Module 1: Micro-Enterprise & Small Business Development

Defining Small and Medium Enterprises (SMEs) Malaysian SMEs can be grouped into three categories : Micro, Small, or Medium. These groupings are decided based on EITHER a) the numbers of people a business employs OR b) on the total sales or revenue generated by a business in a year.

a) Number of Employees

Primary Agriculture

Manufacturing (including AgroBased) & MRS* Less than 5 employees

Between 5 & 50 employees Between 51 & 150 employees

Services Sector (including ICT**)

Micro

Less than 5 employees

Between 5 & 19 employees Between 20 & 50 employees

Less than 5 employees

Between 5 & 19 employees Between 20 & 50 employees

Small

Medium

*MRS : Manufacturing-Related Services ** ICT : Information and Communications Technology

b) Annual Sales Turnover

Primary Agriculture

Manufacturing (including AgroBased) & MRS*

Less than RM250,000 Between RM250,000 & less than RM10 million Between RM10 million & RM25 million

Services Sector (including ICT**)

Micro

Less than RM200,000 Between RM200,000 & less than RM1 million Between RM1 million & RM5 million

Less than RM200,000 Between RM200,000 & less than RM1 million

Small

Medium

Between RM1 million & RM5 million

*MRS : Manufacturing-Related Services ** ICT : Information and Communications Technology

Developing Malaysian SMEs

Importance of SMEs Developing a group of diverse and competitive small and medium enterprises (SMEs) is a central theme towards achieving sustainable economic growth. SMEs are crucial to the economic growth process and play an important role in the countrys overall production network. Some advanced economies have succeeded because SMEs form a fundamental part of the economy, comprising over 98% of total establishments and contributing to over 65% of employment as well as over 50% of the gross domestic product. Although the numbers might be lower in Malaysia, SMEs have the potential to contribute substantially to the economy and can provide a strong foundation for the growth of new industries as well as strengthening existing ones, for Malaysias future development.

Government Strategies Constituting more than 99% of total business establishments in Malaysia, it is clear that promoting a viable SME sector is essential in the nation's stride towards broadening the sources of growth and sustaining the growth momentum. This is reflected in the national development agendas, namely the; Ninth Malaysia Plan (9MP: 2006-2010), Third Industrial Master Plan (IMP3: 2006-2015), Eighth Malaysia Plan (8MP: 2001-2005) and Second Industrial Master Plan (IMP2: 1996-2005).

SME growth under the Ninth Malaysia Plan: 2006-2010 (9MP) During the 9MP, the principal SME policy is the development of a competitive, innovative and technologically strong SME sector that is able to contribute to the domestic economy and compete globally. Strategies will be directed at acquiring technologies to propel SMEs up the value chain in the manufacturing, agriculture and services sector. These include: Outsourcing Inter-firm linkages Entrepreneurship programmes Knowledge skills

Outsourcing Programmes will be implemented to nurture SMEs as Research and Development (R&D) partners. Collaborative ventures among Multinational Corporations (MNCs), Government-linked companies (GLCs) and SMEs will facilitate technology transfer and skills development and marketing; Inter-firm linkages Creating business links between SMEs, GLCs and MNCs would enable SMEs to be more competitive and become reliable suppliers for global outsourcing networks which would expand Malaysia's trade with new export markets;

Entrepreneurship programmes Programmes, including advisory and outreach services, will be expanded to equip SMEs with new and improved management and business practices, methods in production, quality improvement, marketing and distribution; and
Knowledge skills Further development of technical skills amongst SMEs, especially in generating innovation and creating economic value from knowledge application.

Strategies under the Third Industrial Master Plan: 2006-2015 (IMP3)

The priority accorded to developing domestic SMEs is further reiterated in the IMP3. The 15-year blueprint, published hand in hand with the 9MP, has outlined five clear strategies to support the development of diverse and competitive SMEs.

