ASEAN region to become global game changer

ASEAN region to become global game changer

Malaysia’s Budget 2013 has given a much needed shot in the arm for Malaysia’s SME community with a proposed RM1 billion fund in Budget 2013. In a nutshell, the fund is designed to strengthen and solidify their business, and face up effectively to global competition.

Notable this time around is the inclusion - for the first time - of incentives for angel investors and usage of intellectual property rights (IPR) as collateral.

This move is spot on because SMEs make up 99% of all business establishments in the country - and they are crucial to Malaysia’s GDP growth in the next few decades.

In fact, prior to the budget announcement, the UOB SME Survey 2012 revealed that SMEs wanted more tax incentives to help their expansion plans and cushion them from any potential risks in the uncertain global environment.

(The survey was conducted among 450 Malaysian SME owners across multiple sectors to seek their views on business and economic conditions and key business priorities for 2013.)

On that score, the government has certainly heard them.

By their very nature, SMEs are more nimble than GLC’s or multinationals; they are where innovations are seeded. With the added boost of incentives for angel investors and IPR collateral - the Government has put SME growth onto the fast track.

It is an important economic milestone for the country, because SMEs make up 99%  of business establishments in the country, and employ an estimated 56% of the workforce.

Another important SME fact is that of the 500,000 SMEs on the SME Corporation’s watch list, 15% or 80,000 are women-owned. Of these, almost 90% are in the services sector. With the government’s emphasis on the economic empowerment of women, these new incentives are surely a welcome for women entrepreneurs in the socio-economic development of the nation.

ASEAN market bigger than Japanese GDP by 2028

The UOB Survey also picked up on SMEs being cautious about business outlook for the next three years because of the slow recovery in the US and Europe.

They are now focused on opportunities at home and throughout the region, which I believe is the smart way to go because this is where there is dramatic middle-class growth.

Also by 2015, we will have the Asian Economic Community (AEC), which will provide for seamless movement of goods, services and investments within the bloc.

According to a study by IHS Global Insight, , ASEAN will be one of the world’s fastest growing consumer markets over the next two decades, with ASEAN GDP forecast to increase from US$2.3 trillion in 2012 to US$10 trillion by 2030.

Over the next two decades, it said, ASEAN will also continue to benefit from the rapid growth of the two Asian BRIC economies, China and India. Another key factor driving ASEAN’s ascendancy will be the sustained economic growth of Indonesia, which is forecast to become a US$4-trillion economy by 2030, larger than South Korea and Australia in terms of GDP size.

The bloc’s GDP will exceed Japanese GDP by 2028 it said.

Indonesia, Philippines, Vietnam growing fast

Where in the 1990s, Malaysia and Singapore were among those labeled the Tiger economies, this time around some new players have joined the club.

Indonesia and the Philippines have been dubbed the “New Tigers” of the ASEAN region, and going by the numbers, it is a title well-deserved.

Indonesia will be the hub of business growth in ASEAN,  forecasted to become a US$4 trillion economy by 2030, larger than South Korea and Australia in GDP size.

That’s no surprise as its 250 million population has a ‘a rapidly expanding urban middle class ‘hungry’ for lifestyle products and services.

Both Indonesia’s and the Philippines’  stock markets are among the world’s best performing since the end of 2008 — Indonesian shares tripled during the period from beaten-down valuations, and are closely followed by Philippine equities

Vietnam is one of the fastest-growing countries in the region. GDP growth came in at 8.4% last year, and is set to be 7.8% this year, according to the International Monetary Fund - that’s comparable to India. The global poverty benchmark of US$1 a day has dived from 51% to 8%.

Transforming SME mindsets crucial

While the government’s incentives are indeed a boon to local SMEs, there is still much work to be done to ‘brainwash’ local SMEs, many of whom are still stuck in a manufacturing mindset.

Packaging and branding continue to be the bane of many SMEs, which leave them at the mercy of those in the region which are increasingly promoting their products and services in a much more sophisticated manner.

The fear is that it will buckle under the pressure of the competition and the community is desperately in need of assistance to re-design, re-engineer and review their operations.

There must be a global vision before we can even think about building world class brands, and that vision must involve an effective global marketing strategy that helps us connect with our consumers and inspire them.  We must be able to engage our customers in an emotional way – and on the global stage, this need is even more pressing.

I myself began as an SME some 40 years ago and I know the pitfalls as much as I know how enterprises can build for themselves specializations that will position their brands more effectively in the world market.

They are very vulnerable to competition. They can fail very easily. This is why we are so focused on rural transformation, and why in 2010, we launched the SMECorp -Limkokwing SMECorp Limkokwing University Branding Innovation Centre.

The Centre is the only one of its kind in the country to mentor rural SMEs, as is the Mobile Branding Gallery , where buses will travel to small districts and villages to showcase and create awareness among entrepreneurs on the need for a good packaging technique and branding.

The collaboration with SMECorp is an initiative to reach out and touch the rural sector in tangible ways that is aimed at transforming the mindset of the rural entrepreneurs.

Innovation eco-system across the board crucial

Malaysia has no time to waste in innovating across all SME areas. The incentives in Budget 2013 will help ease the path for many of these SMEs, but ultimately, the SMEs themselves must invest in their own mindset transformation.

Chasing fast profits cannot be the be all and end all, because we are living in the biggest ‘game-changing region in the world.
Malaysia has enormous goodwill in the global arena. We trade with almost every country on earth.

The question is how well prepared are we to leverage the huge potential we have in ASEAN, the Commonwealth, OIC markets, the Smart Partnerships and many other organisations that we have developed good relations with since independence?

How well organized are we in building an eco-system that supports business innovation and brand development?

The Government is doing all it can to help the SMEs. Now the SMEs themselves must do what it takes to look at how they fit in within a region that will be the consumer market of the world over the next few decades.

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About Tan Sri Lim

Tan Sri Dato’ Sri Paduka Dr Lim Kok Wing, the Founder and President of Limkokwing University of Creative Technology, does not fit into any ordinary mould that would describe most entrepreneurs.

His journey has been closely linked with the economic and social development of Malaysia.

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Malaysians invested US$14.05 billion abroad in 2008, almost double the US$8.05 billion the country received in foreign direct investment (FDI), according to the United Nations Conference on Trade and Development’s World Investment Report 2009.

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