Branding Innovation Centre

Tan Sri Dato’ Sri Dr Lim Kok Wing

31 March 2010

Ladies and Gentlemen

As we stand here today, engaged in a collaboration that serves to assist the SME community, I want to feel optimistic.

I want to feel optimistic, even in the face of huge challenges thrown in the direction of SME community as it struggles to sustain the progress that it has so carefully built over years and over decades.

Since the 1970s the SME community in Malaysia has served as important economic link-ups to multinational companies with many acting as important sub-contractors to their larger counterparts.

The contributions of SMEs can never be overemphasized. In every economy, it is the backbone that drives industrial development.

Globally, SMEs account for 99 per cent of business numbers and contribute to 50 per cent of Gross Domestic Product of their countries.

In the countries of the European Union, SMEs comprise 99 per cent of an estimated 19.3 million enterprises, providing around 65 million jobs. That represents two-thirds of all employment.

In Japan, some 80 per cent of all employment is with SMEs where the average enterprise employs about nine staff as opposed to four in the EU.

In Malaysia, SMEs represent 99.2 per cent or 518,996 of total business establishments, and these are mainly in manufacturing, services and agriculture sectors.

SMEs are the growth engine in the new economic model that is aimed at transforming the country from a middle-income economy to a high-income one. The government’s vision is for SMEs to contribute more towards GDP, from 29 per cent in 2005 to 37 per cent in 2010. SMEs are expected to increase exports from 19 per cent to 22 per cent and employment to 57 per cent in 2010.

The Prime Minister has said that a masterplan for the years 2011 to 2020 would create an eco-system that would facilitate the development of SMEs from all aspects including funding, capacity-building and logistical support.

He also said measures will be proposed for SMEs to make a quantum leap in performance and for Malaysia to produce domestic, regional and global champions that can spearhead the country’s economic growth.

It is within that scenario that we begin this collaboration. For me personally, it has been a long time coming.

The government stance to bolster the SME community could not have come at a better time.

At the National Economic Outlook Conference 2010-2011, the 2nd Finance Minister disclosed that Malaysia had lost its competitive edge in many sectors of the economy, with private investments now half of what they were before the 1997/98 Asian financial crisis.

Malaysia, he said, is trapped in a low-value-added, low-wage and low-productivity structure.

Our economic growth over the past 3 years, he said, was the second-lowest among our Asian neighbours while private investment has been in a steady decline. He even went further to say that our economy has been stagnating in the last decade.

Ladies and Gentlemen

The point has been made and I am happy to note that the steps are now being put in place to change the course of development.

SMEs in Malaysia are mostly domestically oriented. They now face the full brunt of competition with the full implementation of the ASEAN Free Trade Agreement .

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.

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.

The way forward is made easier when Government acts as a partner, more than a facilitator. In this collaboration between SMECorp and Limkokwing University I see that mindset beginning to take hold.

Ladies and Gentlemen

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.

Samsung is a fine example of an iconic brand that has managed to successfully use creativity, branding and innovation to remain relevant and exciting to its consumers.

In 1998, Samsung entered into various marketing alliances with companies worldwide and sponsored events such as the Seoul Olympics, in line with its global vision to become a global brand. It wanted to be the next Sony – and had in 2001, openly declared it would beat Sony in the consumer electronics market by 2005.

Where is Samsung today? It is ranked 19th in Business Week’s 100 Best Global Brands, ahead of other powerful global names such as Apple, Amazon and Ford. Samsung’s brand value of US$17.52 billion is now well above Sony at US$11.90 billion. If Samsung was a country, it would have been ranked 34th largest economy in the world.

Ladies and Gentlemen

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?

How well recognized are we globally as a country that produces quality products and successful brands?

How much more has to be done to bring us to the level where we are able to compete with the best in the world? We have come some distance, but has it been far enough?

Ladies and Gentlemen,

We still have much to achieve.

We also have much to learn from the examples set by other lesser-endowed economies. By being more creative in their approach, more innovative in their production, more aggressive in their marketing they have built big markets of their own.

There is much to learn from countries like Japan, South Korea and Taiwan. These countries are today branded as countries synonymous with high-tech, innovation and good design.

Ladies and Gentlemen,

It has been said that the world’s 10 best-selling brands generate more wealth than 50 poorest nations with a combined population of 700 million people;

That 51 of the world’s largest economies are companies and not countries.

