SME Masterplan for Innovation-led and Productivity-driven Growth to Achieve High Income Nation [ 01-05-2011 ]
Putrajaya, 29 April- The National Small and Medium Enterprise Development Council (NDSC), convened its Eleventh Meeting today and approved the First Phase of the SME Masterplan (2011-2020). The Plan will chart the policy direction of SMEs in all sectors towards achieving a high income nation by 2020 in line with the New Economic Model (NEM). The vision is to create globally competitive SMEs that enhance wealth creation and contribute to the social well-being of the nation. The Council, which is chaired by YAB Prime Minister, with members from 17 key Ministries and agencies including Sabah and Sarawak, also approved the SME Integrated Plan of Action (SMEIPA) 2011 encompassing the planned programmes for 2011.
SME Masterplan (2011-2020)
The SME Masterplan is divided into two phases with the entire project to be completed in the third quarter of 2011. The Council deliberated on the First Phase of the Plan comprising a new SME Development Framework as well as broad policies and strategies to achieve the NEM goals. The Second Phase of the Masterplan will be undertaken to look into the specific action plans and the monitoring mechanism.
The Plan focuses on creating an enabling ecosystem to accelerate the growth of SMEs through productivity gains and innovation and to bring them to the next level of development. The diagnosis of the current status of SMEs revealed several positive developments. Since a more structured framework for SME development was put in place in 2004 following the establishment of the NSDC, SMEs outperformed the overall economy in terms of growth in value added, employment and productivity. The analysis also showed that high growth SMEs existed across all subsectors and were the major contributor to the increase in value added and employment of SMEs.
Over the years, Government assistance to SMEs has been significant and has yielded positive impact. In the Ninth Malaysia Plan period, SME development amounted to RM26 billion or almost 12% of the development expenditure focusing on enhancing access to financing, building capacity and capability, and strengthening enabling infrastructure. A pilot study on impact assessment by the World Bank on 15 SME programmes showed that these programmes produced net positive impact on SMEs and the economy, particularly on investment, output and value added, but little impact on labour productivity and wages. It was also found that productivity level of SMEs in Malaysia was relatively low at RM44,300 per worker, about one-third that of the large companies (RM143,000 per worker) and also lagged behind other countries.
Going forward in line with the aspirations of the NEM, the Plan focuses on developing high growth SMEs to become homegrown champions that spearhead the economy as well as formalising and developing microenterprises that make up the bottom 40% to achieve the socio-economic objective of balanced growth. In addition to assuming a driver role, SMEs would also be an enabler of growth through creation of effective value chain that links with the global supply network.
The vision of creating globally competitive SMEs is crystallised through the four strategic goals, namely:
- Increase business formationto facilitate business dynamism through a constant stream of new entrants into the market;
- Intensify formalisationto incentivise innovation, growth and promote fair competition;
- Raise productivity of SMEsto boost incomes and raise standards of living; and
- Expand number of high growth and innovative firmsas they generate a substantial share of employment and output in the country as well as having the scale to be globally competitive.
Six focus areaswere identified to support the strategic goals, namely:
- Encourage greater innovation and technology adoptionamong SMEs;
- Enhance human capital and entrepreneurship developmentamong SMEs;
- Ensure that creditworthy SMEs have access to financingfor working capital and investment;
- Expand the marketfor goods and services produced by SMEs;
- Ensure legal and regulatory environment is conduciveto the formation and growth of SMEs, while protecting the broader interest of society; and
- Improve the infrastructure needed by SMEsto operate effectively.
At the same time, the Plan proposed strengthening of the institutional support to ensure successful implementation of the SME Masterplan. This includes having a comprehensive SME database to make informed policy decisions; instituting an effective monitoring and evaluation system; and enhancing coordination and business support services.
The Plan proposes a number of quick wins that can be implemented namely review of programmes and funds based on the new goals, enhancing SME utilisation of existing the Human Resource Development Fund as its training programmes have shown a strong positive impact on SMEs and Green Lane policy to catalyse high growth innovative companies to graduate to become global players.
Achieving the SME development goals will significantly alter the economic structure of the overall Malaysian economy. SME contribution to GDP is expected to increase from 31% in 2010 to 40% by 2020 as value added growth of SMEs continue to outpace the overall economy to expand at an average annual growth rate of 8.7% versus 6% in the overall economy. The quantum leap in growth is highly dependent upon a significant increase of 75% in productivity gains of SMEs.
Other updates
The Council also endorsed the SME Integrated Plan of Action 2011 (SMEIPA)which outlines a total of 219 programmes being implemented with a financial commitment of RM5.9 billion in 2011 (2010: 226 programmes, RM7.1 billion). SMEs continued to obtain financingfrom the financial institutions, with banking institutions remain as the main source of financing, contributing to 85% of the total SME financing and benefiting 547,000 SME accounts as at February 2011. SME approvals remained high at 85%, with SME approved financing expanding by 28%. As at end-February 2011, the SME financing outstanding stood at RM130 billion, accounting for 38.3% of the total business loan. The Council was also informed on the launching of the Economic Census 2011 in May 2011 which will cover all establishments including SMEs. The Census 2011 will assist in enhancing the database to facilitate the Government in policy formulation.
Secretariat
National SME Development Council
29 April 2011
