SME Development in Supporting Trade
Liberalisation: The Malaysian Case
K. Karunajothi
SME Corporation Malaysia
17 August 2011
Presentation covers
1
SME Development in Malaysia
2
Trade liberalisation measures
3
Policies Going Forward
4
Conclusion
2
1
SMEs are the backbone of the economy
• SMEs constitute bulk of
businesses in Malaysia:
- 99.2% of establishments
(2003: 548,267)
- Bulk (80%) micro
enterprises, with less
than 5 workers
- Mainly concentrated in
services sector (87%)
3
National SME Development Council, high level body
to chart SME policy direction
Council established in 2004
• Chaired by Prime Minister, with 15 Ministers and 3 key
agencies
• Secretariat: SME Corp. Malaysia the central agency for
coordination, policy, advisory and business development
Role & Responsibilities
• Formulates broad policies and provides direction for
comprehensive development of SMEs across all sectors
• Oversees coordination and ensures effectiveness in
policy implementation
4
A structured approach in SME Development since 2004
Promote development of competitive and resilient SMEs in all sectors
towards increasing SME contribution to the economy
Strategic Thrusts
Objectives
Economic
Enhancing
viability of SMEs
across all sectors
I.
Strengthening enabling
infrastructure
Socio Economic
Promoting
development of
SMEs in knowledgebased industries
II.
Building capacity and
capability
Developing progressive
and resilient Bumiputera
SMEs and entrepreneurs
III.
Enhancing access
to financing
5
… and a dedicated Agency for SME development
MINISTRIES
AND
AGENCIES
SME CORP. MALAYSIA
Coordinate
Policies
SMEs
PRIVATE
SECTOR
Policy formulation
and
Research
“One-Referral”
Information
and Advisory
NSDC
Secretariat to NSDC
6
Efforts have shown positive results….however
contribution to GDP remains low
SME growth outperformed overall GDP growth during 2004 – 10:
• NSDC was set up and SME development accorded national agenda
• Other supportive policies
GDP & SME Growth
SME GDP in Selected Countries
GDP annual change (2000 price)
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
60%
50%
10%
(8 ~8.5%)e
51%
40%
30%
39%
20%
10%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
e- estimate
GDP Growth
SME Growth
Year
31%
16%
0%
Low
Middle
High Malaysia
income income income
countries countries countries
31% of GDP
7
SMEs face numerous challenges from changing
business environment, includ. liberalisation pressures
Long-term challenges
from globalisation &
liberalisation
Inherent &
structural issues
• Access to market
• Innovation and technology
• Human capital management
• Access to financing
Short-term
challenges from
difficult external
environment
8
…it also opens new opportunities for SMEs
First Mover
Advantage access new
markets
More competitive
with global
acceptance
Become part of
global network
Attract FDIs
Ability to ride out
business cycles
cushioned by demand
in other regions
9
2
Malaysia’s trade policy promotes & supports creation
of a liberal & fair global trading environment
Malaysia’s trade liberalisation is anchored on rule-based multilateral trading
system – WTO and complemented by regional and bilateral FTAs
STATUS
REGIONAL
BILATERAL
Concluded
60% of Malaysia’s
global trade
under preferential
trade
ASEAN Free Trade Area
(AFTA)
ASEAN-China
ASEAN-ROK
ASEAN-Japan Comprehensive
Economic Partnership (AJCEP)
ASEAN-India (Goods)
ASEAN-Australia-New Zealand
Malaysia-Japan Economic Partnership
Agreement (MJEPA)
Malaysia-Pakistan
Comprehensive Economic Partnership
Agreement (MPCEPA)
Malaysia-New Zealand Free Trade Agreement
(MNZFTA)
Malaysia-Chile Free Trade Agreement (MCFTA)
Malaysia-India Comprehensive Economic
Cooperation Agreement (MICECA)
Under Negotiations
> 80% of Malaysia’s
global trade
under preferential
trade
ASEAN-Japan (Investment and
Services)
ASEAN-India (Investment and
Services)
Trans-Pacific Partnership
(TPP) Agreement
Malaysia-Australia
Malaysia-Turkey
Malaysia-EU
Gulf Cooperation Council (Framework
Agreement)
For Consideration
ASEAN+3 (Japan, China and
Korea)
ASEAN+6 (Japan, China,
Korea, Australia, New Zealand
and India)
Malaysia-Bangladesh
10
The trade agreements covers a broad scope
Scope of negotiations
New areas
Trade in Goods
Government
Procurement
Rules of Origin and
Customs
Competition Policy
Technical Barriers to
Trade and Sanitary &
Phytosanitary Measures
Labour
Services Liberalisation
Investment Liberalisation
& Protection
Ecotech
Environment
Lower
Import tariffs
Equity
liberalisation
Horizontal Issues
• Regional Integration
• Regulatory Coherence
• Development of SMEs
• Transparency
11
Services sector liberalisation is ongoing which
affects particularly SMEs
April 2009: 27 specific services sub-sectors fully liberalised and
more to go…
Services
AFAS Timeline (equity)
No.
Subsectors
Year 2010
Year 2015
SME
share, %
1.
Distributive Trade
51%
70%
99.6
2.
Business Services
51%
70%
99.3
3.
Healthcare
70%
70%
99.0
4.
Communications
70%
70%
98.7
5.
Logistics
51%
70%
98.7
6.
Education
51%
70%
98.4
7.
ICT
100%
100%
92.3
8.
Tourism
70%
70%
91.3
9.
Construction
51%
70%
n.a.
10.
