Role Of Smes In Economies Including Malaysia Economics Essay

One of the of import elements of the developed and development economic systems is the little and the moderate-sized endeavors ( SMEs ) sector. The SMEs sector in Malaysia has an of import function in the national economic system. Some of the parts by the SMEs sectors are such as in footings of concern units, employment chances and economic end product. Another facet that are contributed by this sectors in Malaysia are such as the regional income coevals, nest eggs, preparation, stimulation of competition, helping big houses, debut of the invention, and as a seed-bed for growing ( Hashim, 1999 ) .

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Type of Small and Medium-sized Enterprises ( SMEs )

SMEs are categorized by different bureaus based on assorted standards. Practically, in Malaysia, SMEs are based on the standards such as the figure of the employees, sum of the capital, sum assets every bit good as the gross revenues turnover. The small-sized endeavors is the 1 that comprises of less than 50 full-time employees and with the one-year turn-over of non more than RM10 1000000s. On the other manus, the moderate-sized endeavors is the endeavor with between 51 and 150 employees, and with an one-year turnover of between RM10 million and RM25 million ( MITI, 1998 ) .

Development of Small and Medium-sized Enterprises ( SMEs )

In Malaysia, the growing and the development of the SMEs sector was altering over the old ages which can be observed in the National Malaysia Plan. In the first Malaysia Plan ( 1966-1970 ) the authorities is concentrating more in advancing the economic equity for the Bumiputera with 30 % of ownership. In the 2nd Malaysia Plan ( 1971-1975 ) , the authorities expand this sector farther by explicating and implementing the New Economic Plan. The purpose is to cut down poorness among the Bumiputera since the income per capita gained by the Bumiputera is less than 50 % of that of the Chinese ( Chee, 1986 ) . By the 7th Malaysia Plan ( 1996-2000 ) this sector has been distinct in the economic development. During this period, the SMEs comprise more than 80 % of the fabrication constitution. At present, under the tenth Malaysia Plan, the SMEs sector was undergone the transmutation into a competitory corporation, this is in order to back up and ease growing in the Malaysia economic.

Sectors in Small and Medium-sized Enterprises

Agribusiness Sector

In agribusiness sector, SMEs are involved in the production portion such as the natural manufacturers of gum elastic, Paddy, oil thenar, chocolate, Piper nigrum, herbs and veggies. Another illustration is as the agricultural manufacturers of domestic fowl and fishery trade good.

Basic Raw Materials Sector

This sector is affecting the participant of the little endeavors in activities such as the processing and the production of basic natural stuff such as natural nutrient, ice, Calamus rotang, wood, fabric, chemical, metallic and non-metallic stuffs.

General Business Sector

Enterprises that are runing in this class are including those involved in building, wholesaling and retailing, conveyance and storage, personal services such as Barber and beauty store, travel bureaus and washs and every bit good as those who is supplying services such as in hotel, eating house and nutrient catering concern.

Fabrication Sector

This class is consisting of those endeavors that are affecting in the activities such as change overing the natural stuffs into utile merchandises such as nutrient mills, bakeshops, soft drink bottling and every bit good as paper Millss. This class is the most of import class as compared to the old class. Harmonizing to the National Productivity Cooperation ( 2001 ) of all the activities fall under this class, the nutrient processing is the highest that is up to 20 % .

2.0 Incentives Provided by Government Agencies

2.1 Government Agencies

The National SME Development Council ( NSDC ) was formed after SME highlighted in RMK-9 to steer and rede the authorities in development of their policies and coordinates all enterprises. Another word, NSDC is the highest policy-making organic structure related to SME development with 19 members involved. It is president by Prime Minister, 18 Ministries and Government Agencies involved in SME development.

There is five of the chief aim of NSDC ; first aim is formulated wide policies and schemes to ease the overall development of SME ‘s across all sectors. It reviews the functions and duties of Government Ministries and Agencies responsible for SME development, and as guide stakeholders to guarantee effectual execution of SME development policies and actions works. Another aim are encourage and strengthen function of the private sector in back uping development of SME ‘s, and NSDC provide accent to the development of Bumiputera SME ‘s across the economic system.

2.1.1 SME Corporation Malaysia

SME Corporation or once known as the Small and Medium Industrial Development Corporation ( SMIDEC ) was established on 2 May 1996, its aimed at the fabrication sector SME ‘s. It is provided the consultative, financial and fiscal aid services to SME ‘s. On 2009, SME Corporation Malaysia was officially appointed as the new cardinal bureau for the development of SMEs in Malaysia. From the antecedently, the Bank Negara Malaysia was the cardinal bureau, besides the secretariats to the NSDC. The inducements and plans implemented by SMIDEC are market development grant, industrial linkage plan, merchandise design grant, accomplishments upgrading plan, SME Expert Advisory Panel ( SEAP ) , and enterprises 50 Award plan.

