Cruising speed nowhere near enough

• SME Corp has a massive challenge in next 8 years to get SMEs up to speed
• Focus on high growth companies that use innovation and technology

“WE are on cruising speed at the moment,” says Hafsah Hashim (pic), chief executive officer of SME Corp. She is referring to the fact that based on census data from the Department of Statistics, the contribution of small and medium enterprises (SMEs) to the nation’s Gross Domestic Product (GDP) rose from 29.5% in 2005 to 32.5 in 2011.
 
“That’s only 3% over six years,” she exclaims. And if Malaysia dares to dream of being a developed nation by 2020, the contribution of SMEs to GDP has to touch at least 40%.
 
Which means SMEs must add an extra one percentage point every year to their GDP contribution. Cruising speed is nowhere near enough.
 
“That is massive,” Hafsah says. “To do that, we [SMEs] need to register double digit growth rates and leapfrog. It is a tall order, any which way you look at it.”
 
Yet Hafsah is not daunted by the size of the task ahead. Nor is she looking for a way out. Rather she seems charged up by the challenge before her agency, which also includes the goal of growing five global companies within a few years, under Pemandu’s Electrical and Electronic National Key Results Area (NKEA).
 
These five companies are to serve global supply chains as well as the local ones. [Pemandu is the Performance Management & Delivery Unit of the Prime Minister's Department, which implements and oversees the Government's various transformation programs.]
 
The only way to achieve this is to focus on high growth companies and stress on the use of innovation and technology. Here Hafsah is happy to point out that SME Corp already can rely on a pool of high achieving companies from which to find the select 6% to 10% of companies that it can bet on to become high growth champions and take the rest of the SME sector riding on their coat-tails.
 
“Our SCORE program, InnoCert and National Mark of Malaysian Brands act as a filter from which the top 20% of SMEs will likely emerge. It is from this pool that we feel our high growth champions will come. Very likely from within the top 10% of this group,” she adds.
 
SME Corp will put more time and effort and specialized programs to help this group leapfrog their natural growth in the effort to drive SMEs to contribute to a larger portion of Malaysia’s GDP in the coming eight years.
 
Hafsah is quick to point out that SME Corp will be helping all SMEs, just that there will be targeted programs at the different level of companies. This is where the six strategic thrusts of the recently released SME Masterplan come in: Innovation and technology adoption; human capital development; access to financing; market access; legal and regulatory framework; and infrastructure.
 
Technology also comes in play with the Enabling ePayment for SMEs and Micro Enterprises Entry Point Project (EPP) under Digital Malaysia. Targeted specifically at micro enterprises, the objective of the first Digital Malaysia EPP to go live is to encourage them to use a simplified version of POS (Point of Sale) system that also gets them into electronic payment mode while at the same time, helping the Government meet a key target.
 
This target is to reduce the percentage of Malaysians who are in the informal sector (read: have not registered their business and therefore do not pay taxes) from 31%, “among the highest in the world,” according to Hafsah, to around 15% which is what it is for developed nations.
 
“These would be your typical hawker and nasi lemak seller though those who offer various types of consulting services come under this category too,” she says.
 
Add to this are all those who have online stores, be it on eBay, Lelong, Mudah.my or their own blog shops. “They don’t register their business and use PayPal for transactions, how are we going to deal with them?” she poses.
 
SME Corp has been in consultation with the Malaysian Communications and Multimedia Commission and Multimedia Development Corporation on this vexing issue.
 
While the Enabling ePayment EPP is one solution, there needs to be a more holistic approach to this and it is expected that other pieces will slowly fall into place too. Expect the Internal Revenue Board to soon introduce some specific regulations regarding eCommerce.
 
To Hafsah, all these are just pieces of the ecosystem that need to fall into place to tackle the issue of the informal economy but she has her eye firmly on the target of creating high growth companies as that would enable her to hit her target: To ensure SMEs contribute at least 40% of Malaysia’s GDP growth by 2020.