The five strategies are: Competitive Edge - Integration and Rationalisation Outward Bound - Armed and Prepared in a Global Arena ICT - Friend Not Foe Cohesive and Supportive Framework - Encouraging Potential to Shine Nurturing the Services Sector - Towards New Areas of Growth
With the increased allocation of resources outlined in the 9MP and IMP3, the Government has demonstrated its strong commitment for the development of efficient and competitive SMEs; a commitment that is more significant than ever as Malaysia moves towards realising its objective of becoming a developed nation.

SME growth under the Eighth Malaysia Plan: 2001-2005 (8MP)

Under its Eighth five-year planning period, the Government introduced a wide range of assistance programmes for SMEs, all aimed at making them stronger and more competitive. Highlights include : Assistance provided through the Small and Medium Enterprise Corporation Malaysia (SME Corp. Malaysia) to help SMEs to enter export markets; The creation of the Bumiputera Commercial and Industrial Community (BCIC) focusing on entrepreneurial, managerial and technical skills development; Nurturing ICT-based SMEs by assisting local ICT and multimedia SMEs, particularly the start-up companies; and Improving SME access to financing through various schemes undertaken by the Government, Bank Negara Malaysia, and banking institutions.

Strategies under the Second Industrial Master Plan: 1996-2005 (IMP2)

Efforts to strengthen SMEs were also underscored in the 10-year IMP2. Developing stronger SMEs required major changes in the manufacturing sector, as SMEs made up over 90% of the countrys manufacturing sector. IMP2 programmes were designed to develop a resilient, broad based and internationally competitive manufacturing sector. Emphasis was placed on helping manufacturers adapt to the changing global environment. Help was also given to make these businesses more competitive in all respects. Efforts were made to vertically integrate manufacturers supply chains, in order to enhance overall economic efficiency. Development of Malaysian-grown brands was encouraged, as was the use of ICT tools.

Government Programmes To support the development of SMEs, the Government provides a comprehensive set of programmes through the various Ministries and Agencies, which are broadly categorized into

"Financial Assistance" and

"Business Support Services"

Financial Assistance By Type of Financial Assistance

Soft loans Grants Equity Financing Venture Capital Guarantee Scheme Tax Incentives

Financial Assistance By Purpose of Financial Assistance Strengthening Skills of Workforce Entrepreneur Development Marketing & Promotion Product Development & Quality Accreditation Technology Development Debt Restructuring General

Financial Assistance By Government Ministry & Agency

Ministry Ministry of Science, Technology and Innovation (MOSTI) Agency Amanah Ikhtiar Malaysia (AIM) Bank Kerjasama Rakyat Malaysia Berhad (BKRMB) Bank Negara Malaysia (BNM) Bank Pembangunan Malaysia Berhad (BPMB) Agrobank Malaysia Bank Perusahaan Kecil & Sederhana Berhad (SME Bank) Commerce Asset Ventures Sdn. Bhd. Credit Guarantee Corporation Malaysia Berhad (CGC) ERF Sdn Bhd (ERF) Export-Import Bank Malaysia Berhad (EXIM Bank) Majlis Amanah Rakyat (MARA) Malaysian Biotechnology Corporation Bhd (MBC) Malaysia Debt Ventures Berhad (MDV)

Financial Assistance By Government Ministry & Agency (continued) Malaysia External Trade Development Corporation (MATRADE) Malaysian Industrial Development Authority (MIDA) Malaysian Technology Development Corporation Sdn Bhd (MTDC) Malaysian Timber Industry Board (MTIB) Malaysian Venture Capital Management Berhad (MAVCAP) Malaysian Industrial Development Finance Berhad (MIDF) Mayban Ventures Sdn. Bhd. MIMOS Berhad (MIMOS) Multimedia Development Corporation (MDeC) Perbadanan Nasional Berhad (PNS) Perbadanan Usahawan Nasional Berhad (PUNB) SME Corp. Malaysia Tabung Ekonomi Kumpulan Usaha Niaga (TEKUN)