Pioneering Business Transformation - “Charting the Entrepreneurial Journey” By Dato’ Hafsah Hashim CEO of SME Corporation Malaysia (Global Malaysian Network (GMN) Workshop 17th May 2014, San Jose, California)

1. Global Malaysian Network (GMN) Workshop
17th
May 2014, San Jose, California
Dato’ Hafsah Hashim
CEO of SME Corporation Malaysia
by
Pioneering Business
Transformation
““Charting the Entrepreneurial Journey”Charting the Entrepreneurial Journey”

2. 2
SME Corp. Malaysia journey map since
establishment – key milestones & events….
1996
2nd
May 1996, Small & Medium Industries
Development Corporation (SMIDEC) was
former under the MITI to develop SMEs
to be competitive in the
global market.
2004
National SME Development Council (NSDC)National SME Development Council (NSDC)
was formed as the highest governing body.was formed as the highest governing body.
Bank Negara was appointed as theBank Negara was appointed as the
secretariat of NSDCsecretariat of NSDC
2007
SMIDEC took over the role ofSMIDEC took over the role of
NSDC Secretariat from BankNSDC Secretariat from Bank
NegaraNegara
2000 SMI Development PlanSMI Development Plan

3. 3
Cont….
2020
and beyondand beyond
2010
SME Corp. Strategic PlanSME Corp. Strategic Plan
2010-2015 was2010-2015 was
developeddeveloped
2009
SMIDEC was officially rebranded on
2nd
Oct 2009 into Small & Medium
Enterprise Corporation Malaysia
(SME Corp. Malaysia)
2012
SME Masterplan 2012 – 2020SME Masterplan 2012 – 2020
was developed as a catalyst towas developed as a catalyst to
drive SME sector to achievedrive SME sector to achieve
Vision 2020Vision 2020

4. Secretariat to NSDC
SME Corp. Malaysia: a dedicated Agency for SME
development
NSDC
Ministries &
Agencies
SMEs
Chambers &
Industry
Associations
4

5. ROLES & FUNCTIONS OF SME CORP. MALAYSIA
Roles of SME. Corp.
5

6. 6
Manufacturing,
Manufacturing Related
Services and Agro-
based Industry
Full time employees
< 75
Services, Primary
Agriculture,
Information and
Communication
Technology (ICT)
Employees Turnover
Annual sales
turnover < RM 20 m
Full time employees
< 200
Annual sales
turnover
< RM50 m
OR
Definition of SMEs
New SME definition was endorsed
at the 14th NSDC Meeting in July 2013
A business will be deemed as an SME if it meets either one of the two specified qualifyingA business will be deemed as an SME if it meets either one of the two specified qualifying
criteria, namely sales turnover or full-time employees, whichever is lower.criteria, namely sales turnover or full-time employees, whichever is lower.

7. SMEs are the backbone of the
economy
• SMEs account for large proportion of businesses in Malaysia:
- 98.5% of establishments
- Size wise 77% microenterprises, with < 5 workers
Source: Economic/SME Census 2011, Malaysia
662,939
companies
7

8. Distributions of SMEs by
Sector...
Agriculture (1%)
Crops (70.4%),
Livestock (13.4%),
Fisheries (11.6%)
Construction (3%)
Non-residential Buildings (21.5%),
Civil Engineering (21%),
Residential Buildings (17.3%)
Services (90%)
Textiles & Apparels
(26.5%),
Food & Beverages
Products (15.9%),
Fabricated metal products
(10.5%)
Mining & Quarrying (0.1%)
Stone quarrying (83.6%),
Mineral Mining (16.4%)
Manufacturing (5.9%)Wholesale & Retail (49.9%),
Food & Beverages Services (24.6%),
Transport & Storage (6.9%)
Source: Economic/SME Census 2011, DOSM, Malaysia 8

