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 country’s 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 Malaysia’s future development.
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.
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.
- Assistance provided through the Small and Medium Industries Development Corporation (SMIDEC) 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 country’s 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.
The National SME Development Council
One major development during the 8MP and IMP2 periods was the establishment of the NSDC in June 2004. The Council, chaired by the Prime Minister, represents the Government’s top-level commitment to promote SME development.
The Council is meant to coordinate inter-Ministry and Agency efforts on SME development, as well as provide a policy strategic framework for the industry going forward.
There are more than 12 Ministries and 38 Agencies supporting the Government’s SME development efforts. Each of these organisations has been tasked with specific development objectives aimed at particular target groups.