Riau Province Indonesia Investment & Trade Forum, 21 May 2007

Besides introducing Malaysian businessmen to Riau Province in Indonesia, this forum also provided useful information on priority sectors for investors as well as specific investment opportunities available there.

Visit To Fish Farm In Sungai Pelek, Sepang, 24 May 2007

MASSA members were treated to another eye-opening field trip to the world-renowned Sepang Today Aquaculture Centre (STAC). Organised by MASSA to introduce participants to the prospects of the aquaculture industry, this trip also included a visit to a mushroom farm in Tanjung Sepat.

Bangladesh-Malaysia Chamber of Commerce and Industry (BMCCI) / MOU Signing Ceremony, 28 May 2007

On 28 May 2007, the Bangladesh-Malaysia Chamber of Commerce and Industry (BMCCI) organised an MOU signing ceremony for projects in Bangladesh that was held at the Seri Pacific Hotel Kuala Lumpur. The Honourable Minister of Women and Children Affairs of Bangladesh, H.E. Geeteara Safiya Choudhury (in red saree) together with senior officials from MIDA, MASSA and BMCCI witnessed the signing of two Memoranda of Understanding between Bangladeshi and Malaysian companies for:

Briefing on Cameroon’s Promote 2008 Exhibition at MATRADE, 8 June 2007

Mr Philippe Tokpanou of Expert Services Group (ESG) briefed MATRADE officials and representatives from various apex business organisations in Malaysia on the Promote 2008 Exhibition that will be held in Yaounde, Cameroon in December 2008. Promote 2008 aims to provide Malaysian Enterprises with a unique platform to explore business opportunities in Cameroon as well as its neighbouring 15 countries in West Africa and 11 countries in Central Africa.

MASSA Tea Talk by Bayle S.A. and C-Lines S.A., 15 June 2007

MASSA, in collaboration with Conseillers du Commerce Exterieur de la France (CCEF), recently organised a tea talk featuring Bayle S.A., a leading French specialist in the fabrication and installation of modern slaughtering plants for poultry and C-Lines S.A., a specialist in prefabricated buildings, especially for livestock farming and processing buildings.

16th Annual General Meeting of MASSA, 20 June 2007

MASSA held its 16th Annual General Meeting on 20 June 2007 at Bangunan AmBank Group, chaired by MASSA President, Tan Sri Dato’ Azman Hashim. C-Lines S.A., a specialist in prefabricated buildings, especially for livestock farming and processing buildings.

Business Dialogue with Officials from African Countries, 21 June 2007

In conjunction with the Third Country Training Programme for Officials from African Countries organised by SIRIM Berhad, a business dialogue session was held on 21 June 2007 at the Palace of the Golden Horses Hotel. MASSA, represented by Tan Sri Dato’ Soong Siew Hoong and Ms Ng Su Fun, were invited to share its experiences in promoting South-South co-operation and business networking.

Riau is one of the richest provinces in Indonesia and is strategically located in the centre of Sumatra island. The capital of Riau is Pekanbaru and it has a population of over 4.5 million people. The province is endowed with natural resources like petroleum, natural gas, rubber and palm oil.

The investment climate here is encouraging, supported by the country’s open economy, macro stability, trade diversity and strong commodity prices. Growth is driven internally by domestic consumption and by the income redistributed mandated by its decentralisation policies.

For Malaysian investors, there is a huge potential for infrastructure development in Indonesia, especially in Riau.

The GRDP of Riau Province was US$3 billion, registering a growth of 8.95% in 2004 and 8.53% in 2005. It ranks third among Indonesian provinces with the highest GRDP per capita in the country. In 2006, Riau was the province with the second highest domestic investment, with investments worth US$1,839.4 million from 15 projects.

Riau is known as the ‘oil province’ of Indonesia as it contributes to nearly 60% of the country’s petroleum production and it is also the largest producer of crude palm oil. With its abundant natural resources, Riau is poised to become the new economic hub of Sumatra.

Why invest in Riau?

