Sparking INNOVATIONS among SMEs

GROW BEYOND INNOVATE TO GROW NURTURE TO GROW ... SIRIM will tap into the technical competencies of ... • Technology audit and value chain analysis...

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PP 18091/05/2013(033524)

vol. 1. 2015

Sparking INNOVATIONS among

SMEs

Tan Sri Dr. Mohd Irwan Serigar Abdullah Secretary-General of Treasury

Rebranding SIRIM Insights from the Secretary-General of Treasury, Ministry of Finance SME Corp. Malaysia Speaks

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FOREWORD

advisor DATO’ DR. ZAINAL ABIDIN MOHD YUSOF chairperson ZULKIFLI ABDULLAH members RAJA YAHYA RAJA ARIFFIN SUHAIMI MAHMOOD AZMAN HASSAN DR. NEELAM SHAHAB DR. KARTINI NOORSAL KHAIRUL AIMI KAMALUDIN INDERJEET SINGH A/L SOHAN SINGH ZANARIYAH ALI RUSLINA SHAIDIN KADRI KARUWAHARAN ROSLINA HARUN RUHIL AMANI ZAINAL ABIDIN STANLEY TEO KWANG YAW NURAZLINA ISMAIL published and printed by

A Synergistic Partner for SMEs Malaysia’s 2015 Budget emphasises the nation’s progress as we venture into an intensely competitive global arena. It has become a necessity for Small and Medium Enterprises (SMEs) to bolster their innovation stronghold and their competitiveness, ultimately facilitating our aim towards becoming a high income society. As an established and integral entity for research and development as well as quality and standards for over 40 years, SIRIM is well positioned as the cornerstone of the country’s innovations, and is more than capable in lifting SMEs’ productivity to move forward in their goals. This issue highlights our ongoing efforts and plans for the future as well as our strategic collaborations with like-minded organisations and agencies to do just that. With our current rebranding efforts, we aspire to further reinforce our strengths to meet new and upcoming industrial research and development demands, simultaneously forging and boosting technology penetration for SMEs.

SIRIM BERHAD 1 Persiaran Dato’ Menteri Section 2, P.O. Box 7035 40700 Shah Alam, Selangor Toll Free: 1300-88-7035 Tel: 603-5544-6000 Fax: 603-5510-8095

SIRIMLink is an official publication of SIRIM Berhad. The bulletin is distributed free to our clients and associates, business and research establishments. Copyright © SIRIM Berhad. For further information on the articles featured in this magazine, please contact PROMOTIONS & EVENT MANAGEMENT SECTION, STRATEGIC MARKETING DEPARTMENT SIRIM BERHAD 1 Persiaran Dato’ Menteri Section 2, P.O. Box 7035 40700 Shah Alam, Selangor Tel: 603-5544-6772 Fax: 603-5544-6745 Or e-mail [email protected]

INSIGHT

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REBRANDING SIRIM TO MOVE FORWARD

ENHANCING THE ECONOMIC ECOSYSTEM FOR SMEs

SIRIM has been mandated to increase technology penetration and upgrading the Malaysian SMEs and subsequently heighten Malaysia’s economic development as a whole. SIRIM embraces this challenge with gusto.

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When Malaysia’s Budget 2015 was revealed last year, innovation and creativity were identified as core elements in spurring the growth of Small and Medium Enterprises (SMEs) and, ultimately, the development of the nation’s economy.

INSIGHT

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GROWING LOCAL SMEs

ENHANCING RURAL ENTERPRISES

HELPING SETTLERS SUCCEED

As the development gap between cities and rural areas in the country continues to widen, what are the efforts being made to close it?

As the nation’s focus turns to enhancing local SMEs, FELDA is in an opportune position to further its endeavours in elevating the socioeconomic conditions of its communities.

SME Corp. Malaysia was established in 1996 as a specialised agency to spur the development of SMEs by providing support in terms of infrastructure facilities, financial assistance and advisory services, among others.

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Dato’ Dr. Zainal Abidin Mohd Yusof President and Chief Executive, SIRIM Berhad

REBRANDING SIRIM TO MOVE FORWARD SIRIM has been mandated to increase technology penetration and upgrading the Malaysian SMEs and subsequently heighten Malaysia’s economic development as a whole. SIRIM embraces this challenge with gusto.

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With nearly 98% of industries in Malaysia falling under the Small and Medium Enterprise (SME) category, it has a prominent part in driving the country’s economy forward. In order for the SMEs to play their role well, they need to be armed with sufficient technological capabilities. However, while the larger multinationals and governmentlinked corporations typically have their own research and development units, SMEs would, more often than not, need to rely on external bodies for their research and development initiatives. This is where SIRIM plays an important role by embarking on a repositioning exercise to ensure that it can better serve the SMEs, in line with the Budget 2015 highlights.