It is easy to see why the most innovative countries in the world are also the most advanced and the most progressive.

All of them, with no exception, own internationally known brands of products and services that are perceived to be the best in the world, everywhere in the world.

These are countries whose Governments and industries have aggressively invested in global marketing, brand-building and brand-franchising consistently for years and years.

Their Governments have built economic infrastructures and enabling systems that not only encourage but empower product and brand innovation as part and parcel of their strategy for wealth creation.

And resulting from that, these countries themselves have become synonymous with quality, and enjoy the most positive image in the minds of people right around the world. And this, in turn, reinforces the perception that whatever they produce must be the world’s best.

Here and now, corporate and enterprise Malaysia must work shoulder to shoulder with the government of Malaysia to build for the nation a big passion for creativity and innovation.

We must make the development of innovative product and brand development a national agenda.

Ladies and Gentlemen

Earlier in the opening of my speech I said I was optimistic even in the face of such daunting global challenges.

One of the reasons for my optimism is the significance of why we are gathered here today. This collaboration of the University with SMECorp brings us closer to realizing some of the things that I have been concerned about for the past decade.

This collaboration is one of many that we have been engaged in with the Government. We have been working closely with Matrade and with SMIDEC for many years now. Today we have formalised that relationship through this partnership.

This is an important step because a large percentage, I would say some 78 per cent of the SME community in Malaysia operate businesses at a micro-level.

They are very vulnerable to competition. They can fail very easily. This is why we are so focused on rural transformation.

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.

The training aspect is paramount to the success of this collaboration and it is affected in ways that make it easier for first time entrepreneurs to understand the steps they need to undertake to move their businesses to the next level.

The emphasis on the rural sector is pertinent because the transformation of Malaysia’s rural heartland is fundamental to the change that must take the nation to higher value-added and higher income economy as desired by the Prime Minister.

The Branding Innovation Centre has been replenished with packaging ideas that has taken into consideration the renewal that rural enterprises need to undergo. These ideas will be transferred into a mobile version of the gallery which will be taken into the small towns and villages so that we are able to educate as many people as we are able to reach.

The mobile gallery will be launched by the Prime Minister YAB Dato’ Sri Najib Tun Abdul Razak next month. This indicates the importance innovation is to the rural economy and this endeavour by the collaboration of SMECorp and Limkokwing University serves to underscore it.

It is my hope that we will be able to set up smaller versions of the Branding Innovation Centre in every state and by doing so we would have made the centre a national endeavour. As a National Branding Innovation Centre the objective to provide specialized training and offer our services to the rural enterprises will be better achieved.

Ladies and Gentlemen

The optimism that I talked about earlier also pertains to the fact that this collaboration will fit into establishing the much-needed eco-system to map out the way forward for entrepreneurs to find their place or niche in a business that is becoming more and more complex with changing technology and a fast-evolving global scenario.

The task I would set for us in this collaboration is to develop 100 new brands each year. Build them, nurture them because the preliminary task of creating a brand and injecting the quality is always the hardest. Once the brand has been developed and matured within a set timeline we can then hand them over to entrepreneurs who have undergone training to manage a business.

I see this as one of the competent ways that government funds can be put to good use.

By taking on the responsibility of incubating brands to achieve maturity in the market Malaysia has the opportunity to internationalise names that are indigenous like us. Like Suzuki, like Honda, the world must come to recognise names like Putri, Helang, Mawar and immediately recognise that it comes from Malaysia; that it stands for quality.

We have the quality because we have been engaged in contract manufacturing for many of the world’s big brands like Ikea, Nestle, Carrefour and many others. We must now take the giant step to brand our products and invest in global marketing to promote these products.

By being actively involved in the process we can succeed in creating the eco-system needed to help the small enterprises make the leap forward. As it stands now these small enterprises will not be able to take their product to market because of the investments they have to make in food technology, in production, in warehousing, in distribution and in marketing.

With this collaboration in place we are now in a position to provide the bridge that the rural sector requires to bring their products and services to first a national audience and then to a global market.

Ladies and Gentlemen

Let me conclude by saying that what we succeed in doing over the next few years will determine the direction the economy will take. We are standing, right now at the cross-roads. Our future is in our hands.

Thank you.