9. SME Masterplan
(2012 – 2020)
Manufacturing as leading
sector
Shift to industrial-based
Light (textile, F&B) and
heavy (automotive, E&E)
Import substitution
Transformation of
manufacturing sector
Manufacturing ++
Cluster-based development
Global competitiveness
through innovation
Manufacturing & services
sectors
Creation of business
ecosystem for SMEs
Towards achieving high
income economy by 2020
Industrial Masterplan
(1986 – 1995)
2nd
Industrial Masterplan
(1996 – 2005)
3rd
Industrial Masterplan
(2006 – 2020)
SMI Development Plan
(2001 -2005)
Sectoral development
New Economic Model
Transforming Malaysia from middle
income to advanced nation by 2020
SME policy has evolved over the years in line
with the overall country’s development agenda
5-year Malaysia Plans
1 2 3 4
9

10. Chambers and Business
Associations
SMEs
Ministries & Agencies
Think-tanks &
researchers
SME
Corp.
Top-down
Bottom-up
Development of SME policy is through
public – private advocacy…
10

11. High-level
endorsement
Private
sector
engagement
... and the example is the SME Masterplan that
was built from the consensus of all the
stakeholders
11

12. 12
GDP & SME Growth
Holistic approach to SME development brought
positive results…
SME growth outperformed overall GDP growth during 2004 – 2012:
• 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)
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
GDP Growth SME Growth
%
Year
Source: DOSM and SME Corp. Malaysia
GDP & SME Growth
(yoy change)
6%
32% share
of GDP
28.6% share
of GDP

13. National SME Development Council …
high level body to chart SME policy direction
Council established in 2004
Chaired by Prime Minister
15 Ministers and 3 key agencies
Secretariat: SME Corp. Malaysia
(w.e.f. 1 Aug 2008, previously the
Central Bank)Provides direction for comprehensive
development of SMEs across all sectors
Formulates broad policies and strategies
Oversees coordination of programme and
ensures effectiveness in policy
implementation
13

14. New products for SMEs
• Trade Finance Products
• Overseas Project Fund
• Venture Capital Funds
• Guarantee funds
Strengthening financial service providers
• Sustainable Microfinance.
• Transformation of SME Bank, CGC & Bank Pertanian Malaysia
Strengthening financial infrastructure
• SME Credit Bureau
• Small Debt Resolution Scheme
Information dissemination
• SME Annual Report 2005 –
2010/11
• Financial Guide for SMEs
• Govt. Funds & Schemes
• SMEinfo Portal
• HRD Training Portal
Human capital, marketing &
advisory services
• Centralised training for SME
• BNM’s LINK, SME Bank, Banks’
SME Unit
• “One Referral Centre”
In the last 7 years, SME development achieved
progress on all fronts…
Policy
• Standard SME Definition
• 5 – year policy targets (2006 – 2010)
• SME Integrated Plan of Action
• SME Central Coordinating Agency
• SME Masterplan (2012 – 2020)
• Outcome-based approach initiatives at
macro, programme and firm levels
• SME special unit at Ministries & Agencies
Statistics
• Census of Establishment and Enterprise
2005 / SME Census 2011
• Time series value add data
• National SME Database
PROGRES
S
14

15. 15
MASTERPLA
N
SME
2012 - 2020
Catalysing Growth and Income

16. Chart direction until 2020
SME
Masterplan
ETP
RTP
GTP
High-income
nation
The SME Masterplan charts direction for SME
development till 2020
16
4
G
oals
&
6
Focus
Areas
6 High Impact Programmes
National
policies
GDP
Employt
Exports
41%
62%
25%
GDP
Employment
Exports
32%
59%
19%
2011
2020

17. Approac
h
Public-private
partnership
‘Live’ plan
Outcome-based
Innovation and
productivity-led
SME Masterplan takes a new approach in
SME development
17

18. Masterplan is evidence-based,
addresses gaps and leverages on
strengths
%
Source: Schnider (2002)
Share of Informal Sector to GNI
• Material share of informal sector
in the economy
103
93
85
78 76
65
55
51
42
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
18

19. Masterplan is evidence-based, addresses
gaps
and leverages on strengths
Change in Value Added 2000-2005
• 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, Malaysia
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
19

20. 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
New SME Development Framework for innovation-led and
productivity-driven growth
20