Technology Penetration and Upgrading programme is a step closer in reinforcing the relationship between SIRIM and SMEs, and in establishing a successful SME innovation ecosystem. SIRIM’s President and Chief Executive, Dato’ Dr. Zainal Abidin Mohd Yusof, is confident that the “rebranded” SIRIM will be able to effectively take on the role of industry partner of the SMEs to help enhance their technological innovations. “Together with the government, we will expand our subsidiaries. We want to be a partner to industries and provide them with the technologies,” he said.

This is a timely development. As global competition becomes more intense, technological innovation is now an integral prerequisite. The rebranding of SIRIM will, thus, invigorate its capabilities to meet current demands for more complex industrial research and development. Accordingly, the SME

Established Reputation As an established and integral entry for research and development as well as quality and standards, SIRIM can help SMEs to meet the requirements of the international market. Its current focus lies in three main areas, i.e. energy and environment, medical and plant, and medical technology. The subsidiaries are as follows: • SIRIM QAS International Sdn. Bhd. • SIRIM Training Services Sdn. Bhd. • National Precision Tooling Sdn. Bhd. • SIRIM Standards Technology Sdn. Bhd. - SIRIM Measurements Technology Sdn. Bhd. (calibration and measurement) • SIRIM Tech Venture Sdn. Bhd.

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INNOVATION PARTNER Under the rebranding exercise, the SIRIM Research and Technology Innovation programme will be renamed and repositioned, offering industrial research services to the SMEs. This is an opportune time for SMEs to harness the institute’s extensive expertise in this area. “We have a strong set-up in research and development, technology, innovation, design and engineering, quality and standards, and technology transfer,” said Dato’ Dr. Zainal Abidin. This allows SIRIM to provide a wide range of services, all integrated under one roof, simultaneously merging its expertise in technology innovation and a business-oriented approach to deliver solutions that are relevant to the current marketplace. These cutting-edge research and development capabilities are available to all local SMEs, including start-up companies and microenterprises as well as the bigger SMEs which can also stand to benefit from more automation and

mechanisation processes to increase their efficiency. Dato’ Dr. Zainal Abidin cited a tapioca fritter entrepreneur as an example. “By adopting SIRIM’s industrial processes, the entrepreneur can now trim his workforce from 10 people to just two.” SIRIM is also collaborating with Malaysia Debt Ventures, which will allow companies to obtain RM300 million soft loans towards increasing their technological capabilities and ultimately their productivity. Additionally, SIRIM hopes to inspire its own employees to make use of its facilities for entrepreneurship ventures as well. Its business opportunity programme, which is based on models practiced in Taiwan and Italy, aims to increase commitment and inspire its 1,000-strong team of scientists and researchers to nurture their ideas by giving them the opportunity to set up their own companies, while being employed by SIRIM.

SIRIM’s cutting-edge research and development capabilities are available to all local SMEs

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Blueprint for Success

MODEL OF EXCELLENCE

SMEs in the services sector form the majority of all SMEs. The services sector, meanwhile, as the largest contributor to the nation’s economy, has been identified as a key area that will be strengthened, according to the Services Sector Blueprint, which was unveiled in the Budget 2015.

To further enhance its efforts, SIRIM also recently unveiled its Industrial Innovation Model, which adopts and adapts the principles of Germany’s Fraunhofer model on applied research for the development of SMEs.

Among the initiatives included in the blueprint to facilitate the growth of this sector are financing schemes for SMEs and research incentives. Consequently, SIRIM’s rebranding exercise will also be directed at supporting initiatives to increase innovation, research and development, and commercialisation among these SMEs.

According to the SIRIM Industrial Innovation Model, with the support of the Ministry of Science, Technology and Innovation (MOSTI), SIRIM, in collaboration with its strategic partners and industry, will provide innovation services in areas encompassing research and development and market penetration to nurture the growth of SMEs.

SIRIM Industrial Innovation Model Innovation Services

INTRAPRENEURSHIP SPIN-OFF & JV

INDUSTRY

MICRO ENT. APPLIED R&D

NURTURE TO GROW

PRODUCTISATION STRATEGIC PARTNERS

Increased Productivity of Industry

SME

INNOVATE TO GROW

MARKET ACCESS

GLC LLC MNC

GROW BEYOND

© SIRIM Berhad 2015 11

To ensure the efficacy of the model, SIRIM will tap into the technical competencies of Fraunhofer’s network of institutes and other qualified Centres of Excellence to establish the Malaysian Industrial Innovation Network, which will then provide technological solutions to industries. Among the areas which will be emphasised are joint research and technical services, exchange of personnel and information, and strategic innovation studies.

