APEC SME Innovation Seminar Innovation in SME Financing

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APEC SME Innovation Seminar : Innovation in SME Financing and Marketing 25 th –

APEC SME Innovation Seminar : Innovation in SME Financing and Marketing 25 th – 28 th 2009 Seoul, Korea INNOVATION: THE ONLY WAY MOVING SMEs UP THE VALUE CHAIN By Ms. Fadzilah Ahmad Din Small and Medium Industry Development Corporation (SMIDEC ) Malaysia 1

OUTLINE • INTRODUCTION - SMIDEC • SME’S IN MALAYSIA – FACTS & FIGURES •

OUTLINE • INTRODUCTION - SMIDEC • SME’S IN MALAYSIA – FACTS & FIGURES • POLICIES • INNOVATION • STRENGHTHENING SME CAPACITY Ø DEVELOPMENT PROGRAMME Ø FINANCIAL ASSISSTANCE 2

SMIDEC Established under the Parliamentary Act, 539 on 2 nd May 1996 An agency

SMIDEC Established under the Parliamentary Act, 539 on 2 nd May 1996 An agency under the Ministry of International Trade and Industry Focal point for the overall development of SMEs in the country Provides capacity building programmes and assistance through fiscal and non-fiscal incentives

FUNCTIONS Promote, coordinate and implement programmes for the development of SMEs Forge industrial linkages

FUNCTIONS Promote, coordinate and implement programmes for the development of SMEs Forge industrial linkages between SMEs and large companies/multinational corporations (MNCs) Implement, coordinate and monitor financial assistance schemes Provide technical and advisory support services Collaborate with other local and international SME-related agencies

Introducing…….

Introducing…….

FUNCTIONS OF SME CORP. MALAYSIA To Coordinate Policies Formulation and Programmes Implementation • Formulate

FUNCTIONS OF SME CORP. MALAYSIA To Coordinate Policies Formulation and Programmes Implementation • Formulate broad SME policies across all sectors • Point of reference for Government Agencies on SME related issues • Monitor and evaluate effectiveness of policies and programmes Secretariat to National SME Development Council (NSDC) • Provide support and administrative services to NSDC • Ensure decisions from the NSDC are communicated to all relevant stakeholders To be ‘One-Stop’ Information and Advisory Services • Channel to obtain feedback on SME issues • ‘One Referral Centre’ of reference for SMEs To Disseminate Information and Research • Liaise with domestic and international organisations to share best practices and relevant programmes on SMEs • Manage National SME Database • Publish SME related publications and statistics • Undertake research on SME environment 6

SMEs FACTS & FIGURES 7

SMEs FACTS & FIGURES 7

DEFINITION OF SMEs Annual sales turnover Manufacturing, Manufacturing Related Services and Agro based Industry

DEFINITION OF SMEs Annual sales turnover Manufacturing, Manufacturing Related Services and Agro based Industry < RM 25 million OR Full time employees <150 Annual sales turnover Services, Primary Agriculture, Information and Communication Technology (ICT) < RM 5 million OR Full time employees < 50 8

DEFINITION OF MICRO, SMALL AND MEDIUM CATEGORY MICRO SMALL MEDIUM Manufacturing, Manufacturingrelated services &

DEFINITION OF MICRO, SMALL AND MEDIUM CATEGORY MICRO SMALL MEDIUM Manufacturing, Manufacturingrelated services & Agro-based Industries sales turnover < RM 250, 000 OR full time employees < 5 RM 250, 000 > sales turnover < RM 10 mil. OR 5 > full time employees < 50 RM 10 mil. > sales turnover < RM 25 mil. OR 51 > full time employees < 150 Services, Primary Agriculture and Information & Communication Technology (ICT) sales turnover < RM 200, 000 OR full time employees < 5 RM 200, 000 > sales turnover < RM 1 mil. OR 5 > full time employees < 19 RM 1 mil. > sales turnover < RM 5 mil. OR 20 > full time employees < 50 9

4, 537 (0. 8%) TOTAL ESTABLISHMENTS BY SIZE 12, 610 (2. 3%) 100, 333

4, 537 (0. 8%) TOTAL ESTABLISHMENTS BY SIZE 12, 610 (2. 3%) 100, 333 (18. 2%) • Total establishments = 552, 804 • No. of SMEs = 548, 267 (99. 2%) 435, 324 (78. 7%) LARGE MEDIUM SMALL MICRO Source: Census of Establishments & Enterprises 2005 – Profile of SMEs 10