• Strategic location
• Security and law enforcement
• Riau state-owned company as local partner
• Support from the provincial government
• Regional autonomy
• Infrastructure support
• New growth centre
• Abundant natural resources

Priority Sectors For Investors:

• Infrastructure: Toll roads, seaports, new international airport, railway
• Electricity: Based on coal, natural gas and water resources
• Public Utilities Development: Water supply, telecommunications
• Industrial Estate Development/Agribusiness/Industries: CPO factories and its downstream industries, bio-fuel/energy, industrial park, fisheries

Specific Investment Opportunities in Riau Province

1. Infrastructure
   • Pekanbaru
   • Dumai Tollway
   • Riau Railway Network
   • Development of Riau Airlines (RAL)
   • Agribusiness Terminal in Dumai
2. Bonded Zones
   • Dumai Industrial Park
   • Tanjung Buton Industrial Park (Siak Regency)
   • Kuala Enok Industrial Park (Indragiri Hilir Regency)
   • Tenayan Industrial Park (Pekanbaru)
3. Tourism Industry
   • Rupat Island Tourism Area
   • Koto Panjang Tourism Area
   • Danau Buatan Tourism Area
4. Power Stations
   • Lubuk Ambacang Hydropower Plant
   • Cerenti/Peranap (Kuantan Singingi and Indragiri Hulu Regency)
   • Minemouth Power Plant
5. Clean Water Treatment & Supply In Dumai
6. Coal Mining (Ceretin/Peranap)
7. Cement Processing
8. Downstream Industry Of Palm Oil And Rubber
9. Fisheries
10. Trading Of CPO, Coconut/Copra, Gambier, Activated Carbon/Coconut Charcoal

The Small and Medium Industries Development Corporation (SMIDEC), an agency under the Ministry of International Trade & Industry was established in May 1996 with recognition of the need for a specialised agency to further promote the development of small and medium industries (SMIs) in the manufacturing, manufacturing related services and services sector.

SMIDEC provides assistance in building and strengthening capacity and capability of SMEs, through the provision of development programmes. In addition financial assistance is provided to SMEs to assist them in increasing their efficiency and productivity.

Its mission is to transform SMEs to be vibrant, competitive and resilient and to be fully integrated into the manufacturing and services sectors.

One of the core activities of SMIDEC is to provide financial assistance to SMEs through various grants and soft loan schemes. These programmes are aimed at addressing constraints faced by SMEs and to enhance the capabilities especially in areas of financial accessibility.

SMEs have indicated the need for advisory services in a wide range of areas including product development, technology adoption, marketing and promotion, as well as business and financial management.

The BNM’s LINK is the central bank’s centralised point of contact between itself and members of the public, including SMEs. It provides faster and more effective responses to enquiries and complaints pertaining to the financial sector.

In 2006, the number of assistance requests from SMEs increased to 4,186 (2005: 4,037) which reflected a continued awareness among SMEs on the availability of such services from Bank Negara Malaysia. In the first three months of 2007, the number of assistance requests made by SMEs totaled 1,020, of which 70% were mainly enquiries on special funds provided by the Government and advice on loan matters, while 30% were requests for assistance, mainly for loan restructuring and rejections.

Bank Negara Malaysia also assists SMEs with on-going businesses in restructuring their non-performing loans (NPLs) through the Small Debt Resolution Scheme. Under this scheme, a Small Debt Resolution Committee undertakes independent assessments on the viability of the businesses, and loan restructuring and financing requirements of the SMEs. The performance of the scheme has revealed that the restructuring of NPLs is more important than the provision of new financing in ensuring the viability and sustainability of financially troubled SMEs.

SMEs can also seek financial advisory services from other financial institutions such as SME Bank through the SME Bank Advisory Centre (SAC), EXIM Bank, and also commercial banks. All of them have a dedicated SME Unit to provide financial advisory services.

To further strengthen the ability and quality of advisory services provided by the various agencies and financial institutions, the NSDC approved the establishment of the SME Business Adviser Network (SME-NET), a one-stop web-based directory on the SMEinfo Portal (www.smeinfo.com.my). SME-NET provides a platform for SME business advisers to connect and leverage on each other in their respective areas of expertise thus enabling comprehensive advisory services to SMEs – in the areas of marketing, technology and operations management, human resource, financing, business development and product development.

The SME Info Portal. Every SME entrepreneur’s one stop resource centre
For those who are thinking of starting their own business, the SME Info Portal is their first step on the road to success. The free services, information and contact lists that are available on this extensive site will help your business thrive in today’s competitive market environment.

Launched in January 2006, the SME Info Portal is a one stop information portal created specially for owners of Small and Medium Enterprises (SMEs). It provides information on all aspects of SME development including financing, advisory services, training programmes, business and networking opportunities as well as other SME developmental programmes and initiatives by the Malaysian Government and private sector.