SME Expert Advisory Panel ( SEAP )

SEAP is a plan implemented to beef up proficient consultative services to SME ‘s. In this plan, the SME ‘s are given on-site aid by the industry experts to reassign their engineering cognition and industry experience. It ‘s comprises retired experts from the industry and specific Government bureaus. They provided the proficient and consultative to help SME in bettering their operations and usiness best patterns. As study at the terminal of twelvemonth 2010, were 62 industrial experts in assorted subjects appointed under this plan. SMIDEC in order to supply SME ‘s with necessary proficient and other to advance efficiency and productiveness. Were the SME ‘s can claim up to RM 18,000 reimbursement for disbursals incurred. The execution mechanism of the SMEDEC divided into three stage. In the first stage, the activity is the experts will carry on free preliminary consultancy services. Second stage, experts will see the mill sites of SME ‘s and undertake diagnostic audit SME ‘s. Experts besides will do recommendations on the several betterments. The activity of 3rd stage is execution of the recommended betterments from 2nd stage diagnostic audit study.

Enterprise 50 Award Program

This plan has jointly organized with Deloitte Kassim Chan. It aim at the forming the accomplishments of home-grown companies, besides it plan will advancing them.

Skills Upgrading Plan

SMIDEC collaborate with 41 Skills Development Centers ( SDCs ) offer this plan aimed to SME employees that interested in heightening their accomplishments in proficient and managerial degrees, peculiarly in critical countries, such as the electrical and electronics, ICT industrial design and technology Fieldss besides. The aim of this plan are to heighten cognition of the employees of the SME ‘s in managing concern and to heighten the accomplishments and capablenesss of the proprietor or SME ‘s. For this plan, 50 % of grant on the preparation fees for proficient and soft accomplishments.

Product Design Grant

This grant allows up to RM 200, 000 to be disturbed to a company in order to assistance in planing of the new and attractive merchandise packaging and it enable to buy the equipment and services as their demand.

Industrial Linkage Program ( ILP )

For illustration, SMIDEC sponsored SMIDEX convention, where SME ‘s acquiring to showcase their offerings. This plan purpose at the developing SME ‘s as possible providers Multi-National Corporation ( MNCs ) through the assorted of developing plan. The plan was generated RM 335 million in existent of gross revenues and the SMIDEX 2005 convention was generated RM 45 million in possible gross revenues.

The grant strategies and soft loans provided by SME Corporation such as a grant for RosettaNet Standard Implementation, E-Manucfacturing Grant ( ERP ) , grat for upgrading technology design capablenesss, grant for concern planning and development ( ITAF 1 ) , fiting grant for merchandise and procedure betterment ( ITAF 2 ) , soft loan for SMEs, soft loan strategy for mill resettlement and et cetera.

2.1.2 Ministry of Entrepreneur and Cooperative Development ( MECD )

This ministry maps to advance the strategy and plan to SME ‘s, which targets chiefly for bumiputera, besides unfastened to all. Under the strategy of Franchise Development Assistance Scheme, MECD aid to give preparation and advisory to the single enterprisers on unfastened a franchise out of their merchandise or services. At the terminal, for this intent, MECD organizes a seminars and conferences. Besides that, Franchisor Directories are produced by MECD to advance the local franchise and it offering allow up to RM 100, 000 for the selling development for each franchise merchandise.

Another plan that organized by MECD is Vendor Development Program. Where this strategy provides the support via sponsorship and publicity to Bumiputera SME ‘s to maintain on offering their services or merchandises to the Government Companies Multi-National Corporation SME. This strategy besides provided the consultative services and the proficient preparation for SME ‘s.

MECD besides forming the plan called “ Showcase Usahawan ” . Were this plan is a particular enterprise to take on advancing the local SME ‘s merchandises and services to local and foreign market.

2.1.3 Malaysia External Trade Development Corporation ( MATRADE )

The Malaysia External Trade Development Corporation ( MATRADE ) is formed by the Ministry of International Trade and Industry ( MITI ) in 1993. It ‘s established as the Malaysia state ‘s cardinal export publicity bureau that responsible for helping Malaysia companies to export their merchandises and services in international markets.

Furthermore, the specifies duties and maps of the MATRADE are to preparation and execution of exporting schemes, to set about trade publicity activities, conducts market research, develops database on trade, to carries out tranning plans, and besides it ‘s provides services related to merchandise. MATRADE assists SMEs to export their merchandise and service to states across the international. It ‘s besides assisting the local houses to export and provides aid to foreign companies seeking to the beginnings Malysia merchandises and services from the local providers.