SMEs AND THEIR IMPORTANCE TO THE MALAYSIAN ECONOMY SMEs Contribute: 32 per cent to

SMEs AND THEIR IMPORTANCE TO THE MALAYSIAN ECONOMY SMEs Contribute: 32 per cent to GDP 56. 4 per cent to Employment; and 19 per cent to Export; Source: National SME Development Blueprint 2007 11

POLICIES 12

POLICIES 12

NINTH MALAYSIA PLAN (9 MP) (2006 - 2010) 13

NINTH MALAYSIA PLAN (9 MP) (2006 - 2010) 13

STRATEGIC THRUSTS UNDER 9 MP • provide more focused incentives for high value-added industries;

STRATEGIC THRUSTS UNDER 9 MP • provide more focused incentives for high value-added industries; • development of innovation-driven SMEs and technopreneurs; Strategic Thrusts under the 9 MP (2006 – 2010) • services support for the manufacturing sector; • enhancing technological capability and capacity of SMEs; • improving access to financing for SMEs; • financing new sources of growth; and • strengthening SMEs in distributive trade 14 SOURCE : 9 MP 2006 - 2010

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STRATEGIC THRUSTS UNDER IMP 3 • enhancing the competitiveness of SMEs; • capitalising on

STRATEGIC THRUSTS UNDER IMP 3 • enhancing the competitiveness of SMEs; • capitalising on outward investment opportunities; • integrating SMEs into the regional and Strategic Thrusts under IMP 3 (2006 – 2020) global supply chains; • driving the growth of SMEs through technology, knowledge and innovation; • instituting a more cohesive policy and supportive regulatory and institutional framework; and • enhancing the growth and contribution of SMEs in the services sector 16 SOURCE : IMP 3 2006 - 2020

NATIONAL INNOVATION AGENDA Late 1990 s to 2020 and to 2057 National Mission: Innovation-Led

NATIONAL INNOVATION AGENDA Late 1990 s to 2020 and to 2057 National Mission: Innovation-Led Economy Knowledge-based Critical Success Factors • Technology • Market • Funding (risk capital) Rewards are rapid and sustainable: • Wealth creation • Employment creation • Societal well being To Fulfill § 1 To move the economy up the value chain § 2 To raise the country’s capacity for knowledge, creativity and innovation and nurture “first class mentality” § To address persistent socioeconomic inequalities constructively and productively § 4 To improve the standard and sustainability of our quality of life 3 5 § To strengthen the institutional implementation capacity of the country 17 Source: Mo. STI, 9 th Malaysia Plan

MAJOR CHALLENGES FACED BY SMES Limited access to advisory services; Limited marketing & promotion

MAJOR CHALLENGES FACED BY SMES Limited access to advisory services; Limited marketing & promotion strategies; Limited access to domestic & global market; Management and technology capability constraint; Low value add and not competitive; Lack of training; Limited capability in R&D and technology; and Access to finance. 18 (NATIONAL SME DEVELOPMENT BLUEPRINT 2007 - SOURCE : CENSUS 2005)

KEY INITIATIVES PROMOTING SMES DEVELOPMENT Three (3) broad strategic thrusts for the development of

KEY INITIATIVES PROMOTING SMES DEVELOPMENT Three (3) broad strategic thrusts for the development of competitive and resilient SMEs : Strengthening Enabling infrastructure (SME Annual Report 2005) Building the capacity & capability of SMEs Enhancing access to financing 19

INNOVATION 20

INNOVATION 20

CHARACTERISTICS OF SMES IN THE INNOVATION ECONOMY ENTREPRENEURS Technology (and knowledge-intensive labor / human

CHARACTERISTICS OF SMES IN THE INNOVATION ECONOMY ENTREPRENEURS Technology (and knowledge-intensive labor / human capital) Funding (Risk Capital) Market ü Able to identify and recognise a realisable business opportunity by anticipating market trends and demands ü Willing to take calculated risks for maximum returns Es üGreater appreciation beyond basic science and SM RS technology OF EU ED REN E R EP B INNOVATION SMEs W NTR E N E & üMarket and customer focused üHigh percentage of knowledge professionals üUse of Technology and innovation for process and product improvement ü High risk but also high returns üAble to act quickly in a fast-paced market Source: Bina. Fikir Report – SMEs in the Innovation Economy 21