SUPPORT FOR SMEs In increasing the technology penetration and upgrading of SMEs, two main strategies will be implemented: a) Increase technology adoption by small and micro SMEs by 5% annually based on the 2015 baseline b) Strengthen and upgrade technology applications by medium-level SMEs by 5% annually based on the 2015 baseline Accordingly, eight key innovation programmes are being initiated. These are:

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Implement innovation management

• Technology audit and value chain analysis • SIRIM standard on innovation management • Industrial extension on innovation management • Innovation management certification (expansion of 1-InnoCERT)

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Boost technology commercialisation and upscaling

• Product engineering and prototyping • Process engineering and control • Reliability and safety • Feasibility study and field trial • Technology venturing-SIRIM Intrapreneurship

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Increase technology uptake of SMEs

• Automation and mechanisation • Technology enhancement • Localisation of technology including parts and components • Solving industry-wide problems • Personnel attachment with SMEs

REBRANDING SIRIM TO MOVE FORWARD

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Strategic research for future application

• Medical technology • Energy and environment • Plant and machinery

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Nurture growth of small and micro SMEs

• Vendor development • Entrepreneur development (e.g. Groom Big) • Packaging and labelling • Technical advisory on product development and production process

Strengthen market access • Certification • Testing and inspection • Calibration

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Support programme

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Cross-cutting programme

• Standard and specification development • Standard compliance consulting • Technology and marketing intelligence (e.g. technology radar, market explorer) • Intellectual property rights • Education and training (e.g. certified courses, on-the-job training, online learning) • Internationalisation of services

• Programme management • Malaysian Industrial Innovation Network • Competency development

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OPEN ARMS SIRIM is definitely no stranger when it comes to providing a helping hand to SMEs, and has an established reputation among industry players. With its innovation stronghold, SIRIM is well poised to serve the increasing needs of SMEs. Consequently, Dato’ Dr. Zainal Abidin welcomes these players to utilise SIRIM’s capabilities as leverage to innovate and progress. After all, “we want to be a technology provider, build entrepreneurship and enhance technology uptake,” he said.

German Touch In December 2014, SIRIM signed a declaration of intent for cooperation with Fraunhofer IAO (Fraunhofer), one of the world’s largest research and development organisations and Germany’s top ranking research institute. The collaboration, which kicked off its first project in March and will span two years, aims to facilitate Malaysia’s SME growth through innovation and technology management in key areas that include Health and Environment, Mobility and Transportation, Communication and Information, Energy and Resources, Production and Services as well as Safety and Security. According to Fraunhofer’s Deputy Director, Professor Dr. Anette Weisbecker, the inaugural project constitutes the first important step in the collaboration. “We can contribute our special expertise in the areas of innovation and technology management. We’re looking forward to working together and the possibility to take part in further joint initiatives in applied research,” she said. In addition to providing a link between academic research and business practices that transforms scientific expertise into commercial applications, Fraunhofer will work together with SIRIM and the country’s SMEs in strategic studies, on the basis of shared analysis and market development monitoring, as well as the initialisation and implementation of research and development projects to support the development of regional enterprises and joint organisation of conferences, workshops and seminars. Fraunhofer will also advise SIRIM about the qualification of innovation centres based on the Fraunhofer-Gesellschaft model.

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Fraunhofer Model

Model

• • • •

Involvement and funding by SMEs Involvement of universities and students in the universities and Rls Identify technology platform based in market needs Long-term relationship building with SMEs

Funding



• •

1/3 Strategic funding from federal government (research activity for future use in 5-10 years) 1/3 Industry research 1/3 Bidding from public programmes

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Tan Sri Dr. Mohd Irwan Serigar Abdullah Secretary-General of Treasury

ENHANCING THE ECONOMIC ECOSYSTEM FOR SMEs When Malaysia’s Budget 2015 was revealed last year, innovation and creativity were identified as core elements in spurring the growth of SMEs and, ultimately, the development of the nation’s economy. Parallel with this, SIRIM has been thrust into the spotlight as a main vehicle in upholding and driving innovation within the country. As the country gears up for the dash to the final line of our goal towards becoming a high income economy, SIRIMLink gets the Secretary-General of Treasury, Tan Sri Dr. Mohd Irwan Serigar Abdullah, to share his thoughts on the issue. 16