Your Complete SME Business Resource
Whether you’re seeking advice on funding a new business, the latest SME news or updates on government regulations, the SME Info Portal puts vital business information at your fingertips. It simplifies the complexity of looking for bits and pieces of information from various sources and agencies by serving as a single resource hub for SME-related activities.

Besides listing information on financial products, FAQs and tips on how to start and manage a business, the portal also features an SME Business Directory and a platform for members to advertise and showcase their products. There is also an SME Financial Product Directory which allows site visitors to search for suitable financial products for their businesses. Visitors can choose to view and navigate the portal in Bahasa Malaysia, English or Mandarin.

Here is a quick summary of the information and services you will find at the portal:

Another interesting fact to note is that the portal is the first item that appears on the Google search results for the keyword ‘SME info’. According to a Bank Negara Malaysia press statement, the site is visited by foreign visitors from more than 70 countries. It also reported that the SMEinfo Portal received strong responses from domestic SMEs as well. In fact, over 13,000 SMEs have registered in the SME Business Directory of the Portal.

The site is packed with information on SMEs.

Malaysian SMEs can be grouped into three categories: Micro, Small or Medium. These groupings are decided based on EITHER the number of people a business employs OR on the total sales or revenue generated by a business in a year.

The development of the SME sector is an important economic agenda of the Government as the extremely viable and dynamic SME sector is essential to promote domestic-led growth and to strengthen the resilience of the economy in a more competitive and challenging economic environment. Over 99% of business establishments are SMEs but their contribution to the economy is relatively small. Targeting the development of SMEs will have positive spill-over effects to the country’s economic growth in terms of greater contributions of output, productivity, employment and innovation.

The NSDC was formed on 1 June 2004 as the highest policy-making body to chart the future strategic direction for Government policies and strategies for SME development. The Prime Minister chairs the NSDC, and members comprise Ministers and Heads of 18 key Ministries and Agencies involved in SME development¹. Bank Negara Malaysia serves as the Secretariat to the Council. The formation of the NSDC represents the Government’s commitment to the development of SMEs at the highest level.

Given the number of stakeholders involved in the development of SMEs, the NSDC provides the strategic framework for a more focused and coordinated inter-agency effort on SME strategy development and policy implementation that effectively responds to the development needs of SMEs across all sectors of the economy.

A 3-pronged approach strategy has been adopted to develop resilient and competitive SMEs in a more effective and efficient manner, namely by strengthening the enabling infrastructure for SME development, building the SMEs’ capacity and capability, and improving their access to financing.

Over the last 2 years, the major achievements of the Council are as follows:

1. Strengthening Infrastructure for SME development

• Adoption of standard definitions by all Ministries, Agencies and financial institutions for SMEs in the manufacturing, manufacturing-related services, agriculture and services sectors, which are based on annual sales generated and the number of employees.
• The Baseline Census for Establishment and Enterprise 2005 launched by the Department of Statistics Malaysia in March 2005 is the first statistical information compiled on SMEs as one of critical inputs to facilitate effective policies formulation for SMEs.
• Formulation of an annual SME Development Blueprint – this one-year action plan for implementation by Ministries and Agencies involved in SME development provides a clear statement of Government strategic intent and focus for SME development.
• Publication of the SME Annual Report since 2006 to enhance dissemination of information on SMEs in Malaysia and provide comprehensive review on status and performance of SMEs and highlights major programmes of the Government to promote SME development.

2. Building Capacity

• Launch of the SMEinfo Portal (www.smeinfo.com.my) as a platform to provide a one-stop online information resource centre for SMEs (information such as financing schemes and funds, government programmes, business support & advisory services). The Portal, accessible in Bahasa Malaysia, English and Mandarin, receives an average hit of 205,000 per month from various countries and has more than 14,000 SMEs registered in the Business Directory;
• Launch of the HRD Portal (www.hrdportal.com.my), a web-based training portal by Pembangunan Sumber Manusia Bhd., for greater access to information on training programmes available to SMEs and entrepreneurs, offered by various training providers both from the Government and private sector.
• Establishment of the SME Marketing Committee, an inter-Ministry Committee chaired by the Ministry of International Trade and Industry, for marketing of SME products and services at overseas market. A comprehensive programme for 2007 has been formulated to assist SMEs in capacity building, promotion, information management and provision of financial support  to help our SMEs in marketing their products and services overseas.
• Provision of financial advisory services by BNM as well as SME Bank.
• Establishment of the SME Business Adviser Network (SME-NET), a one-stop web-based directory on the SMEinfo Portal to connect all SME business advisers and various expertise available in other agencies and financial institutions for better delivery of advisory services to SMEs.