CRITICAL SUCCESS FACTORS FOR SMES IN MALAYSIA TECHNOLOGY Building the capacity & capability of

CRITICAL SUCCESS FACTORS FOR SMES IN MALAYSIA TECHNOLOGY Building the capacity & capability of SMEs Strengthening Enabling infrastructure FUNDING Enhancing access to financing MARKET Source: Bina. Fikir Report – SMEs in the Innovation Economy 22

NATIONAL INNOVATION ACTION PLAN STRATEGIC THRUST 4 Shaping National Innovation Led Economy by Developing

NATIONAL INNOVATION ACTION PLAN STRATEGIC THRUST 4 Shaping National Innovation Led Economy by Developing Market. Driven and Technology-Driven Innovation for Wealth Creation and Societal Well Being Market Provide fiscal incentives and encourage greater participation in high risk venture Launch “Fast-Track Programme” for i-SME Establish Angel Network Institution Source: MOSTI Innovation-Enhancement Points 23

KEY INITIATIVES… MARKET BUSINESS MATCHING / MARKET ACCESS SMIDEX SHOWCASE TRADE MISSIONS i-SME FUNDING

KEY INITIATIVES… MARKET BUSINESS MATCHING / MARKET ACCESS SMIDEX SHOWCASE TRADE MISSIONS i-SME FUNDING TECHNOLOGY TECHNOPRENEURSHIP SME-UNIVERSITY INTERNSHIP PROGRAMME i-SME I-SME VENTURE CAPITALIST INNOVATION DATABASE TECHMART RESEARCH ER PROFILE GRANTS TECHNOLOGY ROADMAP INNOVATION FOR SMEs 24

Building the capacity & capability of SMEs 25

Building the capacity & capability of SMEs 25

STRENGHTHENING SME CAPACITY INDUSTRIAL LINKAGE PROGRAMME SKILLS UPGRADING PROGRAMME OUTREACH PROGRAMME NATIONAL MARK OF

STRENGHTHENING SME CAPACITY INDUSTRIAL LINKAGE PROGRAMME SKILLS UPGRADING PROGRAMME OUTREACH PROGRAMME NATIONAL MARK OF MALAYSIAN BRAND TECHNOLOGY & INNOVATION PROGRAMME SME-UNIVERSITY INTERNSHIP PROGRAMME SME COMPETITVE RATING FOR ENHANCEMENT (SCORE) ENTREPRENEUR ENHANCEMENT PROGRAMME SME EXPERT ADVISORY PANEL 26

SME COMPETITIVE RATING FOR EHANCEMENT (SCORE) As a tool to evaluate and track SME’s

SME COMPETITIVE RATING FOR EHANCEMENT (SCORE) As a tool to evaluate and track SME’s capabilities and performance in management, operation management, technology adoption, certification initiatives, financial capability and marketing capability. SME Visit & SCORE As a basic to identify: • Weaknesses of SMEs as more focused approach and provide integrated, hand-holding assistance to SMEs; • Facilitating linkages of potential SMEs with large companies/ MNCs / retailers ; and • To facilitate and identify suitable financial assistance for the development of SMEs 27

 • Corporate Planning • Technology & Innovation Management • Human Capital Development •

• Corporate Planning • Technology & Innovation Management • Human Capital Development • IT Adoption Management Capability • Practice of Continuous Improvement • Product Certification • Certification (Basic & Quality Advance Requirement) System • Awards • • • Business Performance Financial Capability SMEs Innovation • Intellectual Property Rights • Product & Process Improvement • Capability of Products & Process Improvement Activities Sales Average Growth Export Marketing Customer Satisfaction Production Capacity • • Current Assets Current Liabilities Gearing Ratio Profit Technical Capability • Capital Investment per Employee (CIPE) • Factory Automation Level • Machine Utilisation • No. of Trained Personnel • MTS Ratio • Types of Technology Utilised 28

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No Star Very basic operation, manual process and informal negative average growth; Manual process,