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What is your opinion regarding the highlights of Budget 2015 – in particular, the focus on SMEs to drive Malaysia’s economy? If you look at the company registrar on the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM), more than 98% of the companies registered are SMEs. However, the SMEs’ contribution to the economy, i.e. the gross domestic product (GDP), only constitutes a small part, at just 33%. We are targeting to increase this share to 41% by 2020. When you look at other countries, the SMEs’ contribution to their GDP is much higher. This shows that the productivity, revenue and operations of our SMEs are still below par. This is where institutions like SIRIM can help to enhance the output of the SMEs by increasing their productivity, changing their production processes to be more relevant and helping them move from labour intensive to technology intensive production. In Budget 2015, this is one of the areas on which we want to focus, so we can really change the ecosystem for the SMEs.

How would you define innovation and its importance in growing Malaysia’s economy? Malaysia’s productivity growth rate of 2% in 2012/2013 is considered low among developing countries. There is a need for the government to increase productivity growth through technology development and product commercialisation. Industrial innovation, therefore, becomes a crucial element to boost the nation’s economy and competitiveness. If you look at the production theory in economy, in the 1960s, they had a conventional economic approach, where land, labour, capital and materials would be the inputs, or factors, of production. However, things are changing, and innovation and creativity are becoming an important component as well. If you only have the capital, materials and labour, you can produce and survive; but if you want to go to the next level and compete in a global environment, then you need to incorporate innovation and creativity. You need to find new ways – not just in terms of the product design or packaging but also in marketing and exploiting the Internet, for example – to penetrate the larger market. You have to be in tune with what the customer wants. It’s not about what you want to produce anymore. It’s about what people want to buy. You need to change according to the changing environment. This is what innovation is about – meeting future needs. This is why SIRIM is important. SIRIM has the potential to play a larger role in bolstering the Malaysian economy. There are more than 1,000 researchers, scientists and engineers in SIRIM with the relevant knowledge and technology which can be tapped to help industries grow and change. 17

98%

Companies registered by the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) which are SMEs.

What role do you see SMEs playing in this aspect? With the key elements, such as innovation, in place, will they be able to increase productivity and such? In Malaysia, the SMEs are often family-based and more traditional in their outlook, and as such are reluctant to pursue technical investment. They don’t see the future potential of these investments and would rather continue with the current technology and labour intensive processes, as they can employ immigrant workers at lower costs. However, they will find it difficult to penetrate the ASEAN or global market. If you want to be competitive, you need to keep innovating. You must have a big dream to go global. “Dream Big. Go Global!” as they say.

Could you please give your view on the country’s endeavours in the development of innovation and commercialisation and how they contribute to the strengthening of our economic growth? We have provided a base for research and development and innovation; through the Ministry of Science, Technology and Innovation (MOSTI), there are a lot of activities and research going on, but there is a missing link. The ideas are there but these are not translated to commercially viable ventures. We need an ecosystem where everything is put together – from product research to market research to financing and intellectual property. There needs to be a clear process that brings the entrepreneurs all the way from conception of idea to the marketplace. In places like the Silicon Valley, there are many ideas being nurtured, and people can talk to any institution or research organisation to get the necessary assistance. Here, we are still at a very early stage, whereby if you have any ideas and talk to someone else about it, they will try to discourage you. We need to change our mindset. We need to have a culture of entrepreneurship development here.

How do you see SIRIM playing a role in supporting SMEs? How about in the development of innovation and commercialisation? SIRIM is an important entity. Under existing initiatives, it has been providing consultation, testing facilities, technology transfer and human resource development to increase SMEs’ capacity by focusing on the latest and cost-effective technology. Simultaneously, it also plays an integral role in product development to reduce Malaysia’s dependency on important products and external manpower. SIRIM plays a vital role in connecting research and development with industry players. One of the high impact programmes under the SME Corp Masterplan emphasises strategic collaboration between productivity and innovation – hence the collaboration between

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SIRIM and Germany’s Fraunhofer Institute to foster partnership with research and development institutions and industry, strengthen pooling of expertise, and widen commercialisation in order to increase productivity and international networking to meet global demands. When I look at the various models in Korea, the US and so forth, I find they have an innovation entity. I thought of nurturing SIRIM to become an innovation centre – a prime mover – where it can guide the SMEs along. I have this vision of making SIRIM the “heart” of innovation that provides the necessary linkages and “pumps the blood” to other entities, such as academia and industries.

