datuk mohd radzif mohd yunus : smes' gateaway to localisation

SMEs GATEWAY TO LOCALISATION

by DATUK MOHD RADZIF MOHD YUNUS,

GROUP MANAGING DIRECTOR, SME BANK, MALAYSIA

4th November 2015

Global Importance of the SMEs

Its contribution to the EconomicGrowth, Exports and Employment

The Engine of Growth and Backbone of Domestic Investment and Private

Consumption

1

ASEAN SMEs Landscape

USD 2.5 Trillion combined GDP

6th largest economy

630 Million population

3rd largest labour force behind China & India

60% population below age of 35

Broad Disparity on Economic Growth

Singapore GDP is 50x higher than Cambodia and Myanmar

7x Variance in Average Earnings

Only 25% Intra-Regional Trade

POINTS OF CONTENTION

OPPORTUNITIES

1A

SMEs Profile & Contributions in Malaysia

OPPORTUNITIES

Source: SME Corporation 2014/2015 & Annual Report BNM 2014

35.9% 65.0% 19.7%

97.3% (645,136) Business Establishments in Malaysia are SMEs

SMEs cut across all sectors of the Economy

SMEs Contribution to the Economy 2014

2

SMEs Stages of Growth

M

A

T

U

R

I

T

Y

G

R

O

W

T

H

I

N

F

A

N

C

Y

Large SMEs

Medium

Small

Micros

Startups

3

Importance of StrengtheningDomestic Supply Chain

Offers employment diversities, towards innovation,

creativities and K-based economies

To build that conducive business environment, the

whole eco-system must support its entities and

strengthen their relationships.

To complement the varying levels of needs through outsourcing, there need to be element of:

Comparative Advantage

Competitive Advantage

Distribution of Labour

4

Building SMEs Capacity:Some Possible Initiatives

SUPPORT BUSINESSES IN AREAS WHERE SUPPLY

CHAIN IS WEAK

ENCOURAGE COLLABORATIVE

INVESTMENT IN R&D

INTELLECTUAL PROPERTY PROTECTION

PROMOTE INDUSTRIAL STANDARDISATION &

CERTIFICATION

INCREASE R&D SPENDING

(Malaysia : 1% of GDP; Singapore 2.2% ; US : 2.8% of GDP)

SUPPORT LONG TERM INVESTMENT

DEVELOP STRATEGIC PROCUREMENT

PROTECT AND ENHANCE CAPABILITY

BUILD AN INNOVATIVE ECOSYSTEM

INCENTIVISE UPTAKE OF STEM-BASED DEGREES

AND JOBS

ADDRESS SKILLS REQUIREMENTS

MONITOR GAPS AND OFFER INCENTIVES TO BUSINESSES TO FILL IN

GAPS

ATTRACT BUSINESSES TO FILL SUPPLY CHAIN GAPS

6

Vendor Development Programme

7

Localizing the Anchor Cos-SMEs Business EcoSystem

/

MNCs

8

THANK YOU

SMEs Landscape in East andSoutheast Asia

CountryNumber of Enterprises (% of total)

Number of Employees(% of total)

Contribution to GDP

(%)

East Asia

Japan 99.7 [06] 69.4 [06] 47.7[08]*

Korea 99.9 [09] 87.7 [09] 47.6 [09]

China 99.0 [08] 75.0 [08] 58.5 [08]

CountryNumber of Enterprises (% of total)

Number of Employees(% of total)

Contribution to GDP

(%)

Southeast Asia

Brunei 98.4 [08] 58.0 [09] 22.0 [09]

Cambodia 98.5 [09] - 85.0 [08]

Indonesia 99.9 [09] 97.0 [09] 56.5 [09]

Lao PDR 99.8 [06] 83.0 [06] 6 to 9

Malaysia 99.2 [10] 59.0 [10] 31.9 [10]

Myanmar 92.0 [07] - -

Philippines

99.6 [09] 63.2 [09] 35.7 [09]*

Singapore 99.4 [05] 62.3 [05] 46.3 [05]

Thailand 99.8 [10] 78.2 [09] 36.7[10]

Vietnam 97.4 [07] 77.3 [02] 26.0 [07]

[ ] : year of latest available dataGDP : gross domestic productSME : small and medium enterprise*% of total manufacturing value added.

Note: SMEs are defined by national firm classification in their respective host countries.

Source: ADB; ADBI; ASEAN Secretariat; ASMED (Vietnam);DTI (Philippines); JODC (Japan); JSBRI (Japan); NSDC (Malaysia); SBC (Republic of Korea); SMBA (Republic of Korea); and SMRJ (Japan)

0

20

40

60

80

100

120

140

OverallStatus (%)

Micro (%) Small (%) Medium(%)

20.3 16.230.7

47.7

55.9 58.1

49.6

46.4

14.3 1512.7

8.530 28.8

33.6

35.5 Others

Borrowings from Friends or Relatives

Personal Savings or Internally Generated Funds

Financing from Banks, DFIs, Micro Credits Insts. and Others

Sources Of Financing : (%) Accessed By SMEs By Size

Who are the SMEs in Malaysia?

OPPORTUNITIESCRITERIA SIZE

MANUFACTURING (INCLUDING AGRO-BASED) &

MANUFACTURING RELATED SERVICESSERVICES SECTOR (INCLUDING ICT)

FULL

TIM

E EM

PLO

YEE

Micro Less than 5 employees Less than 5 employees

Small Between 5 - 75 employees Between 5 - 30 employees

Medium Between 75 - 200 employees Between 30 - 75 employees

AN

NU

AL

SALE

S

Micro Less than RM300,000 Less than RM300,000

SmallBetween RM300,000

& less than RM15 millionBetween RM300,000

& less than RM3 million

MediumBetween RM15 million

& RM50 millionBetween RM3 million

& RM20 million