No Star Very basic operation, manual process and informal negative average growth; Manual process, Minimal quality management system in place, negative average growth Semi-automated process, Basic certification/ compliance, Minimal activities in product and process improvement, Minimal average growth Extensive automation, Quality management system in place, Product and Process improvement carried, IPR registered, Moderately ready for export compliance certification Fully automated, High potential for export, High investment in Product and Process Improvement, With certification for export e. g. CE Marking, GMP, HACCP Have good branding, packaging, already exporting to other countries, Have compliance to exporting countries certification requirements 30

 • Sales Turnover & Growth • Profit Margin • Customer Services • Business

• Sales Turnover & Growth • Profit Margin • Customer Services • Business Growth & Expansion • Suitability of Location • Accessibility • Business Planning / Strategy • Human Capital Development • Reward System • Job Segregation / Management Structure Management Capability • Premise • Insurance • Quality Standards Compliance to Requirements Marketing Capability • Promotional Activities • Customer Retention • Business Value Proposition Business Performance Financial Capability SMEs Stock Management • Current Assets & Liabilities • Liquidity & Gearing Ratio • Creditor's Aging • Profitability Operation Management • Stock Policy • Stock Management • Sourcing Strategy • Qualification & Staffing • Experience • ICT Adoption & Utilisation • Standard Operating Procedures 31

No Star Very basic operation Financial record not well documented, poor ICT utilisation, poor

No Star Very basic operation Financial record not well documented, poor ICT utilisation, poor stock management, low management capability Adequate management ladder, good implementation of SOP, good stock policy, average utilisation of ICT and good customer relation. Efficient management structure, good stock management, positive business expansion, good financial management and performance, comprehensive marketing plan, good utilisation of ICT Basic financial record and stock policy, basic level of operation management, minimal compliance to requirement, unstructured marketing activity Visionary leadership, established brand presence, excellent integrated system, high capability in ICT adoption, excellent compliance to requirement, excellent stock management, outstanding CRM, high business value 32 proposition, excellent marketing strategy and

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FINANCIAL ASSISTANCE PROGRAMMES Matching Grant Soft Loan • 50% of the approved project cost

FINANCIAL ASSISTANCE PROGRAMMES Matching Grant Soft Loan • 50% of the approved project cost is borne by the Government and the remainder by the applicant • Low interest rate • Longer repayment period 34

USD 141, 340 MATCHING GRANTS FOR THE MANUFACTURING SECTOR USD 70, 670 USD 56,

USD 141, 340 MATCHING GRANTS FOR THE MANUFACTURING SECTOR USD 70, 670 USD 56, 500 USD 42, 350 USD 28, 268 USD 28, 250 USD 28, 200 Matching Grant for Business Start-Up Matching Grant for Product and Process Improvement Matching Grant for Certification and Quality Management Systems Matching Grant for Market Development Matching Grant for Development and Promotion of Halal Products Matching Grant for Enhancing Product Packaging Grant for Rosetta. Net Standard Implementation 35

Business Start-Ups (USD 28, 268) Improving and Upgrading of Existing Services and Processes (USD

Business Start-Ups (USD 28, 268) Improving and Upgrading of Existing Services and Processes (USD 141, 340) FINANCIAL ASSISTANCE SCHEME FOR SMEs IN THE SERVICES SECTOR Advertisement and Promotion (USD 14, 100) Certification and Quality Management Systems (USD 70, 670) 36

 • Interest Rate: 2% • Max Loan: USD 848, 200 • Payment Period:

• Interest Rate: 2% • Max Loan: USD 848, 200 • Payment Period: 15 years Soft Loan for Factory Relocation (SLFR) Soft Loan for SMEs (SLSME) • Interest Rate: 2% • Max Loan: USD 141, 340 • Payment Period: 5 ½ years Soft Loan for ICT Adoption (SLICT) Soft Loan Schemes 37

We believe knowledge and innovation are symbiotic Innovation Through Knowledge Through Innovation 38

We believe knowledge and innovation are symbiotic Innovation Through Knowledge Through Innovation 38

xie hvala ti choucran blagadariu kiitos ευχαριστώ por diras Bedankt! arigatou спасибо merces tak

xie hvala ti choucran blagadariu kiitos ευχαριστώ por diras Bedankt! arigatou спасибо merces tak grazzi mulţumire THANK YOU ﺭﻜﺸﻠﺎ dzienkuje go-MOB-dah blagodarya danubat köszönöm dziękuję ederim obrigado muito tante grazie webale nnyo Tusen takk mamnun hvala tesekkur multimesc asante sana kamsahamnida 39