Is this something that is in the works? For 2015, we are looking at technological penetration by SIRIM. If SIRIM excels in this, then maybe we can give it a bigger role and it can become the “heart” that I’ve been dreaming of. In countries like Taiwan and Korea, they have similar institutions set up directly under the Prime Minister to drive innovation and creativity. They are able to go into industry, private sectors and universities; this is how Korea, for example, has been able to move so fast and produce names like Samsung, Hyundai, and etc. They get 100% support from the government.



The government has allocated an additional RM10 million in Budget 2015 to support SIRIM’s rebranding initiatives.



What is the SME Technology Penetration and Upgrading Programme about? What role do you see SIRIM playing in this programme? The programme aims to encourage and assist SMEs to adopt technological innovations to improve their operations, boost productivity and increase competitiveness. The government has allocated an additional RM10 million in Budget 2015 to support SIRIM’s rebranding initiatives, which include SME penetration, upgrading programmes and technology auditing. This new focus will enable it to infuse new technologies to improve the operations of SMEs. I hope that SIRIM will be able to go to selected industries, conduct a study on the technological level of the industry and identify how it can be improved as well as how the government can play a role in assisting them. If the particular industry is labour intensive, perhaps it can be changed to more mechanised processes so that it is not so dependent on immigrant workers and can simultaneously decrease costs and improve quality and productivity.

How will SMEs benefit from Budget 2015 in general and SIRIM’s supporting endeavours in particular? There are a lot of allocations for SMEs; these include the masterplan developed by SME Corp. Malaysia, and funds for technical acquisition, packaging and overseas training. I understand that SIRIM’s 2013-2017 Strategic Plan is to provide industries and end-users total solutions in research and development, testing and certification. SMEs will benefit by having services provided by a one-stop, business-oriented organisation focused on building up their competitiveness and growth. SIRIM will also serve as a catalyst for the growth of technology-centric SMEs that will contribute towards promoting innovative quality and technological solutions for the industry. I have high hopes for SIRIM. I feel that it can drive the nation’s innovation towards becoming a high income and developed nation by 2020.

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Dato’ Hafsah Hashim CEO, SME Corp. Malaysia

GROWING LOCAL SMEs When it comes to the world of business, how much does size matter? According to SME Corp. Malaysia, this is the era of the SMEs. “Small is the new big,” according to SME Corporation Malaysia’s (SME Corp. Malaysia) Chief Executive Officer, Dato’ Hafsah Hashim, at least when it comes to key economic growth contributions. After all, in recent years, the growth rates of Small and Medium Enterprises (SMEs) have been consistently outpacing the national average economic growth by 1% to 2%, which is good news as 98.5% of Malaysia’s business establishments are SMEs.

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Contributing more than 33% to our gross domestic product (GDP), 60% to employment and 20% to exports, SMEs play a key role in spurring the economic progress and prosperity of the country. In view of that, entrepreneurship and SME development have consistently been a focus in our annual national budgets.

SME Corp. Malaysia was established in 1996 as a specialised agency to spur the development of SMEs by providing support in terms of infrastructure facilities, financial assistance and advisory services, among others. It takes on the role as a Central Coordinating Agency, working alongside 15 other ministries and 65 other agencies, one of which is SIRIM, in harnessing the growth of SMEs in Malaysia.

INSPIRING INNOVATION The spotlight on SMEs continues to intensify in Budget 2015. In tandem with this, the SME Masterplan is also in high gear. Alongside this, innovation has been given a boost as a key entity. While some people are intimidated when it comes to innovation, Dato’ Hafsah emphasised that this need not be so. She defines innovation as “doing things differently and continuously improving on what we have been doing in yesteryears. We keep looking for new things, more efficient and definitive processes that can impact the masses,” she explained. Consequently, innovation is very much entrenched in the SME Masterplan; and two of its six high impact programmes, i.e. the technology commercialisation platform and the inclusive innovation programme, are actually innovation-based.

MORE THAN

33% Gross Domestic Product (GDP)

60% Employment

20% Exports

Malaysian SMEs’ Contributions

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BRIGHT SUCCESS

CATALYSING GROWTH The SME Catalyst programme is a high impact programme under the SME Masterplan. Companies that wish to participate in this structured programme are evaluated using the SME Competitive Rating for Enhancement (SCORE), which scores them according to seven criteria. Companies which are given rankings of 3-stars and above will then be eligible to participate in the programme. SME Competitive Rating for Enhancement (SCORE) • Compliance to Certification and Standards • Technological Adoption and Innovation • Overall Business Performance • Human Resource and Skills • Management Capabilities • Financial Strength • Utilisation of ICT

