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S5 KarunajothiKandasamy by 87PTFg

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									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

                                           Economic                                Socio Economic
Objectives




                         Enhancing                   Promoting                Developing progressive
                      viability of SMEs            development of             and resilient Bumiputera
                                                                   -
                      across all sectors         SMEs in knowledge-           SMEs and entrepreneurs
                                                  based industries
Strategic Thrusts




                               I.                               II.                       III.
                    Strengthening enabling            Building capacity and       Enhancing access
                         infrastructure                     capability               to financing




                                                                                                         5
… and a dedicated Agency for SME development



    MINISTRIES
       AND              SME CORP. MALAYSIA
    AGENCIES
                              Coordinate
                               Policies


      SMEs                             “One-Referral”
                 Policy formulation                     NSDC
                        and             Information
                     Research           and Advisory



     PRIVATE
     SECTOR             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)                                   60%
  12%                                                            50%
                                          10%
  10%                                               (8 ~8.5%)e                             51%
                                                                 40%
   8%
   6%                                                            30%
   4%                                                            20%              39%
                                                                                                    31%
   2%
                                                                 10%     16%
   0%
  -2%     2001 2002 2003 2004 2005 2006 2007 2008 2009 2010      0%
  -4%                                                    Year             Low     Middle     High Malaysia
                   GDP Growth        SME Growth                         income income income
                                                                       countries countries countries

 e- estimate
                                                31% of GDP
                                                                                                          7
SMEs face numerous challenges from changing
business environment, includ. liberalisation pressures

                         Long-term challenges
                          from globalisation &
                             liberalisation




                                              Short-term
            Inherent &                     challenges from
         structural issues                 difficult external
                                             environment
       • Access to market
       • Innovation and technology
       • Human capital management
       • Access to financing
                                                                8
…it also opens new opportunities for SMEs


 First Mover
                   More competitive
 Advantage -         with global
 access new          acceptance
   markets



Become part of
                      Attract FDIs
global network



         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          ASEAN Free Trade Area (AFTA)      Malaysia-Japan Economic Partnership Agreement
 60% of Malaysia’s    ASEAN-China                       (MJEPA)
   global trade       ASEAN-ROK                         Malaysia-Pakistan
 under preferential   ASEAN-Japan Comprehensive         Comprehensive Economic Partnership Agreement
       trade          Economic Partnership (AJCEP)      (MPCEPA)
                      ASEAN-India (Goods)               Malaysia-New Zealand Free Trade Agreement
                      ASEAN-Australia-New Zealand       (MNZFTA)
                                                        Malaysia-Chile Free Trade Agreement (MCFTA)
                                                        Malaysia-India Comprehensive Economic
                                                        Cooperation Agreement (MICECA)
Under Negotiations    ASEAN-Japan (Investment and       Malaysia-Australia
> 80% of Malaysia’s   Services)                         Malaysia-Turkey
    global trade      ASEAN-India (Investment and       Malaysia-EU
 under preferential   Services)                         Gulf Cooperation Council (Framework Agreement)
       trade          Trans-Pacific Partnership (TPP)
                      Agreement
For Consideration     ASEAN+3 (Japan, China and         Malaysia-Bangladesh
                      Korea)
                      ASEAN+6 (Japan, China,
                      Korea, Australia, New Zealand
                      and India)                                                                         10
The trade agreements covers a broad scope


Scope of negotiations           New areas

                                  Government
     Trade in Goods
                                  Procurement

   Rules of Origin and
                               Competition Policy
        Customs                                          Lower
  Technical Barriers to                               Import tariffs
  Trade and Sanitary &              Labour
 Phytosanitary Measures
                                                          Equity
  Services Liberalisation
                                  Environment         liberalisation

 Investment Liberalisation   Horizontal Issues
       & Protection          • Regional Integration
                             • Regulatory Coherence
         Ecotech             • 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)        SME
      No.      Subsectors        Year 2010         Year 2015   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                 Creating national/
            income economy                 regional/ international
                                                champions
   Inclusive
(bottom 40%) &             Key driver of
  sustainable            domestic growth    High Income Economy
    growth

   Promote                                      Increasing
                           Employment
 innovation,
                            providers /      microenterprises’
 creativity &                                contribution to the
                           talent source
    growth                                       economy

            Strong linkages
            support for large
                 firms


                                                                     13
In 2011, 219 SME Development programmes worth
RM5.9 bil are being implemented
                                                          • Automotive Centre Development Project
                                                          • Cottage Retail Shop
                          Strengthening Enabling
                                                          • Permanent Food Production Park
                               Infrastructure
                              19 programmmes
                                                          • Products Collection and Marketing Centre
                                                          • Incubation & Technopreneur Development
                                                          • Integrated Aquaculture Zone