2.1.4 Malaysia Industrial Development Authority ( MIDA )

MIDA was established in 1967 under the Ministry if International Trade and Industry ( MITI ) as the prima authorities bureaus responsible for advancing and organizing industrial development and investings in the fabrication and services sectors in the state. It ‘s authorization to advancing and co-ordinates industrial development and investings by O.K.ing fabrication licences, measuring applications for revenue enhancement freedoms, import responsibility and besides supplying the assorted of inducements.

a ) Main inducement offered by MIDA for the Agriculture and Food Sector

I ) Pioneer Status

The companies bring forthing promoted merchandise or services in the fabrication sector are eligible for Pioneer Status. Was a Pioneer Status company will bask freedom from income revenue enhancement. This company will pay revenue enhancement on 30 % of its statutory income for five old ages, start from the first twenty-four hours of sale of the agribusiness and nutrient green goods. Unabsorbed capital allowances accumulated losingss incurred during the pioneer period can will be carried frontward and deducted from the station pioneer income of the company.

two ) Investing Tax Allowance

The company that bring forthing promoted merchandises or engaged in promoted activities can use for Investment Tax Allowance ( ITA ) as an alternate manner for Pioneer Status. An allowance 60 % is eligible for a company granted ITA on its measure uping capital outgo incurred within 5 old ages from the first day of the month of measure uping capital outgo incurred.

Companies besides can countervail this type of allowance against 70 % of their statutory income for every twelvemonth of appraisal. Any unutilized allowances can be carried frontward to the subsequent old ages until wholly utilised. The staying 30 % of the statunory income is taxed at the predominating revenue enhancement rate.

three ) Incentive for Food Production

At the degree of farm and production or processing, the specific inducements are introduced to pulling the investing into nutrient undertaking. These inducements will heighten the supply of the natural stuff for the nutrient processing sector, hence cut downing dependance on imports of such natural stuff. For this sector, the revenue enhancement inducements are given to both of invested company and its subordinate company that set abouting this nutrient production sector. He revenue enhancement inducements given are depend as follows:

A company which invest in its subordinate company occupied in nutrient production activities be able to see for revenue enhancement tax write-off equivalent to the sum of investing that made in that subordinate.

For the subordinate company duty to the nutrient production activities e able to considered for a full revenue enhancement freedom on its statutory income for the 10 old ages of appraisal for new undertaking or for the 5 old ages of appraisal for enlargement undertaking. This freedom period is commences from the first old ages of the company derived statutory income.

four ) Incentives for Existing Companies which Reinvest

Existing companies that reinvest in the production of the nutrient merchandises qualifies for the same inducements for nutrient production above for a period of five old ages. Where the nutrient production undertaking for both of new and bing companies should get down within a twelvemonth from the day of the month of inducements was approved.

V ) Incentives for “ Halal ” Merchandises

These classs of inducements are divided in four types of inducement, there are:

Incentives for Production of Halal Food

Halal Industry Development Corporation ( HDC ) inducements

Double Tax write-off for Expenses to Obtain Halal Certification and Quality Systems and Standards Certification

Incentives for Reinvestment in Food Processing Activities

2.1.5 Federal Agriculture Marketing Authority ( FAMA )

FAMA duty to support of the agribusiness concern based of SMEs which has created specifically to supervise the development, selling and promoting of the agribusiness merchandises. FAMA besides map as a go-to entity for information on monetary values with a demand and supply state of affairss through FAMA info portal.

2.1.6 Bank Negara Malaysia

Te Government of Malaysia has produced assorted fiscal aid through the Bank Negara Malaysia to assist SMEs finance their concern operations and activities. All of these aid plans are channeled through the take parting f instituations such as banking instituations, development fiscal instituations ( DFI ) , and ERF Sendirian Berhad. The authorities promoted the financess and warrants through the Bank Negara.

2.2 Government Financial Institutions

2.2.1 SME Bank

The SME Bank was recognized to presume the complementary function of helping the bing banking establishments in supplying fiscal and concern back uping services to the SMEs. This bank was get downing their operation on October 2005. The SME Bank provides equity funding, working capital, term loans, industrial hire purchase, leasing, factorization, contract funding, and bank warrants in term of funding. Besides that, SME Bank besides offers the concern back uping services, likes a consultancy, readying of concern programs and professional advisory. The Bank besides provide the professional advisory such as research and cognition linkages, concern matching, concern conferences, and concern appraisal.

The SME Bank offers 5 specific loan strategies, were the mark of all this 5 loan strategy are otherwise for 5 different types of little and average sized endeavor. The 5 loan strategies are:

SME Professional loan

This funding provided for the professionals such as physicians, advisers, and druggists.

