A partner for small and medium enterprises

SME Corp is the central point of reference for information and advisory services for all small and medium enterprises in Malaysia. As such, it encourages partnerships with the private sector and investments, as well as ensures effective implementation of the overall SME development programmes in the country.

Interviewee: Dato’ Hafsah Hashim, CEO of SME Corp

Q: What are the latest developments at SME Corp?

A: First of all, we moved to a new building that fits our needs in Kuala Lumpur Central and can now be better reached by SMEs – by sea, air, and road. They can even walk to us. Regarding the SME Master Plan, it has been endorsed by the National SME Development Council (NSDC) in November 2011. For 2012, our buzzword is Go, go, go! We now need to see how to harness our energy to ensure that all the targets in the Master Plan are met, because when you look at it, it’s not all carved in stone. We have to revisit it on an annual basis, to see what really ticks and what needs to be fine-tuned, because the external environment changes. The Master Plan is aligned to the overall national policy and and it will be fine-tuned in line with the changes in the environment.  It is running until 2020, so it has to be flexible. What’s important is that by the end of 2020, we will be watching from outside if we have met the target, because this is the date when Malaysia plans to have reach the developed nation status. Henceforth, the targets we have set in the SME Master Plan are also targets that are typical characteristics of a developed economy status. And we hope to be able to meet the target. From 2004 until 2010, SMEs have consistently outperformed the overall GDP growth, but this is not enough. To realise the Vision 2020. SMEs need to accelerate their growth and double their productivity level.oAs we speak, the Department of Statistics has just completed the latest census – the last one was in 2005. The census will provide updated statistics to show where we stand now and for us to plan and manage the future better.

Q: What is the expected impact of the Master Plan in the short term?

A: Definitely, the 32 initiatives including the six high-impact programmes are supposed to increase the GDP contribution of SMEs so we can reach the bottom of a typical developed economy which is about 40%. The Masterplan also aims to increase the contribution of SMEs to employment and exports to 62% and 25% respectively. Now these are targets that we have set for ourselves. What’s important is to look at the four goals of the Master Plan. The first one is truly about creating dynamism in the domestic economy through business formation. The economy cannot grow extraordinarily without it. We are putting in a lot of energy to encourage new business formations among individuals, especially the young. You know very well that we just hit seven billion world population mark in November 2010, and the world is not getting any bigger, and space is getting smaller. By 2030, we are going to hit nine billion population mark on earth, and if we do not address this explosion in population growth, it will become a social problem for a lot of economies. For us, engaging people and creating more awareness among individuals to form businesses, is the right formula. It’s much about employability. The old school says, when someone comes out from higher education, wherever he is, he gets a job and is successful. But this perception has changed, and educated people no longer get jobs automatically. But if you don’t get a job, it’s not the end of the world, because you can also create jobs by yourself. That’s what we encourage in Malaysia at successful businesses and highly innovative companies, that they incubate those crème-de-la-crème people. They can benefit from this mentor/mentee relationship, and be successful themselves. For example, we worked together with the top most innovative company in 2010, and its CEO incubated six others like he was incubated himself earlier. It’s all about grey matter; he didn’t need to have a whole manufacturing plant. It’s about his brains, he was able to create a design for microchips systems, and he went to universities and chose six of the best students and incubated them. He said: I am successful; my people earn an average of 42,000 ringgit a month, which is more than 13,000 US dollars, straight money for a new graduate. Now, there are six new companies that have been founded by these six university students. The effect that I see is that universities have made entrepreneurship mandatory as one of their elective subjects, which is good. It creates business for you and for others. We are trying to change the mind-set of people that success is not just being measured by being employable, but that someone can also create employment for others.

There are other goals of the Master Plan – increasing the number of high growth and innovative companies as they are the ones that generate employment and additional output for the country.  As I’ve mentioned earlier, the other goal is to enhance the productivity of SMEs to boost income and standard of living. Last but not least, we know that in Malaysia – as well as in other Asian countries –, the informal sector is very high, standing at 31% of GNI. So the Masterplan is also targeting to bring down the informal sector and to get as many SMEs as possible to formally register their businesses.