3. Enhancing Access to Finance

• Launch of SME Bank in October 2005 to complement the banking sector and support the development of SMEs through the provision of financial and business support services to SMEs. Since its establishment, RM3.2 billion has been approved to 1,935 SME accounts as at end-March 2007.
• Enhancement of Credit Guarantee Corporation’s organisational structure and operations to provide a wider range of credit enhancement products, financial and business advisory services and credit information services.
• Securitisation of SME loans via credit-linked notes, the first synthetic securitised product in the country, issued by Cagamas Bhd amounting to RM600 million, was launched on 22 May 2007.
• Launch of two new trade financing products: i.e. Multi Currency Trade Finance and Indirect Exporter Financing Scheme for SMEs in January 2006 to encourage SMEs to export, particularly to non-traditional markets such as members of the Organisation of Islamic Conference, by providing financing to Malaysian direct exporters at lower costs and without collateral requirements.
• Set
• Development

The City skyline of Sabah’s capital, Kota Kinabalu, belies the startling changes that have taken place in Malaysia’s eastern state nestling in the northeastern tip of Borneo, a region that until the latter half of the past century still evoked images of vast tracts of impenetrable tropical jungles, blowpipe carrying nomadic tribes living in longhouses and living in what the world in general regarded as ÒThe Lost WorldÓ.

Some 29 thousand square miles in size, nearly two-thirds the size of Peninsular Malaysia, 3.2 million people and separated by 900 miles of the South China Sea from the national capital of Kuala Lumpur, the state provides a unique study of the socio-political challenges of modernisation and economic development in Malaysia.

Just after World War II, Sabah had less than 360 kilometres of sealed roads, 100 km of railways, 600,000 people and a primitive telephone and telegraph system that mainly served the tiny government establishment Jesselton, Sandakan and Kudat. Its capital, Jesselton, was totally devastated by bombing, and no roads linked its major settlements of Sandakan, Tawau, Keningau and Kudat. The state’s economy relied heavily on timber extraction from its fabulously rich and varied tropical rainforests, with almost every other basic need imported at a price from Singapore, Hong Kong or Peninsular Malaysia. Industry as we know it today was non-existent.

Fast forward to 2007. Kota Kinabalu is a bustling modern city of dazzling resorts, shopping malls, sprawling residential estates in the suburbs and rapidly expanding industrial and commercial activities. More than two million tourists arrive each year to enjoy the incredible natural attractions of the state and its colourful cultural variety. Golf is the in-thing at the moment, with a good number of top class designer courses available in all its major towns charging green fees that must be among the lowest anywhere in Asia. Air and sea links, along with modern communications facilities keep the visitor and businessman in constant touch with the rest of the world. This is Sabah today.

The same scenario is played out in the other major towns of the state. Oil and Gas have overtaken timber as a revenue earner for Sabah, and oil palm is the ‘golden crop’ of the times. Sabah is today Malaysia’s major producer of both.

The State Economic Development Corporation, SEDCO, incorporated in 1971, has played a major role in bringing about these exciting changes in Sabah’s development. Born of an idea mooted by Malaysia’s second Prime Minister, the late Tun Abdul Razak Hussein, after the formulation of the New Economic Policy that called for economic development designed to eliminate economic disparities between the indigenous or Bumiputera community and the non-indigenous population, SEDCO was set up under the chairmanship of the then Chief Minister, Tun Datu Mustafa Harun. It was tasked with the twin responsibilities of spearheading the state’s industrialisation program and advancing the development of a Bumiputera Commercial and Industrial Community, BCIC. Thirty-five years on, and SEDCO has a proud track-record in having met both objectives.

With some seventeen companies under its wing, the SEDCO Group has pioneered the manufacture of steel and cement in Sabah. It is still the only manufacturer and major supplier of these two products, so essential to development and industrialisation in the state. SEDCO also pioneered the automotive industry in Sabah in partnership with the peninsula-based Lion Group to assemble and distribute trucks and FWD vehicles in Sabah. Other activities of the Group in manufacturing include paint, fertilisers, flour, concrete products, and tiles.