SME Start-UP

This loan schemes is financing undertaking for commercialisation.

SME Procurement

This is the funding for sellers with secured contracts.

SME Franchising

This strategy is reserve for the franchiser and franchisee.

SME Global

The loan strategy is for the concern traveling planetary.

2.2.2 AgroBank

The ArgoBank, once known as the Bank Pertanian Malaysia Berhad was entablised to supply banking services, chiefly financing to houses in the agribusiness sector in this state. ArgoBank plays an of import function in imparting fiscal aid to little concern in the agribusiness sector. Agrobank presently functions to promote and finance agricultural activities particularly for micro concern, SMEs and single or private concern. It play a cardinal function in hiking the agribusiness development in Malaysia in funding for concern in agribusiness and agro related sectors. They have 11 types of funding offered:

Fund & A ; nutrient

Paddy Credit Scheme

Non-Food Agriculture Development Scheme

Micro Credit Schemes for Entrepreneurs

Youth Agriculture Scheme

Small and Medium Industries Fund

Fishery Boat funding Scheme

Particular Fund for Fishery Sector

Agribusiness Entrepreneurs Scheme for Graduates

Oil Palm Replanting Fund Food Production Credit strategy

Financing Scheme for Bumiputra & A ; Industry Community.

2.2.3 Perbadanan Usahawan Nasional Berhad ( PUNB )

PUNB is the national enterpriser development corporation that a wholly-owned subordinate of the Bumiputra Investment Foundation ( BIF ) . The PUNB was established to assisting in the development of bumiputra enterprisers in the state. It provided funding to assist bumiputra to start-up their concern, to help them in spread outing their concern, largely in the concern countries such as nutrient engineering, agribusiness merchandises, biotechnology, medical, ICT, automotive, and et cetera. Where the funding provided by PUNB includes equity and loans installations.

In the retailing country, PUNB more specifically offers 3 chief types of funding strategies. Were the funding for all these strategies are based on the rules of Islamic finance. The three funding strategy is included:

Prosper Retailer Scheme,

Prosper Wholesale Scheme, and

Prosper Graduate Scheme.

The sum of these funding ranges is from RM 5,000 to RM 1 million, and the continuance of refund of the fiscal strategies is between 5 to 7 old ages.

Tax Incentives

Grant Assistance

Loans, Credit & A ; Equity Participation

Infrastructure & A ; Supporting Services

Pioneer Status

Investing Tax allowance ( ITA )

Reinvestment Allowance ( RA )

Double tax write-off of disbursals incurred on wide advertisement, export publicity, export recognition insurance premiums and research & A ; development.

Industrial Technical Assistance Fund ( ITAF )

Skill Upgrading Program

Technology Acquisition fund ( TAF )

Commercialization of Research & A ; Development Fund ( CRDF )

e-commerce Grant

mill scrutinizing Scheme

Minimum Lending Guidelines for SMEs

Government Funded Financing Facilities

Recognition Guarantees for SME Borrowers

Equity Financing & A ; Venture Capital

Infrastructure Development Grant

Supporting services:

Technical & A ; concern advisory clinics & A ; briefings

Information airing & A ; advancing consciousness

Product displays & A ; concern matching

Promoting of export by SMEs

Table 2.1: A general sum-up of assorted public sector inducements provided to SMEs.

3.0 SME ‘s Growth Potential Area

Employment distribution of SMEs in the Manufacturing Sector is high. Harmonizing to SMIDEC, 94 % of companies in the fabrication sector are SMEs. They contribute 32 % to the state ‘s GDP and use 56 % of the state ‘s work force excepting the Government. As we know, the nutrient processing industry in Malaysia is dominated by little and average endeavors and every bit good as foreign companies that has invested and is known as Multinational Corporations ( IMP3 2006 ) .

The lifting planetary demands for nutrient bring more possible and chance for SMEs to make in market. The opportunity is become high by cognizing trade is expected to spread out with engagement of new participants and market. The more incorporate planetary market, high opportunity for new chances and greater market entree for Malaysia SMEs. Recognizing this, the Government, under the 9MP and IMP3 has identified cardinal growing countries for SMEs in nutrient industry. There have three chief country which high potency for SMEs to make new market. They are Halal industry and franchising in nutrient sector with back uping strategic.

3.1 Halal Industry

Malaysia, foresees that there is great possible for developing and advancing halal

merchandises and services for the planetary market. The Third Industrial Master Plan ( IMP3 ) 2006-2020, specifies three chief state of affairss promoting Malaysia to go a planetary halal hub for the production and trading in halal goods and services. These specifications are that the Muslim population is about 1.6 billion and is spread out across the universe and therefore is estimated that by 2010, the planetary Muslim population will be about 3 billion.