• Entrepreneur Development                 • Business Quality &
• Retraining and Skills Upgrading            Enhancement
• National Dual Training System            • SME-Brand Development
• Content Industry Development             • SME-University Internship
• Franchise Development                    • Market Development Grant
• Taste of Malaysia                        • Exporters Training              Building Capacity and
• Training for Furniture Design & Making   • SME Expert Advisory Panel             Capability
• Craft Entrepreneur Development           • Biopreneur Clinic                 150 programmmes

                               • Franchise Financing Scheme          • Tourism Infrastructure Fund
                               • Micro Enterprise Fund               • Maritime Fund
                               • Soft Loan Scheme for                • ICT, Biotechnology and
   Enhancing Access to           Service Sector                        Technology
        Financing              • Soft Loan Scheme for Automation       Development Project
     50 programmmes              and Modernisation                     Financing
                               • Soft Loan for SMEs                  • Green Technology Financing
                               • Business Accelerator Programme        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

                   • Diagnostic tool to rate and
                     enhance competitiveness of SMEs                  Example of Radar Diagram
What is SCORE?       based on their performance and                      for 3-Star company
                     capabilities.
                   • Developed in-house in Aug 2007

                   • Identify strengths and weaknesses
    Function         for improvements; and
                   • Facilitate linkages.

                   •   Business Performance • Technical Capability
                   •   Financial Capability  • Quality System
   Parameter
                   •   Management Capability• Innovation
                   •   Production Capability

                   • 0 – 2 Stars : Very basic business
                     operation
 Characteristics   • 3 – 5 Stars : Some degree of
                     sophistication and can be groomed for           Analysis:
                     export                                          Weak in financial capability

                                                                     Assistance:
 Implementation    • Work with partner agencies on the               Require financial management
    Channel          various SCORE models                            training


                                                                                                    16
    The assessment is comprehensive covering various
    parameters

                                                                                       •   Sales
       • Corporate Planning                                                            •   Average Growth
       • Technology & Innovation                                                       •   Export
         Management                                                                    •   Marketing
       • Human Capital Development                                                     •   Customer Satisfaction
       • IT Adoption                           Management
                                                Capability             Business
                                                                     Performance
• Practice of Continuous
  Improvement
• Certification
• Awards                                                                           Financial
                                     Quality                                       Capability    •   Current Assets
                                     System
                                                                                                 •   Current Liabilities
                                                                SMEs                             •   Gearing Ratio
                                                                                                 •   Profit



  • Intellectual Property Rights                                             Technical
  • Product & Process
                                          Innovation                         Capability
    Improvement
  • Capability of Products &                                 Production
    Process Improvement                                       Capacity
    Activities
                                   • Capital Investment
                                     per Employee (CIPE)                      • No. of Trained Personnel
                                   • Factory Automation Level                 • MTS Ratio
                                   • Machine Utilisation                      • Types of Technology Utilised
                                                                                                                           17
1-InnoCERT programme to rate innovative companies


Starting    • National Innovation Action Plan
Point         – Strategic Thrust 4
            • Adaption of Korean Innobiz
                                                 Assessment Process
              Innovation Evaluation System

Objective   Foster innovative companies to
            become profitable global ‘blue-
            chip’ companies

Current     Maf & Non-Maf, Biotech, Expert
Available   Industrial Design, Software/ ICT,
Sectors     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




                                                                      18
1-InnoCERT assessment criteria

SMEs will be assessed using 4 Main Criteria:
                                                           I
                                                      Technology
    Technology manufacturing ability                   innovation
    Ability to develop products using                    ability
    Technology
    Marketing ability                          II
                                          Technology
                                        commercialization
                                             ability                R&D activity index
                                                                    Technology Innovation System
                                                                    Technology Innovation Administration
                                                                    Technology Accumulation System
  Outcome of Technology                          III                Technology Analysis Ability
  Competitiveness Progress                  Technology
  Technology management result               innovation
  Technological Achievements
                                            management
   (forecasting)
                                               ability
                                   IV
                              Technology
                              innovation
                                 result
                                                                    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




                                              20
Assessment of the National Mark

       Mgt.      Top management’s guidance &
Commitment          direction towards brand                   ASSESSMENT BASED ON:
 & Capability               success

         Financial        Allocation of company
        Capability    resources to maintain brand &
                         business sustainability
                               Systematic management of
     Brand Management &       customer to ensure constant
               Marketing        delivery of brand promise
                                      Ensuring processes to deliver brand
                         Operation     promise established, implemented
                       Management                & maintained

                                     Quality &      Plan action to consistently
                                     Standard       meet/exceed standards or
                                                          brand promise
                                   Management Best         Maintain, control & improve
                                         Practices        processes towards improving
                                                                  brand equity
                CRITERIA                               Social     Contribution to stakeholders,
                                                 Responsibility     society & environment in
                                                                        brand excellence
                                                                                                  21
4       Conclusion



        Vision




 Creating national,
regional and global
    champions




                      22

								
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