THE LAUNCHING OF RM2 BILLION SJPP GUARANTEE SCHEMES FOR INDUSTRY 4.0
YB. TUAN LIM GUAN ENG
MINISTER OF FINANCE, MALAYSIA
Date: 18 February 2019 (Monday)
Diamond Ballroom, Mandarin Oriental Hotel, Kuala Lumpur
Yang Berusaha Mr Chen Yin Heng
Principal Officer of Syarikat Jaminan Pembiayaan Perniagaan Berhad
CEO/Managing Directors and representatives from various Financial Institutions
Ladies and Gentlemen
Morning and Salam Harapan,
1. I would like to thank the organizer for inviting me today to launch a new guarantee scheme worth RM2 billion through SJPP to help SMEs make the leap towards Industry 4.0. The RM2 billion is part of a total of RM6.5 billion guarantees allocated in 2019 Budget designed to increase access to financing for Malaysian SMEs (see Table 1 for details).
TABLE 1: DETAILS OF THE RM6.5 BILLION SME GUARANTEE SCHEMES UNDER SJPP AS ANNOUNCED IN BUDGET 2019
|Function||Guarantee fee||Size (RM billion)|
|Guarantee program for Bumiputra SMEs||0.75%||1.0|
|Specific SME guarantee program for Industry 4.0||1.00%||2.0|
|Guarantee program opened to all Malaysian SMEs||1.00%||3.5|
2. I am happy to report that this is yet another follow-up to Budget 2019 which was tabled on 2 November 2018. SJPP is of course a company under the Ministry of Finance that manages the Government’s guarantee schemes for SMEs. Since its inception in 2009, SJPP has made available a total of RM35 billion guarantees of which RM18 billion has been used up. This has benefited more than 14,000 SMEs nationwide.
3. Provision of such guarantees is a cheap way to encourage SME growth. This is especially so when the NPL is 0.9% across all active SJPP schemes.
THE IMPORTANCE OF SMES TO SHIFT TOWARDS INDUSTRY 4.0
4. The RM2 billion guarantee scheme provided by SJPP is designed having in mind that SME contributed to 37% of the Malaysian GDP last year. That contribution is projected to rise to 41% by 2020. Meanwhile, figures from the Department of Statistics show that SME employed two-thirds of all workers in Malaysia. Perhaps more starkly, SMEs made up about 98.5% of total business establishments in the country.
5. Given its importance to the economy, the Government cannot afford to ignore SMEs around the country. If we want to see Malaysia move forward and retake our rightful place as among the Asian Tigers, we must make sure our SMEs are competitive and capable of going to the next level to compete beyond Malaysian shores, regionally and globally.
6. Without SMEs familiar with Industry 4.0 technology, Malaysia will not be able to move forward and will not become the prime investment destination for high-tech manufacturing and high value-added services.
GUARANTEE SCHEMES BY SJPP
7. Under the RM2 billion guarantee scheme, up to 70% of the borrowings made by SMEs will be guaranteed by the SJPP. This program together with the other RM4.5 billion as announced in the 2019 Budget will improve SMEs access to financing as it encourages banks to take risk. This is important as we find banks are very risk-adverse and generally prefer to lend to large companies as well as those who do not actually need any financing. Through SJPP, we hope to change this and help spur the SMEs sector forward. Banks should be risk-conscious, and not too risk-adverse.
8. Additionally, out of the RM4.5 billion guarantees, RM1.0 billion has been reserved exclusively for bumiputra SMEs. While the rest of the guarantee schemes under SJPP that is open to all have a guarantee fee of 1.00% per annum, the special Bumiputra program has a lower guarantee fee of 0.75% annually (see Table 1 above).
9. This should help make the economy more inclusive and prove the point that the federal government is working for all Malaysians.
10. The guarantee scheme would not work without the participation and cooperation by various banks. As I understand it, 13 banks are actively working to promote the guarantee schemes coming from SJPP. I would like to see more of this kind of public-private partnership to drive the economy forward. In particular I would like to mention RHB Bank, SME Bank, Maybank Islamic, Standard Chartered Bank Malaysia and UOB Malaysia for providing the largest financing amount to SMEs under the various SJPP programs. These 5 banks have provided RM5.2 billion approved loans under various active SJPP guarantees. This is 70% of total approved financing for SMEs.
ENCOURAGING ECONOMIC TRENDS
11. The Government is projecting the 2019 GDP to grow 4.9% after the economy expanded 4.7% last year. We have a good base to build on for this year. In the fourth quarter, the GDP grew healthier at a faster rate of 4.7% year-on-year compared to the third quarter 4.4%. The faster growth was contributed by the policy certainty and clarity provided by the Government, especially as we complete our review of all public projects that we feel were inflated for various reasons.
12. Malaysia is building the capacity for future growth too. Approved manufacturing FDI grew 249% to RM48.8 billion for the first 9 months of 2018 compared to the same period in 2017. These approved 5 manufacturing FDI are expected to create 41,000 additional manufacturing jobs within the next 2-3 years.
13. Meanwhile, exports grew 6.7% to nearly RM1 trillion for the whole of 2018, the highest in Malaysian history. Our trade surplus reached its highest level ever at RM120 billion, which is 22.1% larger than the one recorded in 2017, despite the ongoing trade war between China and the US. The growth of the trade surplus is the fastest in 10 years.
14. The largest trade surplus in history has helped Malaysia sustains a positive current account. I am happy to report that based on figures released by the Department of Statistics last Thursday, Malaysia recorded a current account surplus of 2.3% of GDP. The consistent surplus has protected Malaysia from the worst in the financial markets, and made our ringgit among the best performers in the region in terms of currency and the equity market in 2018 and also 2019.
CONFIDENCE IN THE ECONOMY AND IN THE PAKATAN HARAPAN GOVERNMENT
15. All this signals confidence in the economy and also in the Government. Whilst we can see that foreign investments or foreign investors have indicated their confidence in the economy, domestic investment should also be encouraged to follow suit. We are focused on implementing institutional reforms that should be completed within 3 years. Some of our initiatives with supports from the rakyat are already bearing fruits.
16. Just the other day, I launched the newly detoxified TRX project which is being jointly developed by Ministry of Finance company’s TRX City together with Lendlease, a large reputable Australian developer with wide experience in urban regeneration, following the successful detoxication of TRX from the 1MDB scandal. Four banks, HSBC, Maybank, Standard Chartered and Sumitomo Mitsui Banking Corp were so confident of the Government that they were more than willing to provide RM2.15 billion financing to the TRX City-Lendlease venture on the strength of the project alone.
17. The confidence for these investors and banks was only possible after we as the Government of the day successfully identified, isolated and quarantined 1MDB from the TRX project.
18. At the Ministry of Finance, I am leading the initiatives various fiscal reforms that include the migration from cash-based accounting towards accrual basis to increase Competency, Accountability and Transparency (CAT) in the public sector. Open tender has been implemented widely since last year and we are continually to improve the process. The Government has achieved our targeted fiscal deficit of 3.7% of GDP last year and is committed to cut it further to 3.4% this year and 3.0% in 2020, and should be below 2.8% in 2021. These has showed that the numbers have come out positive over the last one month, we have achieved all our targets, and defied the naysayers. This shows that once you have confidence from the public and investors, they’ll not only be willing to invest in the country but also pay up their taxes.
19. Our determination for reforms have convinced the 3 largest international credit rating agencies, namely Fitch, Moody’s and S&P to 7 maintain the Malaysian sovereign credit rating at A3 or A-. This is a big thumbs-up to the Pakatan Harapan government.