Another specification is halal merchandises and services are besides deriving an increasing acceptableness among non-Muslims. The planetary market value for trade in halal nutrient and non-food merchandises is estimated to be at US $ 2.1 trillion yearly besides the ground why SMEs create chance in this country. This market has hence created an involvement for nutrient production by both Muslim and non-Muslim states ( Riaz and Chaudry, 2004 ) .

Therefore, Mohammad Noorizzudin et Al. ( 2007 ) , states that one of the halal hub potency is to make chances for SMEs to perforate into the halal market. This statement is supported by IMP3 ( 2006 ) , which indicates that SMEs involve more than 80 per centum of the entire figure of corporations in the nutrient processing industry.

In order for Malaya to be established as a planetary halal hub, the Malayan authorities prefers in promoting enfranchisement globally ( Riaz and Chaudry, 2004 ) . However, combinations pattern of both criterions where the halal criterions are and international criterion needs a balanced execution when fabrication or bring forthing halal nutrient or merchandises.

3.2 Supporting Strategic for Achieve

In order to convey Malaysia towards halal hub at that place have several back uping strategic that authorities take for accomplishing that end. They are taking the development by Halal criterion, Malysia international Halal show window, universe Halal forum, making Malayan trade name, inducement for Halal industry and Halal avenues.

3.2.1 Leading The Development by Halal Standard

The Halal Industry Development Corporation ( HDC ) was incorporated in 2006. Placed under the National Industry Task Force within the Prime Minister ‘s Department.HDC is tasked with gaining Malaysia ‘s planetary Halal Hub aspirations by 2010. HDC coordinates attempts to reexamine criterions, development of local industry, publicity of Malayan Halal merchandises and services in international market. HDC is duties to ease the growing and engagement of Malayan companies including SMEs in the Halal industry.

HDC set up a Halal Act in order to make focussed and cohesive model. So, HDC tied up with intelek enfranchisement by scrutinizing and enfranchisement include ISO 90000 and planetary safety direction criterion including the British Retail Consortium Food Technical Standard ( BRC ) and Hazard Analysis & A ; Critical Control Points ( HACCP ) . From that, it will assist HDC to come up with Halal criterion guidelines and best patterns.

3.2.2 Malaysia International Halal Showcase

Malayan International Trade and Industry Ministry ( MITI ) and MATRADE with the support of the Ministry of Entrepreneur and Cooperative Development ( MECD ) was organised Malayan International Showcase ( MIHAS ) . This show window is about halal merchandise exhibition and more than 90 exhibitioners from 18 states take parting, each twelvemonth. The exhibitioners are from the United States of America, China, South Africa, Australia, Iran, Pakistan, Thailand and Saudi Arabia ( MECD, 2004 ) .

The exhibition goes a long manner towards advancing Malaysia as a Halal hub such as promote halal merchandise Malaysian SMEs, showcasing the state ‘s holistic attack to Halal offerings which encompasses amongst others nutrient and drink, pharmaceutical merchandises, Shariah compliant funding and logistic services. At MIHAS 2007, the show window was held approximately five yearss. The output from that show window is confirmed in gross revenues originating from the concern fiting Sessionss, deserving RM213.9 million up 27 % from last twelvemonth ‘s RM168.3 million.

Apart from these, there are still trades worth more than RM400 million in the dialogue phase. The United Arab Emirates recorded the highest gross revenues value with more than RM90 million, followed by the UK ( RM41 million ) , Hong Kong ( RM36 million ) and France ( RM20.1 million ) . The international show window saw a sum of 3,215 concern meetings held between international purchasers, transcending the forecasted mark of 2,757.The encouraging response signals the turning involvement from the planetary community and the high gross revenues value from non-muslim states is a clear indicant of the potency of Halal merchandises ( Mohammad Noorizzudin et al. , 2007 )

3.2.3 World Halal Forum

Organised exhibition and forum are the back uping strategic by authorities Malaysia to accomplish Halal hub. World Halal Forum ( WHF ) , brings together persons from the private sector to consider on issues related to the Halal market and the application of Halal criterions and accreditation. The 3rd one-year WHF in 2007, brought together 500 of the universe ‘s cardinal leaders of the Halal industry from the corporate sector, faculty members, Non Governmental Organisation ( NGOs ) , Islamic administrations and Government representatives from around the universe. The aim was to discourse challenges and concern chances every bit good as to portion cognition and expertness during forum.