One of the endeavours under the SME Masterplan’s catalyst programme concerns the development of five worldclass home-grown LED companies by the year 2020. The beginning of the journey in 2012 saw around RM6 million in sales being recorded by the companies. Just two years down the road and these same companies are well on their way towards becoming world-class, charting sales amounting to RM88 million, with an annual growth rate of 25%, average salary of RM5,400 per employee (for management and above) and RM3,500 per employee for skilled staff and technicians. To add to these achievements, 335 new jobs have been created. It’s not all about quantity, though. Quality matters, and it is because of this that the LED companies have made a significant impact in Frankfurt, London, Dubai and Nigeria. In fact, during a convention in Dubai, people were queuing up at the Malaysia pavilion to purchase their LEDs because, according to the purchasers, these are “value for money”. The catalyst programme involves SME Corp. Malaysia “scoring companies, providing them with the funds and enhancing their capabilities via our structured capacity building programmes,” said Dato’ Hafsah. With this achievement, SME Corp. Malaysia has now been given a new task of replicating the success with other industries such as biotechnology, medical devices, oil and gas, and ship building and repair, to name a few.

SYNERGISTIC PARTNERSHIP Given that the crux of SME Corp. Malaysia lies in elevating the profile of SMEs, it is no surprise that it works closely with SIRIM in many aspects. Apart from certification standards, they also collaborate on the SME Innovation Award and National Mark of Malaysian Brand. The former offers cash rewards of up to RM1 million to the top winner. The latter, conceived in 2005, emphasises the quality of companies and the importance of having a brand, and also offers cash rewards to companies to fund their advertising and promotional endeavours. When the initiative started, they were given a target to have top 100 brands of Malaysia. SME Corp. Malaysia successfully hit this target last year, with a stable of brands that include Joven and Parkson.

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“This is how we catalyse growth, through companies that we preselect in terms of their capabilities,” explained Dato’ Hafsah.



With the focus of SME Corp. Malaysia now shifting towards driving innovation and productivity, Dato’ Hafsah envisions a more prominent role for SIRIM, bringing it to a higher level of importance as well as visibility in terms of technology, innovation, creativity and production. “With our SME Masterplan being productivity-led and innovation-driven, we are able to enhance the image of SIRIM. We have latched SIRIM to the Fraunhofer Institute of Germany, thus allowing SMEs to take advantage of this linkage in order to drive innovation among their own businesses.”

LOOKING AHEAD For Dato’ Hafsah, efforts in facilitating the growth of SMEs will never be enough. “We need to keep on changing, your adrenaline must be flowing all the time!” she exclaimed. Nevertheless, she is confident that SMEs will remain as the main ingredient in advancing the nation’s economy. “In the 11th Malaysia Plan, I would say that the heart and soul is on SME development,” she said. “We must not disregard their role; we must be able to recognise their inherent weaknesses, address these weaknesses and leverage on their strengths,” she added.

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ENHANCING RURAL ENTERPRISES

As the development gap between cities and rural areas in the country continues to widen, what are the efforts being made to close it? Dato’ Rahim Abu Bakar Deputy Secretary General (Planning), Ministry of Rural and Regional Development

In order for Malaysia to attain developed nation status by the year 2020, it is essential that rural sectors are offered adequate infrastructural and socioeconomic development. This is where the Ministry of Rural and Regional Development (KKLW) comes in. In tandem with its objectives of developing rural areas and subsequently enhancing rural living standards, the KKLW’s primary focus has always been on providing rural residents with basic infrastructures, for instance roads, electricity and water.

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To do this, the ministry allocated RM4 billion in 2015 to assist with the development works. Additionally, Regional Development Authorities have also been set up with the hopes of hastening the development in rural and regional areas. Some of these agencies include the Federal Land Consolidation and Rehabilitation Authority (FELCRA), Community Development Department (KEMAS) and Lembaga Kemajuan Terengganu Tengah (KETENGAH).

ENHANCING RURAL ENTERPRISES

According to the Deputy Secretary General (Planning), KKLW, Dato’ Rahim Abu Bakar, “These agencies were set up to combat poverty and to narrow the development gap between Sabah, Sarawak and the east coast, and the west coast of Peninsular Malaysia. We have these agencies working together with us to develop these villages.” These efforts have undoubtedly made a difference, as the poverty rate has dropped significantly from 70% in 1970 to 2.5% in 2010. In addition to developing rural areas with basic infrastructure, KKLW is also focused on the development of human capital.

GROOMING ENTREPRENEURS

KKLW was introduced in 1959 by then-Minister of Rural Development Tun Abdul Razak with the intention of developing physical infrastructure and providing extensive basic amenities to rural residents. It provides a solid track for rural areas to become active and advanced.