21. Through interaction with stakeholders, 6 focus
areas were identified where constraints need to be
addressed
Constraints to Growth
21

22. Plan proposes 32 initiatives across all focus
areas,
of which 6 are High Impact Programmes
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
22

23. 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

24. Breakout Strategy for
Micro Enterprises
(MEs)
Breakout Strategy for
Micro Enterprises
(MEs)

25. 25
5 programmes have been identified, targeting MEs across the various
stages of the lifecycle …
GrowthStart-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
P1
P2
P3
P4
P5

26. Outcome is measured at 3
levels
26
Macro
performance
(GDP, exports
employment)
Programme
level
Firm
level through
SCORE

27. 27
Programme
KPIs
Common KPIs set at Programme LevelProgramme Level

28. 28
SCORE a diagnostic tool for firm level
measurement and to provide targeted
assistanceSME Competitiveness Rating for Enhancement (SCORE):
A tool developed in-house in 2007
SCORE evaluation
Choose a model:
•Manufacturing
•Retail & Distributive
Trade
•Construction
•ICT
•Maintenance, Repair &
Overhaul
•Professional Services
0 – 2 stars:
Very basic
business operation
3 – 5 stars:
Competitive & export-
ready companies
Capacity building Financing & assistance
to go global
Enhanced
competitiveness
Improved
performance
SCORE
re-evaluation
1
23 3
4

29. SME Competitiveness Rating For
Enhancement
(SCORE)
• MDEC
• PSDC
• SME Bank
• TM
• MPC
• HDC
• NCIA
• MTIB
• 0 – 2 : Very basic business operation
• 3 – 5 : Competitive and export-ready
companies
Example of Radar Diagram
for 3-Star company
Analysis:
Weak in financial capability
Assistance:
Requires training in financial
management & improvement in
quality management
• Technical
capability
• Quality System
• Innovation
29

30. • a comprehensive diagnostic tool to
enhance competitiveness of Micro
Enterprises
• developed in Feb 2010
• Level 1 : Basic business operations
• Level 2 : At average and has a potential
• Level 3 : Complete the criteria
•TEKUN
•AGROBANK
•SME BANK
Example of Radar Diagram
for Level 2 Micro Enterprise
Analysis:
To measure capabilities of start-ups
or existing micro enterprise
businesses.
Assistance:
To provide hand holding assistance
•BSN
•AIM
•ICU, JPM
M-CORE for the micro enterprises…
30

31. Simple assessment process…
31

32. Success stories…
32

33. 0.00
2.00
4.00
6.00
Business
Performance
Financial
Capability
Technical
Capability
Production
Capability
Innovation
Quality
System
Management
Capability
2008
2011
Significant Improvements in:-
•Financial Capability
•Technical Capability
• Innovation
• Management Capability
• Quality System
Moderate Improvements in:-
•Business Performance
•Production Capability
Success story A
33

34. 0.00
2.00
4.00
6.00
Business
Performance
Financial
Capability
Technical
Capability
Production
Capability
Innovation
Quality
System
Management
Capability
2008
2011
Significant Improvements in:-
Quality System
Technical Capability
Innovation
Moderate Improvements in:-
Management Capability
Business Performance
Financial Capability
Production Capability
Success story B
34

35. 1-INNOCERT
35
Innovation Certification forInnovation Certification for
Enterprise Rating andEnterprise Rating and
TransformationTransformation
NATIONAL INNOVATION AGENDA
NATIONAL INNOVATION COUNCIL
JTPIN
Market
Institution
Technology

36. 36
THE KOREAN SUCCESS STORY

37. 37
Impact Analysis Framework on
SME Development Programmes
(IAFSP)

38. WEIGHTAGE
RANGE OF ACHIEVEMENTS
1.Exceed Target (ET):
80% - 100%
2.On Target (OT): 70%
- 79%
3.Below Target (BT):
60% - 69%
4.Unsatisfactory (US):
59% and below
RANGE OF ACHIEVEMENTS
1.Exceed Target (ET):
80% - 100%
2.On Target (OT): 70%
- 79%
3.Below Target (BT):
60% - 69%
4.Unsatisfactory (US):
59% and below
Note:
•Outcome-based that emulates the Guideline of Sistem Pemantauan Projek (SPP) by EPU
Impact Analysis
Framework on SME
Development
Programmes
(IAFSP)
Monitoring & Evaluation Mechanism

