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SME Corp - GMN Workshop Deck 2014

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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)

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SME Corp - GMN Workshop Deck 2014

  1. 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. 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. 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. 4. Secretariat to NSDC SME Corp. Malaysia: a dedicated Agency for SME development NSDC Ministries & Agencies SMEs Chambers & Industry Associations 4
  5. 5. ROLES & FUNCTIONS OF SME CORP. MALAYSIA Roles of SME. Corp. 5
  6. 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. 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. 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. 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. 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. 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. 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. 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. 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. 15 MASTERPLA N SME 2012 - 2020 Catalysing Growth and Income
  16. 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. 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. 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. 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. 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. 21. Through interaction with stakeholders, 6 focus areas were identified where constraints need to be addressed Constraints to Growth 21
  22. 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. 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. 24. Breakout Strategy for Micro Enterprises (MEs) Breakout Strategy for Micro Enterprises (MEs)
  25. 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. 26. Outcome is measured at 3 levels 26 Macro performance (GDP, exports employment) Programme level Firm level through SCORE
  27. 27. 27 Programme KPIs Common KPIs set at Programme LevelProgramme Level
  28. 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. 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. 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. 31. Simple assessment process… 31
  32. 32. Success stories… 32
  33. 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. 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. 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. 36 THE KOREAN SUCCESS STORY
  37. 37. 37 Impact Analysis Framework on SME Development Programmes (IAFSP)
  38. 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. 39. Newly Reported 20 RM508.5m Deferred / Cancelled 18 RM864.9m Implemented 157 RM11.6b 63% 101 % Programme “Report Card” for 2013
  40. 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. 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. 42. Performance 2013 by Funds Allocation: Govt vs Private
  43. 43. EXAMPLE OF HIGH PERFORMANCE PROGRAMMES
  44. 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. 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. 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. 47. Kick-OffKick-Off of Initiatives inof Initiatives in 20142014
  48. 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… RETAILRETAILRETAILRETAILMANUFACTURINGMANUFACTURINGMANUFACTURINGMANUFACTURING INTERNATIONALINTERNATIONALINTERNATIONALINTERNATIONALLOCALLOCALLOCALLOCAL 48
  49. 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. 50 Way forward
  51. 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. 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. 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. 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. 55. Thank youThank you www.smecorp.gov.mywww.smeinfo.com.my 1-300-30-6000 Find us on Facebook SME Corp. Malaysia

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