R&D
49%
70%
n.a
12
3
Going forward, SMEs important to achieve growth
targets to become a developed nation by 2020
SMEs in NEM & RMK10
Bedrock of high
income economy
Inclusive
(bottom 40%) &
sustainable
growth
Key driver of
domestic growth
Promote
innovation,
creativity &
growth
Employment
providers /
talent source
Creating national/
regional/ international
champions
High Income Economy
Increasing
microenterprises’
contribution to the
economy
Strong linkages
support for large
firms
13
In 2011, 219 SME Development programmes worth
RM5.9 bil are being implemented
Strengthening Enabling
Infrastructure
19 programmmes
• Entrepreneur Development
• Retraining and Skills Upgrading
• National Dual Training System
• Content Industry Development
• Franchise Development
• Taste of Malaysia
• Training for Furniture Design & Making
• Craft Entrepreneur Development
Enhancing Access to
Financing
50 programmmes
• Automotive Centre Development Project
• Cottage Retail Shop
• Permanent Food Production Park
• Products Collection and Marketing Centre
• Incubation & Technopreneur Development
• Integrated Aquaculture Zone
• Business Quality &
Enhancement
• SME-Brand Development
• SME-University Internship
• Market Development Grant
• Exporters Training
• SME Expert Advisory Panel
• Biopreneur Clinic
• Franchise Financing Scheme
• Micro Enterprise Fund
• Soft Loan Scheme for
Service Sector
• Soft Loan Scheme for Automation
and Modernisation
• Soft Loan for SMEs
• Business Accelerator Programme
Building Capacity and
Capability
150 programmmes
• Tourism Infrastructure Fund
• Maritime Fund
• ICT, Biotechnology and
Technology
Development Project
Financing
• Green Technology Financing
Scheme
14
Key mechanism to upgrade SMEs to the next level
SCORE (SME Competitive Rating for Enhancement)
1-InnoCERT
The National Mark of Malaysian Brand
15
SCORE a tool to rate capability of SMEs
What is SCORE?
Function
Parameter
Characteristics
Implementation
Channel
• Diagnostic tool to rate and
enhance competitiveness of SMEs
based on their performance and
capabilities.
• Developed in-house in Aug 2007
Example of Radar Diagram
for 3-Star company
• Identify strengths and weaknesses
for improvements; and
• Facilitate linkages.
•
•
•
•
Business Performance • Technical Capability
Financial Capability
• Quality System
Management Capability• Innovation
Production Capability
• 0 – 2 Stars : Very basic business
operation
• 3 – 5 Stars : Some degree of
sophistication and can be groomed for
export
Analysis:
Weak in financial capability
• Work with partner agencies on the
various SCORE models
Assistance:
Require financial management
training
16
The assessment is comprehensive covering various
parameters
• Corporate Planning
• Technology & Innovation
Management
• Human Capital Development
• IT Adoption
• Practice of Continuous
Improvement
• Certification
• Awards
• Intellectual Property Rights
• Product & Process
Improvement
• Capability of Products &
Process Improvement
Activities
•
•
•
•
•
Management
Capability
Sales
Average Growth
Export
Marketing
Customer Satisfaction
Business
Performance
Financial
Capability
Quality
System
SMEs
•
•
•
•
Current Assets
Current Liabilities
Gearing Ratio
Profit
Technical
Capability
Innovation
Production
Capacity
• Capital Investment
per Employee (CIPE)
• Factory Automation Level
• Machine Utilisation
• No. of Trained Personnel
• MTS Ratio
• Types of Technology Utilised
17
1-InnoCERT programme to rate innovative companies
Starting
Point
• National Innovation Action Plan
– Strategic Thrust 4
• Adaption of Korean Innobiz
Innovation Evaluation System
Objective
Foster innovative companies to
become profitable global ‘bluechip’ companies
Current
Available
Sectors
Maf & Non-Maf, Biotech, Expert
Industrial Design, Software/ ICT,
Agriculture, Environment and
Construction.
Cost
• Standard on-site audit fee
−SMEs: RM5,000
−Non-SMEs: RM10,000
• Additional logistics charges for
companies outside Klang Valley
Assessment Process
18
1-InnoCERT assessment criteria
SMEs will be assessed using 4 Main Criteria:
Technology manufacturing ability
Ability to develop products using
Technology
Marketing ability
I
Technology
innovation
ability
II
Technology
commercialization
ability
Outcome of Technology
Competitiveness Progress
Technology management result
Technological Achievements
(forecasting)
IV
Technology
innovation
result
III
Technology
innovation
management
ability
R&D activity index
Technology Innovation System
Technology Innovation Administration
Technology Accumulation System
Technology Analysis Ability
Management’s innovation ability
Ability to respond to changes
Manager’s sense of values
19
Branding Malaysia through the National Mark
Quality, Excellence
and Distinction
Objectives
• Increase awareness & importance of
branding
• Create & build a strong brand presence
towards customer recognition
• Increase global & regional market
penetration
Benefits
• Priority lane for MATRADE’s Brand Promotion
Grant
• Access to MATRADE’s local & international
trade promotion and A&P activities
• Special access to MICCI-SME Corp. mentoring
programmes
• Invitation to specific training by SME Corp. &
its partners
20
Assessment of the National Mark
Mgt.
Commitment
& Capability
Top management’s guidance &
direction towards brand
success
Financial
Capability
ASSESSMENT BASED ON:
Allocation of company
resources to maintain brand &
business sustainability
Brand Management &
Marketing
Systematic management of
customer to ensure constant
delivery of brand promise
Operation
Management
Ensuring processes to deliver brand
promise established, implemented
& maintained
Quality &
Standard
Plan action to consistently
meet/exceed standards or
brand promise
Management Best
Practices
CRITERIA
Maintain, control & improve
processes towards improving
brand equity
Social
Responsibility
Contribution to stakeholders,
society & environment in
brand excellence
21
4
Conclusion
Vision
Creating national,
regional and global
champions
22