By KHOR HUI MIN
In many countries, small- and medium-sized enterprises (SMEs) are the engines of growth of local economies in ASEAN. According to ASEAN SMEs – Are You Transforming for the Future?, SMEs currently constitute more than 50% of a country’s gross domestic product (GDP) and produce up to 30% of its exports. They are also the main source of employment in all economic sectors.
The Department of Statistics Malaysia reports that real GDP growth of SMEs in Malaysia has been consistently higher than the overall economy – in the 2011-2017 period, the average growth rate of SMEs was 6.6%, whereas the national GDP was 5.2%. The overall GDP contribution of SMEs was 37.1% in 2017.
National policies and key initiatives that support SMEs
During the past decade, the government has introduced progressive policies and enabling initiatives for SME and entrepreneurial development. Structural and regulatory reforms were introduced to help micro, small and medium enterprises flourish.
According to the SME Annual Report 2017/18, the National SME Development Council (NSDC) was established in 2004 to be the highest policy-making body for the development of SMEs in the country. Its aim is to formulate a comprehensive and coordinated approach to attain its objectives. Its achievements after 14 years include:
- Adoption of a standard definition for SMEs
- Creation of an SME database
- Monitoring and analysis of SME performance (to facilitate policy formulation)
- Improving dissemination of information on SMEs
- Development of SME financial infrastructure
- Formulation of the SME Masterplan (2012-2020)
Introduced in 2012, the masterplan was formulated to help increase SMEs’ contribution to GDP to 41.0% by 2020.
The report also described the recent introduction of the SME Central Incentives System (SCenIc) in 2017. Developed by SME Corp, SCenic is a centralised database of the beneficiaries of government aid, and it is intended as a referral hub to avoid duplication.
As well as optimising the utilisation of resources, the system will also improve transparency in the reporting and coordination of SME programmes.
In 2017, more policies for SMEs were unveiled. Firstly, the Insolvency Act 1967 was introduced, which enables a second chance for bankrupt entrepreneurs by giving them an automatic discharge to recover and return to their business pursuits.
Secondly, the Employment Insurance Scheme was introduced to aid in the improvement of the social security of workers.
Thirdly, the National eCommerce Strategic Roadmap (NeSR), launched in 2016, was conceptualised to help propel Malaysia further into the digital economy, which is the next frontier for economic growth. In 2017, the Digital Free Trade Zone (DFTZ) pilot project was also introduced as part of the growth roadmap.
MDEC: Helping Malaysian SMEs GAIN a Global Foothold
The government incorporated an agency, MDEC (then named Multimedia Development Corporation) in 1996 to spearhead the development of a key national digital economy development initiative – MSC (originally known as Multimedia Super Corridor) Malaysia, which is a special economic zone and high-technology business park that provided local tech companies with the platform to grow.
At the same time, the MSC attracts foreign direct investments (FDIs) and domestic direct investments (DDIs) in order to finance the development of state-of-the-art digital and creative solutions in Malaysia.
In conjunction with MDEC’s 20th anniversary, it was renamed Malaysia Digital Economy Corporation Sdn Bhd, as it is entrusted with the mission of pioneering and championing the transformation of the nation’s digital economy.
Its role includes strategically advising the government on digital economy legislation, policies and standards, and multimedia operations.
A key aspect of MDEC’s task is to guide the country’s SMEs that are engaged in developing digital-driven solutions to expand to the next level.
To help SMEs address their challenges in expansion, MDEC introduced the Global Acceleration and Innovation Network (GAIN) programme in 2015.
GAIN’s mission is to catalyse the expansion of local technology SMEs and to help them realise their potential as global players. GAIN seeks to help SMEs achieve this by facilitating market access, leadership and capability development, brand visibility and access to scale-up capital.
Customised assistance is provided to each company based on their needs and goals, which include:
- Gaining market access
- Increasing brand visibility
- Upskilling the workforce
- Improving access to funding
- Facilitating match-making for mergers and/or acquisitions
The GAIN programme also helps to accelerate the following:
- Growth in size and export revenues
- Expansion of global market presence
- Creation of more global Malaysian tech champions
The selection guidelines are as follows:
- Malaysian headquartered tech companies
- Forward-looking leadership and management team
- iGlobal aspirations
- Scalable/innovative technology products and solutions
- Strong financials
The GAIN programme operates through four pillars, namely market, visibility, mentor and money. It is supported by around 50 channel partners, six business chambers, 30 investors, eight government agencies, as well as around 50 corporations and business associates.
Breaking barriers to achieve success
Since its establishment, GAIN has assisted over 150 companies in their quest to grow their reach and expand their capabilities. By participating in the GAIN programme, the companies have successfully increased their overall revenue and export revenue.
Some of these companies have been featured in the media and appeared in leading speaking roles in key events in the region, which has also acted as an inspiration to other companies intending to embark on the same journey.
In the 2015-2017 period, the average total revenue earned by local MSC companies increased by 16%, while the total revenue of companies in the GAIN programme grew 170% (refer to Figure 1).
GAIN companies grew 10 times faster than their counterparts, which is an encouraging statistic.
In terms of export revenue in the same period, the average local tech companies grew 27%, whereas the GAIN companies grew 47% (refer to Figure 1).
The export revenue of GAIN companies grew 1.7 times faster than their counterparts. This percentage is set to increase significantly in 2019, as MDEC is focusing on increasing market access into more countries.
International growth and expansion
To help increase market access, GAIN offers a market immersion programme in four ASEAN countries. Known as GAIN Connex, it is a business matching and networking platform. The four countries involved are the Philippines, Vietnam, Indonesia and Thailand.
Besides that, six business support ecosystems were activated in 2018, in Jakarta, Manila, Bangkok, Dubai, Ho Chi Minh and Phnom Penh.
GAIN also enables visibility and media engagement as part of its programme via its media partners. For example, initiatives have been done through print articles, key event speaking roles and TV interviews.
Mentorship is also a significant part of GAIN’s efforts to cultivate better entrepreneurs. In 2018, GAIN organised its 9th CEO Series, involving industry leaders, media partners, listing firms, credible mentors, VCs and other agencies.
The mentorship here is on a pro-bono basis and the entrepreneurs have adopted a ‘pay-forward’ approach, especially to the younger companies/entrepreneurs.
Last but not least, having funds is necessary for tech companies to grow and develop their products. In 2018, GAIN has been working with corporates, VCs, PEs and investors around the region, and have shortlisted a sizeable number of companies that are now in a discussion at various stages of fund-raising.
There is still much to do and many more SMEs need to get on board to grow their capabilities, upskill their employees and enter into new markets.
As such, MDEC will have its hands full in its role as a catalyst for the growth of local IT companies, enabling them to make their mark in the global market and make Malaysia proud.