In pursuit of its BCIC goals, SEDCO through its subsidiaries the Sabah Urban Development Corporation (SUDC) and Perkasa Realty Sdn. Bhd. has transformed the urban landscape through real estate development that has enabled Bumiputera entrepreneurs and businessmen to acquire business and residential premises and properties in the urban areas. In the rural areas, new townships like Ranau and Siptang owe their development to the efforts of SEDCO. The previously bleak and isolated rural landscape has seen a remarkable transformation from the development of new townships like these, bringing hope and economic opportunities to the rural people who are mainly Bumiputera.

SEDCO is also involved in tourism-related activity. Sabah’s tourism sector has been growing by leaps and bounds. In the sixties and seventies, small numbers of tourists came to Sabah annually, mainly those with local connections or to enjoy jungle trekking, diving or scaling the famous Mount Kinabalu. Today it is a different picture. More than two million visitors arrive annually, and the numbers keep growing. Ecotourism is the big thing, mountain climbing, jungle trekking, white water rafting and diving. Then there’s the fabulous and affordable golfing on offer, good shopping, excellent convention and meeting facilities and a good choice of accommodation from five-star hotels to backpacker level.

SEDCO’s involvement in the hospitality sector began in the mid-seventies when it built hotels in Tenom, Keningau and Kundasang where quality accommodation was then not available. Even today these establishments under the Perkasa Hotels Group are the main players in the hospitality sector of Sabah’s interior. In Kota Kinabalu itself SEDCO holds majority equity in the five-star Hyatt Regency Kinabalu. The hotels in the Perkasa Group are currently being upgraded and improved while there are plans for new hotels in the east coast towns of Sandakan, Lahad Datu, Semporna and Tawau.

SEDCO’s Bumiputera development agenda has also been pursued with vigor and commitment. Throughout the state hundreds of Bumiputera traders and small businesses have been established, both in the towns and rural areas. Trading premises, shophouses and even residential premises have been provided for Bumiputera entrepreneurs under favourable financial terms. Training in business and commerce is also provided for the Bumiputera community at government expense on a regular basis. Thousands of Bumiputera businessmen and traders who are today a permanent feature in the state’s socio-economic scenario were given a start in business and industry by SEDCO agencies.

The future is equally exciting, and as the state gears itself for the final push towards Vision 2020 and beyond, SEDCO is setting the bar higher by looking to move into new vistas of business and corporate directions. To mention a few, the oil and gas sector, biofuels, biomass, agribusiness, and marine industries. SEDCO is also preparing itself to take a leap of faith into the era of the k-economy by involving itself seriously in ICT with plans to develop Sabah into a regional communications hub to eventually link the Brunei Darussalam Indonesia Malaysia Philippines – East ASEAN Growth Area (BIMP – EAGA) of sixty million people in Sulawesi, Mindanao and Kalimantan to the world.

Malaysia’s economic performance todate for 2007 continue to be strong as there has been sustained growth in all sectors. Going forward, it is anticipated that this momentum of growth will be sustainable.

Whilst this may be a boon for Malaysia, we must continue to remain vigilant and improve our competitiveness on all fronts. The Malaysian Government has recognised the importance of the SMEs as they contribute 32 percent to the Gross Domestic Product (GDP), provide 56.4 percent of employment in the country and have accounted for 19 percent of total exports.

We have seen an increasing number of SMEs successfully penetrating the export markets, particularly markets in the developing countries. The potential to promote our Malaysian products and services in these developing countries is promising. We also note that SMEs still require assistance to gain market access, improve production capacity and capability as well as enhance productivity and competitiveness. The Malaysian Government has taken cognizance of these challenges and have put in place programmes and initiatives to assist SMEs. The National SME Development Council chaired by YAB Prime Minister, has endorsed the first National SME Development Blueprint in 2006 which sets the framework to coordinate, streamline and monitor SMEs development programmes implemented by various Ministries and Agencies. We thank Bank Negara Malaysia (BNM) and Small and Medium Industries Development Corporation (SMIDEC) for their support by sharing with members in this newsletter their respective articles on this important agenda for nation building.

MASSA held its 16th Annual General Meeting on 20 June 2007. The office bearers were once again re-elected to serve for another term of 2 years (2007 to 2009). The Executive Committee members were also re-elected again except for Tan Sri Lee Kim Yew who wished to retire. I wish to express my sincere gratitude to all committee members who have consented to serve for another term with dedication. I also extend my appreciation to YBhg Tan Sri Lee Kim Yew for his services to the Association.

As we move forward, MASSA will endeavour to provide support to members in their quest to develop and deepen their business linkages in the developing countries.

TAN SRI DATO’ AZMAN HASHIM
President