datuk ismail ibrahim : iskandar malaysia

Iskandar Malaysia

WIEF 2015

SME & Internationalism

1.Iskandar Malaysia Macroeconomic Landscape

Iskandar Malaysia Macroeconomic Landscape

9.2%

3.39 3.43

2005 2006 2007 2008 2009 2010

Summary

Population, Johor, 2005-2010(mil)

Johor is the 5th largest state by land area in Malaysia withtotal land area of 19,210 km²

Johor has witnessed an increasing population from 2005 to2010. On 2010, Johor population is at 3.45 million with 2.2%population growth rate annually

Iskandar Malaysia has approximately 1.6 million residence in2010

37.1%

Indian

43.8%

54.1%

6.5%

30.9

%

0.4%

61.8%22.5%

6.7%

0.8%8.1%

BumiputraOthers

Johor:

Malaysia:

ChineseForeigners

0.5%

9.4%

2010

8.1%

2010

2010

3.313.24

3.173.10 Iskandar

Malaysia:


48,651

Summary

15,440 16,18118,726 19,930

18,45820,911 22,116

23,503

2005 2006 2007 2008 2009 2010 2011 2012

Johor GDP per Capita

GDP per Capita RM

10.2%

34.8%

3.4%

51.5%

Agriculture Mining and Quarrying

Construction

0.1%

Manufacturing

Services

44,276 46,608 48,448 53,197 56,264 59,791

2005 2006 2007 2008 2009 2010 2011 2012

Johor Gross Domestic Product(GDP)

50,687

Johor state’s GDP size of RM53.2 billion is the thirdbiggest contributor to Malaysia GDP (9.3%-9.8% eachyear) with 60% of it coming from Iskandar Malaysia

The Johor economy is largely dependent on the servicessectors which contributed 51.5% to the state GDP in2011

Contribution of the services sector to the GDP isincreasing steadily due to the economy becoming moreknowledge driven

GDP RM (million)

Johor Sectoral Shares in GDP 2011


Population (million)

GDP (RM billion)

Employment (m persons)

0

20

40

60

80

100

120

140

160

20052010

2025

Population (million)

GDP (RM billion)

Employment (m persons)

1.3

0

31.6

0.710.62

160

31.9

1.4

Increment in terms of employment rate and GDPshows that SME in Iskandar Malaysia hassignificantly growing in align with thedevelopment of the region

Iskandar Malaysia constitutes 45.6% of the Johorpopulation and half of the total employment.


Total Large SME

No of Establishments

70,522 2,390 68,132

Gross Output(RM billion)

175.9 116.5 59.4

Value Added(RMbillion)

42.1 24.3 17.8

Persons Engaged 812,117 357,770 444,347

(Percentage) %

No of Establishments

100 3.4 96.6

Gross Output 100 66.2 33.8

Value Added 100 57.7 42.3

Persons Engaged 100 44.6 55.4

of Gross Domestic Product in 2010

Constitutes 59.9% of Johor’s GDP in 2010

RM53.2

1.6 million3.43 million

Constitutes 46.6% of Johor’s Population in 2010

billionRM31.9

billion

Johor Iskandar Malaysia

Population in 2010

70,522operating in 2010

companies

companies estimated to be operating in IM in 2010 which constitutes 70% of Johor’s total

441,700employed in 2010

estimated to be employed in IM in 2010 which constitutes 40% of Johor’s total

GD

PP

op

ula

tio

nN

o. o

f C

om

pan

ies

Emp

loym

en

t

• 97% of all establishments in Johor are SMEs• Large establishments contributed more towards

total Gross Output and Value Added• SMEs provide more employment than large

establishments

49,365

176,680

As with Malaysia, 97% of

Companies

are SMEs

97% of establishments in Johor are SMEs, mostly in Services sector

2,390

68,132

Large

SME

Total70,522

88%4%

7%

1%

0%

Services

Manufacturing

Construction

Agriculture

Mining & Quarrying

Total68,132

Out of which, 88% of SMEs are in the Services sector

7% in

Manufacturing

Note: Services* excludes distributive trade, utilities and financial services

97.0 98.3 93.275.5

90.3

3.0 1.7 6.824.5

9.7

41.3

58.7

Distributive

Trade

(30,200)

Services*

(31,113)

Manufacturing

(5,181)

Agriculture

(1,316)

Construction

(2,666)

Mining &

Quarrying

(46)

Distribution of Number of Establishments in Johor, SME vs LARGE

83.6

45.2

45.2

54.9

34.1

34.4

45.9

1.714.7 9.5 11.0

19.7

55.6

25.9

18.5

DistributiveTrade

(29,300)