3.2.4 Making a Malayan Brand

In order to heighten the development of Halal industry, several programmes and events have been planned to advance Malaysia ‘s place in Global Halal sphere. This involves the development of effectual stigmatization, selling and promotional runs for Malaysia ‘s Halal enterprises. Example of programme or events is HalMart. This is the first incorporate Halal retail mercantile establishment and the universe ‘s first Halal supermarket.

Malayan SMEs back uping by authorities bureaus such MECD, Majlis Amanah Rakyat ( MARA ) and Small and Medium Indutries Development Corporation ( SMIDEC ) was initiated the gap of HalMart in Johor Bahru ( SME, 2006 ) . A farther 100 shops will follow within the following two old ages via franchises and a licensing programme. At the terminal of 2006, HalMart had confirmed two licensees from Brunei and Indonesia, and in 2007 to open mercantile establishments in France and across Europe. HalMart ‘s premier focal point is to move as a platform to advance merchandises produced by local Halal nutrient makers through its international mercantile establishments. Currently, 211 local enterprisers fabricating 50 different merchandises have signed up to be HalMart providers.

3.2.5 Incentives for the Halal Industry

Plans are made to set up one-stop Centres to supervise and help Halal SMEs for enfranchisement, grants, selling and investing. A entire sum of RM95 million has been allocated for the Halal hub. A farther RM50 million will be set aside to set up Halal Parkss, located in Pasir Mas, Kelantan ; Chendering, Terengganu ; Gambang, Pahang and Padang Besar, Perlis. In add-on, RM20 million will be used for funding through the SME Bank.SME Bank assisting enterprisers develop Halal merchandises. HDC is involved in explicating the construct for Halal Parks. Halal Parks is the topographic point or country designated for high-tech and modern mills for fabrication of Halal merchandise. It will function as the province ‘s Halal Hub and first Agro-based Industrial Park. Taman Pengeluaran Produk Usahawan ( TPPU ) in Rembau and Serkam are in the procedure of being set up as collaborative ventures between MECD, Standard and Industrial Research Institute of Malaysia Bhd. ( SIRIM ) and SMIDEC with the land proprietors, Malayan Industrial Estates Bhd. ( MIEL ) and the Melaka State Government.

3.2.6 Halal Avenues

This programme is organised by the the Ministry of Domestic Trade and Consumer Affairs ( MDTCA ) . This programme is aim to present Malayan merchandises to the international market and be held in abroad such UK and France. This programme allows Malayan SMEs can portion their merchandise cognition and information with another state. The first publicity was held in London in March 2007 organised with Tesco. The programme saw the engagement of 30 Malayan SMEs showcasing 120 merchandises. Business fiting chances brought in orders deserving RM17.9 million. Tesco has declared a committedness to purchase RM1 billion worth of Halal goods from Malaya about the following five old ages. This is to run into increasing client demand for Halal merchandises across 15 of its subdivisions in the United Kingdom.

3.3 Franchising

Franchising country is a large concern. Malayan SMEs have to make chances to perforate into immense market in nutrient industry particularly. Presently, there are 321 franchise systems in Malaysia with 197 home-grown franchise trade names and 124 foreign franchises including nutrient sector. The creative activity of an internationally will acknowledge Malayan trade name and the Government has highlighted franchising in the 9MP, as one of several schemes to advance a globally recognized Malayan trade name such as HalMart.

Assorted inducements and funding strategies are already available to SMEs lend to franchising. The authorities has besides established PNS ( Perbadanan Nasional Berhad ) to assist develop the franchise sector. While PNS marks chiefly Bumiputera entrepreneuers, however non-Bumiputeras are besides allowed to take part in its assorted offerings. PNS besides purchases bets in assorted franchises in abroad. For illustration, 1901 Hot-Dogs and Gloria Jean ‘s Coffee, both of which started as little mercantile establishments so grown into a big market.

3.3.1 Available optional for franchising

1901 Hot Dog

1901 Hot Dogs is a popular Malayan fast-food franchise that sells reliable American manner hot Canis familiariss. Established in 1997, 1901 presently has 70 mercantile establishments in Malaysia and Singapore. 1901 offers three types of concern theoretical accounts to enterprisers, viz. , handcart, nomadic booth and bite coffeehouse. In 2006, PNS acquired a significant portion keeping in the franchisor company, Nineteen O One Sdn Bhd. With this hard currency injection, programs are in topographic point to widen the trade name ‘s presence to include Saudi Arabia, Thailand, Indonesia, United Arab Emirates and Egypt by 2008 and increase its abroad gross revenues by 20 % .