With Budget 2015 placing the spotlight on Small and Medium Enterprises (SMEs) to drive the nation’s economy, KKLW now has the responsibility to push for the development of the local entrepreneurs in rural areas. In line with this, the ministry has been allocated a total of RM4.5 billion for several projects, of which RM51 million was allocated specifically for SMEs and entrepreneurship development programmes under its Economic Development Division. A portion of this amount has also been set apart for the implementation of a new programme, the 21st Century Village (21st CV), which was spurred by the Government Transformation Programme (GTP) 2.0 (2013-2015). In reinforcing KKLW’s efforts to enhance the economic development of rural residents, the programme is aimed at creating more job opportunities while expanding the business activities of rural entrepreneurs, particularly the youth, SMEs and cooperatives. The 21st CV marks a slight shift in KKLW’s focus. While previously it concentrated on infrastructural and human capital development, this programme emphasises the development of the villages based on economic activities. The programme encompasses the Rural Business Challenge (RBC) and Desa Lestari, the former targeting young rural residents, while the latter is for cooperatives. The programmes are aimed at creating an enabling environment for them to advance themselves. “RBC is focused on developing young entrepreneurs, and this we do by creating opportunities for them,” elaborated Dato’ Rahim. It is hoped that these programmes will ultimately pave the way towards more job opportunities and increase income for the SMEs and cooperatives.

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ENCOURAGING PASSION KKLW also awards grants to entrepreneurs who possess the necessary capabilities and are truly passionate about going into business, and ensures that these entrepreneurs achieve success in their endeavours by subsequently monitoring their performance and, together with the state agencies, working closely with them.



“It is our hope that our efforts will not only result in these people becoming entrepreneurs themselves, but that their success will pave the way for entrepreneurship in the villages,” continued Dato’ Rahim.



COOPERATIVE CONNECTIONS A similar approach is used with the Desa Lestari project, a collaborative effort between SIRIM and KKLW since 2013. Here, cooperatives take on the role of a catalyst in enhancing the economic development of the villages. SIRIM’s involvement in these programmes includes providing the necessary machineries and helping the cooperatives comply with relevant certifications. With SIRIM’s extensive resources and capabilities, it is able to provide innovative solutions and identify the best processes for production, and then pass this information on to the cooperatives. Among the Desa Lestari projects that SIRIM and KKLW have worked on together is the Koperasi Desa Lestari (KODESAL) project, which includes the Stingless Bee Farm, Kampungstay project and fritter project in Marang, Terengganu. As cooperative projects, any profits made from these endeavours are shared among the members. Consequently, as all the members of the cooperative are rural residents, the profits can be used to enhance their villages and living standards.

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ENHANCING RURAL ENTERPRISES

KKLW is also simultaneously developing similar initiatives in other villages, such as Kampung Kuala Medang, Kuala Lipis in Pahang, and Kampung Sempeneh in Batu Kurau, Perak.

FURTHER COLLABORATIONS Moving forward, there are more collaborative efforts between KKLW and SIRIM that are underway, and it is hoped that these will accelerate the economic growth of the rural areas. KKLW is encouraged by how its past efforts have made a positive impact to rural communities. “We will continue to serve the rural people and we hope that our efforts will help realise the country’s goal to achieve a developed nation status by 2020,” concluded Dato’ Rahim.



“We will continue to serve the rural people and we hope that our efforts will help realise the country’s goal to achieve a developed nation status by 2020,” concluded Dato’ Rahim.



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HELPING SETTLERS SUCCEED As the nation’s focus turns to enhancing local SMEs, FELDA is in an opportune position to further its endeavours in elevating the socioeconomic conditions of its communities.

Ismail Samingin Director of Entrepreneur Development Department, FELDA

In 2014, the Small and Medium Enterprises (SMEs) operating under the Federal Land Development Authority (FELDA) scheme contributed 0.5% of the total SME contribution to Malaysia’s gross domestic product (GDP). With the many programmes, current and upcoming, falling nicely in place, the numbers look to be increasing in the near future. One such programme is a collaboration that FELDA has with SME Corporation Malaysia (SME Corp. Malaysia) and SIRIM. This collaboration was initiated in 2009, where SME Corp. Malaysia provides entrepreneurs from FELDA settlements with grants amounting to 80% of their endeavours, while the balance 20% is provided by FELDA through its Entrepreneur Incentive Scheme (SIUF). SIRIM, on the other hand, provides the technology and innovation (e.g. providing the necessary machineries for processing and packaging) as well as consultancy services.