Services*(30,784) (4,666)

Manufacturing Agriculture(999)

Construction(2,407)

Mining &Quarrying

(27)

Distribution of Number of Establishments in Johor SMEs by Size

Medium

Small

Micro

Within SMEs in Johor, Services sector engaged 62% of the employment workforce

62% in Services

62%

28%

Persons engaged by SMEs inJohor 2% 0%

8%

Services

Manufacturing

Construction

Agriculture

Mining &Quarrying

Total441,700

84.3 83.0

20.237.1 39.7

26.4

15.7 17.0

79.862.9 60.3

73.6

DistributiveTrade

(155,000)

Service*(170,117)

Manufacturing(50,802)

Agriculture(332,372)

Construction(90,070)

Mining &Quarrying

(2,808)

Distributionof Persons Engaged in Johor, SME vs LARGE

52.237.6

32.5

46.1

6.7

21.6

30.9

13.310.8

12.0

15.2

47.2 40.855.9

77.2

DistributiveTrade

(130,600)

Service*(135,304)

Manufacturing(128,102)

Agriculture(10,494)

Construction(35,775)

Mining &Quarrying e

(742)

Medium

Small

Micro

Distribution of Persons Engaged in SMEs in Johor


3 10 40

115

4 28

136

Micro Small Medium Large

Manufacturing

540

Average persons engagedper enterprise in Johor

Non-manufacturing

In line with the SME definition

for Manufacturing ….

Manufacturing SMEs contributed the majority of Gross Output, Service sector SMEs accord the majority of Value Added among SME

60%

TotalRM 59.4 bn

Gross Output of SMEs in Johor1% 0%

5%

34%

58%34%

Services

Manufacturing

Construction

Agricultural

Mining and Quarrying

TotalRM 17.8bn

Value Added of SMEs in Johor

2% 0%6%

Contribution to Gross Output and

Value Added of both agricultural and

mining & quarrying SMEs are

relatively negligible

Majority from

Services

Majority from

Manufacturing

77.166.2

29.08.3

34.119.5

22.933.8

71.0

91.7

65.980.5

DistributiveTrade

(RM 7.0 bn)

Services*(RM 7.4 bn)

Manufacturing(RM 21.0 bn)

Agriculture(RM 3.8 bn)

Construction(RM 3.08 bn)

Mining &Quarrying

(RM 169 mil)

Distribution of Value Added of Establishments in Johor, SME vs LARGE


79.967.3

27.411.6

33.0 24.9

20.132.7

72.688.4

67.075.1

DistributiveTrade

(RM 12.2 bn)

Services* Manufacturing Agriculture(RM 16.0 bn) (RM 131.5 bn) (RM 6.8 bn)

Construction(RM 8.9 bn)

Mining &Quarrying

(RM 493 mil)

Distribution of Value Added of Establishments in Johor, SME vs LARGE

2.Internationalism

The significance of SMEs towards the growth of economies are increasinglygaining attention in countries across the world. Governments have put inplace various interventions in aspects such as human capital, infrastructure,finance, market access to accelerate the growth of SMEs.

With the increasing adoption of such initiatives, there is now a broad rangeof examples and best practices to learn from as a base for developingimpactful interventions for the development of SMEs in Iskandar Malaysia.

The section covers examples of what other countries have adopted in SMEdevelopment in three sections. It includes the most common and currenttrends in SME development in broadly six key areas – getting finance,supply of human capital, access to domestic and export markets, basicinnovation, technology adoption and infrastructure.

Internationalization of the Iskandar Malaysia SME Landscape

SME Development Common Practices and Trends

Common SME Challenges

Common SME Support Practices

Low hanging fruits Programs


Strengthening and highlighting the attractiveness of IM as the investment location forinternational operating SMEs forms a major component of the first phase of theinternationalization of the Iskandar Malaysia SME landscape. Attracting internationalSMEs to establish their presence in Iskandar Malaysia will be a formidable challengebut one that IRDA is well positioned to overcome.

The first major issue that has to be addressed is ensuring that the image of IskandarMalaysia is in line with the needs and wants of prospective SMEs from outside ofMalaysia. The positioning of Iskandar Malaysia as The SME Investment Destination willbe the centrepiece of the internationalization campaign that is set to align IMambitions and regionally and globally operating SMEs’ needs and wants. IskandarMalaysia is to portray itself as welcoming SMEs in all sectors. Parallel to this a focusedapproach towards attracting SMEs operating in the 9 growth areas is to spur IskandarMalaysia’s appeal to high-growth SMEs.