Gloria Jean ‘s Coffee Franchise

PNS Francais Sdn Bhd ( PNSF ) acquired the Gloria Jean ‘s Coffees Master Franchisee rights for Malaysia and Brunei in December 2006. The franchise understanding calls for the gap of 30 Gloria Jean ‘s shops in Malaysia over a five twelvemonth period. Entrepreneurs can go portion of the Gloria Jean ‘s Coffees franchise through the PNS Franchisee Schemes and Programmes.

Malaysia Kitchen

The Malayan Kitchen Programme is a national enterprise, aimed at adding value to the touristry and agribusiness sectors by looking at chances to spread out the nutrient industry abroad. As portion of MECD ‘s Glokal Entrepreneur Programme, the Malayan Kitchen franchise serves to advance Malayan culinary art by set uping Malayan eating houses in major metropoliss around the universe and at the same clip develop Malayan enterprisers. MECD has been entrusted with implementing the programme through its subordinate PNSF. With the Malayan Kitchen Programme PNSF, plays a cardinal function in supplying a head start for franchisees through smart partnerships and networking for logistics, supply concatenation, advertisement and publicities and any Government linked issues.

4.0 Challenges Faced by SME to Stimulate Local Food Production

SMEs play an of import function in the Malaysia economic system in footings of economic growing and supplying employment. They have become the premier mover and besides the anchor of nutrient industrial development in Malaysia. Despite their of import part to exports, employment and economic growing, there is a broad acknowledgment in the literature about the challenges and barriers confronting SMEs in Malaysia, forestalling them from turning farther and seting them in a critical place to confront the new challenges that are originating from globalisation, liberalisation and extended organisational, institutional and technological alteration.

4.1 Internal Challenges Faced by SME

SMEs face many internal challenges. It is peculiarly ambitious particularly for the start-up concern in Malaysia.

4.1.1 Assorted Problems of Registration Process

Registrations of a company has ever be jobs to some of new nutrient maker as enrollments of licences are capable to many ordinances, policies and conditions. Conformity of returns and signifiers require excessively many information and excessively detail, sometime doubling the initial information already provided in the enrollment phase. In this facet, the authorities has set up ePortal to ease such returns. The enrollment fees for companies have been comparatively high comparison to enrollment of concern. In add-on, the punishments imposed on the SMEs incorporated for non conformity with the one-year filing of returns and histories have been rough ( the punishment imposed on SMEs incorporated must non be compared with that of the public listed companies ) . In Singapore, the authorization have waive the external audit demand for private limited companies of SMEs

4.1.2 Limited Access to Financing and Capital

Possibly the biggest obstruction SMEs face is that of acquiring funding or capital. This is because SMEs normally are non of a really big size, hence Bankss and other funding establishments may experience hesitant when it comes to loans, particularly if those SMEs are unable to offer any appropriate collateral. Therefore, SMEs may be excessively large for a little loan ; excessively little for a large loan. This jobs has been solves by a batch of authorities bureaus that involve to give capital and investing for a SMEs to develop more cause authorities knows that SMEs is really of import for our state and our nutrient industries to travel farther in planetary competition.

4.1.3 Cost of Human Resources

With engineering going progressively advanced and with knowledge-intensive sectors blossoming, demand for trained human capital has become instead high. The job here is that, one time once more, due to SMEs general deficiency of fundss, using knowledge-workers ( particularly trained 1s with a university grade ) tends to be dearly-won. Another issue here is that labour cost is going progressively expensive ( compared to other states like China, which still has slightly low labor costs ) . Lack of skilled and gifted workers will impact the quality of production every bit good as efficiency and productiveness. The cost of running the concern in regard of fees, rate, appraisal, tolls, public-service corporations, sewage charges, are comparatively disputing although non the highest in Asean.

4.1.4 Lack of Information

Another challenge that SMEs face is that of deficiency of information. Datas on market, client and rival tendencies are going progressively critical for an SME to remain competitory, but fiscal or other factors mean that they do non hold the entree to such of import information, or do non seek for it. Many of them have non taken the attempt to develop elaborate concern programs ( which may, nevertheless, require dearly-won third-party aid ) . Likewise, some may non see the demand for the assistance of confer withing houses to rectify any jobs ( due to fiscal issues etc. ) , which may do it harder for it to confront competition, particularly if they are in demand, for illustration, of utile ways in which to distinguish and advance their merchandise or service. When SMEs do non travel out to seek for critical information on affairs such as R & A ; D and selling, this may do it to lose out. As it can be seen, most SMEs face legion challenges particularly due to the fact they are by and large little endeavors, which makes it difficult for them to obtain funding. Despite assorted authorities inducements, it is obvious that non all SMEs can profit from authorities grants and programmes. This means that an SME is forced to turn to Bankss or other beginnings when it needs support.