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HELPING SETTLERS SUCCEED

Some of the products from local entrepreneurs who have benefited from FELDA’s efforts

INNOVATING FOR SUCCESS

PROGRESSING ONWARD

Twenty-two entrepreneurs from Perak, Pahang, Negeri Sembilan, Johor and Sabah were selected from a total of 88 applicants to receive the necessary aid in facilitating their business growth. And the results, as reported by Ismail Samingin, Director in FELDA’s Entrepreneur Development Department, were encouraging.

Encouraged by the success of the collaboration, FELDA aims to provide assistance to the entrepreneurs in applying the lean production management system to facilitate zero or minimal wastage in their production processes.

“Ardani Enterprise (one of the participants in this programme) achieved a 90% increase in its sales in 2013. Our partnership with SIRIM went smoothly, and we were both able to deliver the needed technological improvements and advisory to the entrepreneurs to help them succeed,” he said. The support received by the participants include technology improvement, increased production capacity, enhanced engineering and automation capabilities, financial management, package design and labelling, adherence to international standards and quality assurance.

In a bid to help these entrepreneurs widen their market share, FELDA also plans to assist them in obtaining relevant certifications, such as Halal, Food Safety is the Responsibility of the Industry (Makanan Selamat Tanggungjawab Industri – MeSTI), Good Manufacturing Practices (GMP) and Hazard Analysis and Critical Control Point (HACCP). In the pipeline is a collaboration with Malaysia External Trade Development Corporation (MATRADE) for an export programme, whereby 10 to 20 entrepreneurs will be given the necessary assistance to export their products overseas. This programme is currently in its preliminary stage. According to Ismail, innovation is the linchpin that will determine the success of FELDA and its settlers, as well as of SMEs as a whole. “Innovation is the key for SMEs to transform their businesses to become more innovative and competitive,” he said.

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FELDA was originally established in 1956 under a Parliamentary Act to help eradicate poverty. Through the years, it has provided 10 acres of land to 112,635 settlers across the country. Since the 1990s, the agency has shifted its focus from establishing settlements to engaging in diverse economic development and business activities in line with its objective to develop the FELDA settlements to become high income communities.

ENTREPRENEURS WITH BIG DREAMS Upon moving to the FELDA Ulu Penggeli settlement in Johor, Kasmunah Idris was told that she could do anything she wanted with the land. She decided to plant banana trees. This soon led to her venturing into making kerepek pisang (banana crisps). In time, as demand for her kerepek continued to rise, it was only logical that the next step would be to open a shop. And thus, Mak Munah Food Enterprise was born. As business continued to flourish, Kasmunah sought help from FELDA, subsequently becoming a beneficiary of the FELDA-SME Corp. Malaysia-SIRIM collaboration. In addition to the grant and loan from SME Corp. Malaysia and FELDA respectively, she received a packaging and sealing machine, an estimated 100,000 packets of packaging and a digital weighing machine from SIRIM for her two bestsellers – Rempeyek Mini and Kerepek Pisang. She definitely appreciates that the packaging helps to provide an identity for her products. “Now, when customers see the packaging, they know at once that this is a Mak Munah product!” she exclaimed.

Packaging for Mak Munah’s bestsellers

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Clockwise from top: Ardani shows how he seals the packaging; Kuih baulu fresh from the oven; A batch of kuih baulu ready to be packed

Kasmunah is filled with entrepreneurial spirit. Her plans for the future include expanding her shop and getting Halal certification to get the Mak Munah brand out in the marketplace. “We welcome the government’s efforts in helping SMEs, especially those like us, which are not prominent, to come to the forefront,” she said. Another Johorean, located in FELDA Sungai Sibol, Ardani Mohd Arshad has a similar story to tell. He started his baulu business from his own kitchen, armed with a small container and a handful of eggs. As a result of his participation in the FELDA-SME Corp. Malaysia-SIRIM programme, his Baulu Kismis and Baulu Cermai line of products have become more marketable.

“I obtained a lot of technical guidance and support from SIRIM,” he said. Among the equipment that he received were an oven, packaging and sealing machine, and an expiry date stamping machine. This has increased his daily production from 3,000 kuih baulu previously to 10,000 pieces! Subsequently, Ardani Enterprise charted a sales revenue of RM510,000 in the year 2013, an increase of 90% from previous years. As his business continues to grow, Ardani hopes to further upgrade his production capabilities to meet increasing demands, particularly during the festive seasons, and hone his entrepreneurial skills, while maintaining the quality of his products. After all, ultimately, “It’s the quality that is important,” he declared.

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