GOAL

Iskandar Malaysia as the SME Investment

Destination

2025 SME Iskandar Malaysia

Landscape Vision

Promoted SME Industry

Acceleration Plan

Iskandar Malaysia: The friendliest SME

Investment Destination Promotion Campaign

Facilitating International

SMEs arrival in Iskandar Malaysia

Enhancing market access for

international SMEs operating in Iskandar

MalaysiaKey Strategic Levers

Strengthening and highlightingthe attractiveness of IM as theinvestment location forinternational operating SMEs

Enhancing closer collaborationbetween Iskandar MalaysiaSMEs and foreign-based SMEs

Facilitating the arrival andgrowth of foreign SMEs inIskandar Malaysia

Common SME Challenges to Internationalize

Getting Finance Quality/Supply of Human Capital Access to Domestic and Export Markets

Infrastructure & SecurityAdoption of Innovation Mechanization and Adopting Technology

1) Lack of Avenues Financing (soft loan,venture capitalist)

2) Poor Credit History (no financial recordor have a history of bad debts)

3) Failure of Awareness Mechanism(lackof awareness of financing options)

1) Lack Capacity to Pay Competitively (ascompared to large companies, SMEsare less able to pay as much as largecompanies to retain employees)

2) Little Emphasis on Training (SMEs aretypically resource strained and unableto give sufficient employee training)

1) Low Bargaining Power(to commandhigher prices due to low volumes)

2) Exports Information Barrier(not know-how to access export markets)

3) Lack of Branding and Marketing (SMEshave little focus on marketing andbranding)

1) Limited Access to National ResearchOutputs(KPIs of research institutes arelargely white paper based leading tolimited collaboration with SMEs)

2) Low Emphasis on R&D(SMEs typicallyhave low focus on research andinnovation)

1) Low Adoption ofMechanization/Automation (smallercompanies typically have less capacityto mechanize processes and adoptautomation)

1) Lack of Product CollationInfrastructure for SMEs(SMEs typicallyhave smaller volume and thus needsinfrastructure that collates inputs frommultiple SMEs to be sold as one largebulk)

Getting Finance

1) Lack of Avenues Financing (soft loan, venture capitalist)2) Poor Credit History (no financial record or have a history of bad debts)3) Failure of Awareness Mechanism (lack of awareness of financing options)

Basic Financing Equity Based and Grants

Guidance/Information Mechanism

SME support is

going beyond the

provision of basic

financing

instruments to the

improving uptake

through guidance

and accountability

through matching

grants systems

Which Reduces Cost and Provides Non

Asset Based Collaterals

Soft Loans, Credit Guarantee

For All Sizes of Establishments

Micro, Small, Medium

For Various Stages of Growth

Seed, Startup, Growth

Which Provides Promising Firms Cost

Free FinancingVenture Capitalist, Grants

For High Growth or Innovative Businesses

In Companies Investing in New Technologies or Promoted Industries

To Inform SMEs of the Existence of Financing

Options and Good Book Keeping

Road Shows, Online Portals, News Letters, Through Association

Quality/Supply of Human Capital

1) Lack Capacity to Pay Competitively (as compared to large companies, SMEs

are less able to pay as much as large companies to retain employees)

2) Little Emphasis on Training (SMEs are typically resource strained and unable

to give sufficient employee training)

Basic/Secondary

EducationTertiary

Skills Enhancement

and Raising Wages

The development

of human capital

at basic and

tertiary education

levels takes time.

immediate

interventions exist

to encourage

training of existing

workforce and

raising wages

Reduce Proportion of

Unskilled Workforce

Through Vocational

Training

Through a Balanced

Approach Towards

Mainstream and

Vocational Training

Develop Vocational

Training as a Field of

Excellence e.g. Germany

Promote Training

With the Setup of

Training Centers and

Incentivizing the

Uptake of Training

Ensure Industry

Readiness of

Graduates

To Create Ready to

Work Individuals for

Businesses

Through Greater

Involvement of

the Industry

Industry Attachment

and Involvement of

Industry in

Development of

Syllabus

Access to Domestic and Export Markets

17

1) Low Bargaining Power (to command higher prices due to low volumes)2) Exports Information Barrier (not know-how to access export markets)3) Lack of Branding and Marketing (SMEs have little focus on marketing and branding)

Start-up Expansion Maturity

SMEs challenges atdifferent levels ofdevelopmentvaries and requiresa different form ofintervention andeach level

