SME Masterplan (2011-2020)

The National Small and Medium Enterprise Development Council (NSDC), 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:

1. Increase business formation to facilitate business dynamism through a constant stream of new entrants into the market;
2. Intensify formalisation to incentivise innovation, growth and promote fair competition;
3. Raise productivity of SMEs to boost incomes and raise standards of living; and
4. Expand number of high growth and innovative firms as they generate a substantial share of employment and output in the country as well as having the scale to be globally competitive.

Six focus areas were identified to support the strategic goals, namely:

1. Encourage greater innovation and technology adoption among SMEs;
2. Enhance human capital and entrepreneurship development among SMEs;
3. Ensure that credit worthy SMEs have access to financing for working capital and investment;
4. Expand the market for goods and services produced by SMEs;
5. Ensure legal and regulatory environment is conducive to the formation and growth of SMEs, while protecting the broader interest of society; and
6. Improve the infrastructure needed by SMEs to 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.

Source: SME Corp Malaysia (www.smecorp.gov.my)