39. Newly Reported 20 RM508.5m
Deferred / Cancelled 18 RM864.9m
Implemented 157 RM11.6b
63%
101
%
Programme “Report Card” for 2013

40. Planned Implemente
d
No. of Programmes 155 157
Financial Commitment (RM ‘mil) 18,396.27 11,586.87
SMEs benefitted 467,838 884,911
Programmes Implemented in 201
by Focus Ar
(15 progs)
(59 progs)
(21 progs)
(28 progs)
(34 progs)157 progs @
RM11.6b
Benefitted 884,911
SMEs (189%)

41. PERFORMANCE:
82.9%
EXCEED TARGET (ET)
Business
Sustainability
(BS)
Increase Formation
and Formalisation of
Businesses (IBF)
Increase
Profitability
(IP)
New Employment
Created
(NEC)
High Growth and
Innovative Firms
(HGIF)
Increase
Productivity and
Efficiency
(IPE)
Overall Performance 2013 for
Ministries / Agencies (M&As)

42. Performance 2013 by Funds Allocation:
Govt vs Private

43. EXAMPLE OF HIGH
PERFORMANCE PROGRAMMES

44. Overall REPORT CARD for 2013
WEIGHTAGE KPIs Measured
27.3%
• Beneficiaries
• Sessions implemented
• Training(s) conducted
• % increase in sales
• % increase in knowledge
• % of Non Performing Loan
RESULT
34%
23%
84%
Overall Achievement for SME
Development Programmes

45. Programmes Planned forProgrammes Planned for 20142014
• 131 SME programmes
• Total allocation: RM13.2b
GOVERNMENT
FUNDING
111 progs
RM6.8b
PRIVATE SECTOR
FUNDING
20 progs
RM6.4b
RM

46. In 2014, planned programmesIn 2014, planned programmes
cut acrosscut across 5 focus areas5 focus areas……
To benefitRM13.2 billion 526,359 SMEs
Focus Areas
Financial
Allocation
(RM mil)
No. of
Programmes
13,172.9131TOTAL

47. Kick-OffKick-Off of Initiatives inof Initiatives in
20142014

48. Industrial Linkages
48
 Facilitating access to market by integrating SMEs into the supply
chain of the large companies
 Concentration on high value-add portion of the supply chain…
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INTERNATIONALINTERNATIONALINTERNATIONALINTERNATIONALLOCALLOCALLOCALLOCAL
48

49. Integrating into global supply
chain…
49
Composites
Technology
Research
Malaysia
Aero
Composites
Composites
Technology
Research
Malaysia
Aero
Composites
Spirit
AeroSystems
Malaysia Sdn
Bhd
Spirit
AeroSystems
Malaysia Sdn
Bhd

50. 50
Way forward

51. Government
Private
Sector
• Facilitator
• Act as catalyst
• Associations, chambers & NGOs to develop SMEs
• Large firms to mentor SMEs
• Participation in design & implementation of progs.
SME development a shared
responsibility...
51

52. What
needs to
be done?
52
Strengthen
industry
association
11
Increase
range of
services
provided by
associations
22
Build bridges
between public
and private
sectors
through shared
services
(funds, space)
33
Enhance
capacity of
private
training and
advisory
provider
44
Encourage
establishment
of private
finance
providers
55
Develop
capacity for
private
professional
services for
SMEs
66
…with private sector assuming a greater
role

53. 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
53

54. 54
It’s the little pieces that make up the big picture,
Generating wealth of no small measure,
The collective strength of our nation’s economy,
Providing employment, driving demand,
creating opportunities.
Being small is more and the more the better,
It’s in our interest to see them prosper,
We’ve transformed to serve their needs
We’ve striving to ensure they succeed.
SMEs are the building blocks of our nation’s
economic growth.
PowerPower
TheThe
SmallSmall
ofof

55. Thank youThank you
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