Q: How do you measure the outcome of projects?

A: We started doing this in 2007, when people started asking us, ‘How many SMEs are there that are competitive, and how do you measure this?’ So, my team and I brainstormed and came up with a score, a diagnostic tool, which measures competitiveness and capability, and delivered information to SMEs on how to better manage their firms. What’s important with this tool is not the star rating that comes with it, but the diagnostic analysis for capacity building.

We measure outcome at three levels, the firm level, programme level, and the macro level. The firm level is measured by scores, so that the company sees where issues are and how they can be addressed. At programme level we measure among others sales turnover, productivity and technology uptake. All this boils up into the macro level indicator, GDP, employment and exports. However, a lot of people tend to confuse between outcome and output. You can have 200,000 people attending a programme, but what’s important is what happens to them afterwards as a result, as a next step.

Q: What collaboration do you see between SME Corp and the GCC?

A: A lot of GCC companies have come here for assistance in terms of SME development. As of late, the Khalifa Foundation from Abu Dhabi was here in December 2011, and they collected all the information because they want to set up a similar organisation in the UAE. Oman and Qatar want to do the same, and we are providing them advisory services and help them out. In the last 15 years, we have been training all the GCC and OIC countries on an annual basis, at least 30 of GCC organisations come here to be trained at any point of time. In 2011, we started with African countries, we received a lot of interest and enquiries, and there were about 20 organisations coming to visit us. This is supported by the Malaysian government. You know, if big companies and investors come in here to set up business, they want to have a reliable pool of SMEs, and that’s the message I send across to this investors. When you come to Malaysia, you have this pool, we’ve got it. Our database is comprehensive and very rich. We have all the company profiles. If big companies come here, the first go to MIDA for incentives, then they come to SME Corp and we link them up. They don’t have to evaluate companies anymore. We only have three star companies and above. For example, in 2011 Boeing and BAE Systems came to us, and we had a very productive session because they saw that they don’t need to assess companies with whom they wanted to work together by themselves. From investors’ perspective, the time they spend with us is productive. If they want to work in a special sector, we’ve got the pool for it.

Q: What are the challenges that you faced in the period since the global economy went down?

A: Those challenges are interesting, and they make us creative. Globally, the challenges on SMEs are different, with issues such as access to information, finance, technology, and markets. For SME Corp as an organisation, our challenges are a little but different. Earlier, we were very much focused on manufacturing, but we realised that we were focusing on the wrong case as the services sector was much bigger. Today, ´´almost two thirds of GDP contribution of Malaysian SMEs is coming from services. Moreover, the government has liberalised 27 sub sectors, and what’s challenging for SMEs is that now new expertise is sought, because management transfers have increased. It is important for the SME sector that people are provided with the right advice. For us, the challenge is about providing training services. Today we have 57 business counsellors and eight business coaches to make sure that the right advice is given to SMEs. They are all young graduates from universities, and they don’t have a clue of how to do business, and therefore they go through to our training programme and get advisory services. Another challenge is the external environment. 80 per cent of our SMEs are domestically oriented, only those who are exporters are affected by the global situation and price fluctuations. What the government has consistently shown to us during the global financial crisis is that it is willing to fund stimulus packages. We had RM6.5 billion in 2009 for our SMEs, which helped them very much to address those challenges. They have been quite agile and flexible during the recession, which means that probably we did something right. The SME sector was able to show positive growth in the last two years, in 2010 it grew 8.4 per cent, and in 2011 it was about eight per cent, which is higher as the average economic growth in Malaysia.

Q: Could you encapsulate what an SME incorporates for our readers?

A: SMEs are a very important group that we should not put aside, they are here to stay, and our role is to ensure that SME are integrated into the economic mainstream. It is very much depending on our SME Master Plan. The way to go is that we tweak the plan accordingly to reach our goals.