4.2 External Challenges of SME

In the face of the new challenges posed in the planetary economic system, Malayan SMEs need to execute, vie and last in the undermentioned challenges.

4.2.1 Increased Global Competition

In the face of the new challenges posed in the planetary economic system, Malayan SMEs need to execute, vie and last in the undermentioned challenges. It is without inquiry that many multi-national companies have chosen to put up concern in states like China and India, with their blooming economic systems and inexpensive work force. Indeed, such states produce inexpensive merchandises and services which rival that of Malaysia ‘s. Even if quality is non up to par, many concerns may wish to beginning such merchandises from elsewhere, alternatively of Malaysia.

A survey that surveyed Asian SMEs found out those companies in assorted industries preferred Chinese SMEs to that of other states. Filipino and Indonesian SMEs were considered the least competitory, while Malayan SMEs were considered 10th best. With free trade and free trade understandings looming over the skyline, SMEs are invariably faced with increased force per unit areas from foreign concerns, particularly if those concerns have such advantages as economic systems of graduated table or holding a cheaper exchange rate, intending cheaper merchandises. This will necessitate Malayan SMEs to alter from traditional fabrication industries to knowledge based industries, and to accommodate their traditional direction processes to knowledge creative activity procedures. All these do it harder for SMEs to vie, and the chief job here is that most SMEs by and large do non hold the capital to enable them to go more competitory.

4.2.2 Limited Ability or Inability to Adopt Technology

The outgrowth of India as the new ICT super power in the part. This has prompted many Malayan SMEs to alter their strategic attack by integrating information engineering into cognition direction system, and information direction into cognition direction. The deficiency of technological use by SMEs makes it particularly hard for them to go more competitory. By and large, most SMEs do non use even basic ICT, such as computing machines and package. This earnestly decreases their productiveness and may lend to higher disbursals.

The issue here may be chiefly due to the deficiency of capital: deployment of such engineering ( while increasing efficiency and salvaging costs in the long tally ) can turn out to be really dearly-won. This issue is non confined to ICT use entirely, it besides stretches to fabricating equipment, wherein some SMEs are hesitating or unable to buy better, more advanced equipment due to miss of capital. Likewise, it may besides include research and development activities which may be unable to be conducted due to miss of support. Malayan SMEs are far behind, in footings of invention, compared to progressing Asiatic economic systems like South Korea, Taiwan and Singapore. The puting up of Cradle Fund and Cradle Investment Programme provide the inducement to Malayan SMEs to foster heighten their engineering capableness and commercialisation, therefore to vie in the planetary engineering environment.

4.2.3 Lack of Research and Development ( R & A ; D )

A batch of SMEs are family-based and are excessively little to set about or unaware of the benefits of R & A ; D activities. It is clear that, research capableness as measured in footings of research workers per million dweller and outgo on R & A ; D, Malaysia placed far behind a batch of states such as Korea and others. This lead to several of import inquiries refering to the province of the R & A ; D in the SMEs sector in Malaysia, the grounds for the deficiency of investing in R & A ; D, and the function of the authorities in advancing this activities. It is besides of import to cognize the degree of invention and distinction of Malayan SMEs and the attitudes towards making trade name names and niche markets.

5.0 Decision.

There is a whole scope of assorted inducements, grants and other programme that are established by the governmental bureaus in exciting the local nutrient production in Malaysia. Apart from fiscal support, the governmental bureaus besides cover soft skill preparation, the equipment or the installations every bit good as the market planning.

Over the old ages the Malayan authorities is turning their involvement in developing and spread outing the growing of SMEs. There are many ministries and bureaus are affecting in giving the local nutrient manufacturers the aid needed.

Some Governmental bureaus that are involved in helping the SMEs financially are such as follows Bank Negara Malaysia, Agrobank Malaysia, Bank Perusahawan Kecil dan Sederhana Berhad ( SME Bank ) , Perbadanan Usahawan Nasional Berhad ( PUNB ) , Small and Medium Industry Development Corporation ( SMIDEC ) , Majlis Amanah Rakyat ( MARA ) and others.

Apart from back uping the industries with fiscal for merchandise enhancing, packaging every bit good as labelling and the support in obtaining needed enfranchisement, fiscal support besides are given for soft accomplishments aid. Agency that is supplying the preparation in soft accomplishments is SME Corporation besides known as SMIDEC. For this cause, they have The Skills Upgrading Programme. It is taking to heighten the accomplishments and the capablenesss of employees of SMEs.

As a decision, SMEs have an advantages and good hereafter challenges for development. An inducement are really of import to SMEs to develop and acquire long stairss for domestic market and besides international markets. What an of import things are, incentive that had given for SMEs can alter their market of concern, alter their life and develop our state.

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