business registration & licensing to enhance ease of doing business
15
HIP 2: Technology Commercialisation Platform (TCP) to encourage Innovation
• SMEs face issues in accessing the national innovation system
• Many initiatives exist but are fragmented & not interlinked
• Mainly dependent on public funds & not linked to commercial funding
•Designed to remove
market barriers to
innovation
•Provides a range of
services including
financing, technical
assistance, market
information, policy
advice & capacity
building programmes
•Built on the existing
landscape, public or
private.
Context
Technical
Experts
Management
Experts
Financiers
(VC)
Labs Testing
services
Advisory
services
Incubation
Facilities Proof of
concept
(POC)
Stage
Commer-
cialisation
Funding
for POC
16
HIP 3: SME Investment Programme (SIP) to provide early stage financing
Equity
Private Investors Government Loan
through SIP
• Limited avenues for early stage financing • VC industry lacks vibrancy; highly dependent on public funds (51%)
• Govt. provide long term
capital into licensed
investment companies
• Investment companies to
provide debt, equity or
hybrid investments in
promising SMEs
SMEs
Context
RM1 RM1
debt capital
Characteristics
• Debt in addition to equity
• Has monitoring &
evaluation
• Managers are mainly from
industry
17
HIP 4: Going Export (GoEx) Programme to expedite internationalisation of SMEs
• Constraints on new market entry
• High upfront cost of market entry
Required
services
Partial payment for
required services
• Customised assistance
on steps to export
• Link to expertise
• Link to buyers
Emerging
SME
Exporters
Programme
Management Team
Preparation &
Execution of Export
Sales Plan
• Targets:
- New Exporters
- Existing Exporters (new
product / market)
• Matching grant
- Cost of Export Sales Plan
(ESP) if needed
- Other support in ESP after
proof of export
arrangement
•Market driven after initial
success
Context
18
HIP 5: Catalyst Programme to promote more homegrown champions
• Top high growth companies generate bulk of additional GDP & jobs
• Popular strategy worldwide to develop a select group
Time
Rev
enu
e
Ideas
Incubation
Start up
Technology
Commercia-
lisation
Platform
SMEs
Select
potential
high growth
firms
Provide
comprehensive
support over a
period of time
Homegrown
champions • Targeted
approach with
total support: - Bank guarantee
- Govt. procurement
- Talent from abroad
- Mentoring
•Transparency in: - Selection & exit
criteria
Context
19
HIP 6: Inclusive Innovation to empower the bottom 40%
• Promote rural transformation
• Improve business environment for SMEs especially in rural areas
• Increase the innovation pool
Commercialised
Products &
Services to mass
markets (incl. Govt.
procurement)
Incentives
Innovation
targeted at
masses (e.g. Mobile
payment)
Innovation from
grassroots
(e.g. Cycle
powered machine)
Technical + Mgmt.
Advisory
Support Facilities
Promotional Support
Linkage - Financing
Inclusive Innovation Programme
Context
20
Theme 1: Resource pooling & shared services to overcome scale disadvantages
Encourage Consortiums / Aggregation Service
Providers
Establish Logistics Consolidation Centres
Enhance HR / Organisational Development Support – as a
shared service
Theme 2: Create demand for SME products
Specific policy on Govt. procurement
Encourage MNCs to procure from SMEs through vendor development programme
Financial support for market compliance (standards &
certification)
1
2
3
4
5
6
Other initiatives include thematic programmes to address specific challenges
21
Theme 3:Reduce information asymmetry for enhancing opportunities
Build further on credit information system (Govt. funds)
Foster greater IP adoption- awareness & outreach
Independent Panel of Experts to assist financial institutions
Effective outreach to enhance financial inclusion
Theme 4: Building capacity through knowledge acquisition & skills upgrade
Ensure industry readiness of new entrants into workforce
Transform polytechnic & technical fields into a career of
choice
Tap-on talent from abroad to address skills shortage among
SMEs
Intensify training programmes to meet specialised needs
7
8
9
10
11
12
13
14
Other initiatives include thematic programmes to address specific challenges
22 IPE to assist FI to evaluate new technology projects incl.biomass
Increase business
formation
Expand no. of high growth
& innovative firms
Raise productivity
Intensify formalisation
Average annual increase of
10% in high growth & innovative firms
RM47,000
RM91,000
Avg. annual increase
RM/worker
15%
2000 2020
% of GNI
The high impact programmes to contribute significantly towards achieving targets under each goals
23
Target is to increase contribution to GDP to slightly
over 40% by 2020
Projections by SME Corp. Malaysia
Economic Contribution
in 2020:
GDP
Employment
Exports
32% 41%
59% 62%
2010 2020
19% 25% 3
4
5
6
7
8
9
2000 - 05 2006 - 10 2011 - 20
GDP Growth
Quantum
leap
“Business
as usual”
growth
New SME growth path
CAGR (% change)
(6.5%)
(8.7%)
24
25
SME Masterplan focuses on recalibration of activities towards high value activities, including biomass
New growth Opportunities for SMEs
SMEs contribute to the biomass value chain
Optimising economic potential and moving towards higher value chain
26
SMEs as suppliers of renewable organic
matter e.g. oil palm, sugar cane & timber
waste, rice husk,, etc.
R&D and engineering in renewable energy
Value-added eco-products (e.g. bio-plastics
& fertilizers) & generate renewable energy
(e.g. solid biofuel pellets)
Innovative SMEs in the biomass industry can avail to the 1-InnoCERT assessment by SME Corp.
Objective • Foster and support innovative
SMEs to be globally innovative and competitive players
Benefits
• Participate in the SME Innovation Award which offers RM1 mil to the Top Most Innovative SME
• Enjoy Green Lane Policy
Recipients • 114 companies
(12 undertaking biomass activities)
27
Procurement
Tax Deduction
Financing Priority to
participate in Offset
Programme and
Government
procurement
(including MOF-
owned companies)
2% interest rate
rebate a year
subject to maximum
RM200,000 per
year; Stamp duty
exemption on loan
agreement
Expenses incurred
to obtain the 1-
InnoCERT for the
first time
28
These innovative SMEs are eligible for the incentives under the Green Lane Policy