• Young, small enterprises

• Simple organisational structures

• Little functional specialisation

• Focus on product development

• High growth

• Slightly older and larger enterprises

• More complex organisational structures

• Functional specialisation generally adopted

• Focus on product commercialisation

• Very high growth

• Medium sized enterprise

• Divisional structure

• Highly centralized

• Highest functional specialization level

• Moderate growth

Diversification

• Size on average two times expansion stage enterprise

• Complex organizational structure

• Highly functional specialization with increasing decentralization

• High growth

Adoption of Innovation

18

1) Limited Access to National Research Outputs (KPIs of research institutes are

largely white paper based leading to limited collaboration with SMEs)

2) Low Emphasis on R&D (SMEs typically have low focus on research and

innovation)

Range of ServiceCommercial

Oriented

SMEs typically

have limited

access to the

output from

research

institutions. There

are programs on

overcoming the

barrier and to have

greater focus on

inclusive research

• Provides a Range of

Services including

Financing, Technical

Assistance, Market

Information, for SMEs to

Access the Innovation

System

• Introduce Commercial

Orientated KPI to

Researchers e.g.

Number of

Collaborations with

SMEs/Businesses to

increases awareness

level among SMEs

Mechanization and Adopting Technology

1) Low Adoption of Mechanization/Automation (smaller companies

typically have less capacity to mechanize processes and adopt

automation)

IssuesCommon

Solutions

The provision of shared

facilities in logistics and

incentives to automate are

common approaches to

support SMEs in areas of

infrastructure and

mechanization/automation

It is not economically viable for

SMEs with low trade volume to

utilize the distribution/logistics

networks

• Establish LogisticsConsolidation Network

• Encourage Consortiums /Aggregation ServiceProviders

SMEs lack the financial

capacity to invest in technology

and mechanization

• Matching grant for

adopting technology

Infrastructure & Security

1) Lack of Product Collation Infrastructure for SMEs (SMEs typically have

smaller volume and thus needs infrastructure that collates inputs from

multiple SMEs to be sold as one large bulk)

IssuesCommon

Solutions

Streamlining regulatory

processes and adopting

online license application

and approval systems

are common approaches

to reduce the regulatory

burden on SMEs

Excessive Regulatory Procedures is

a Common Problem for SMEs and

this Increases the Cost of Doing

Business which is Burdensome to

SMEs with Limited Financial

Capacity

• Establish an Agency to Identify andStreamline Regulatory Processes

• Establish Coordination mechanismswith SME Associations

• Get Feedback from the BusinessCommunity through SMEAssociations on Areas whereBusiness Processes can beImproved e.g. Netherlands

Time taken to Prepare and Get

Approval for Permits is Cost to

SMEs

• Online Licensing System

Singapore and New Zealand

adopts online filing for a vast

array of licenses

Entrepreneurial Development Plans for Internationalization(Low hanging fruits)

New Market Access

(Internationalisation)

Facilitate entry into ASEAN markets

Multi-market alliances amongst business

associations

G2G collaborations and media interventions for enhanced marketing

3. BUSINESS OPPORTUNITIES OFFER

Business Opportunities for SMEs

Current SMEs are not in the right business or lack information to benefit extensively fromanchor projects. Gaps to be filled with new SMEs and greater transparency of projectopportunities

Dir

ect

Inte

ract

ion

Ind

irec

t In

tera

ctio

nInvestments

Suppliers (Factors of Production and Maintenance)

Project Involvement

Population Growth Driven Demand

Branding of the Sector Internationally

•Maintenance Services (Cleaning)•Materials Supply•Equipment Supply•Management Services•Security Services

•Joint Implementation through partnership or collaboration

•Short Term Accommodation•Retail Sector•Transportation•Tourism•Food and Beverage

No

ne

Utilization of Local Resource

•Storage facilities

•Presence of big names such as Legoland, Pinewood Studios, and Kerry Food puts Iskandar Malaysia on the global map which is beneficial to local businesses

Business Opportunities for SMEs

SMEs are poised to benefit from population growth driven demand for services , maintenance andsupporting activities catering to major investments in Iskandar Malaysia

Po

pu

lati

on

Gro

wth

Dri

ven

De

man

d

Dir

ect

De

man

d f

rom

Op

era

tio

ns

of

An

cho

r P

roje

cts

Food and beverage

Tourism

Housing

Hotel and resorts

Car rental

Retail laundry services

Beauty and aesthetic care

Vehicle maintenance service

Education

Entertainment

Construction

Pest control

Furniture/Home decoration

Laundry services

Transportation/Logistics

Construction

IT Services/Solutions provider

Paper products

Security

Retail laundry services

Machinery repair

Fleet car services

Legal advisory services

Head hunting services

Secretarial service

Landscaping services

Building maintenance services

Advertising/Media

datuk ismail ibrahim : iskandar malaysia

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