Entrepreneurship Development in Malaysia PDF

1 Entrepreneurship Development in Malaysia 2  Synopsis This chapter introduces students to the historical and policy perspectives of entrepreneurial development in Malaysia. Introduction to Entrepreneurship...

1 Entrepreneurship Development in Malaysia 2  Synopsis This chapter introduces students to the historical and policy perspectives of entrepreneurial development in Malaysia. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Objectives The objectives of this chapter are: To introduce students to the development of entrepreneurship in Malaysia and the various government support and incentives for entrepreneurial activities. To introduce students to Malaysia’s economy and entrepreneurship development history. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Learning Outcomes At the end of this chapter, students should be able to: Gain a better understanding of the historical perspective of entrepreneurial development in Malaysia. Appreciate and analyze past and present Malaysian Government Policy on entrepreneurial development. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  List of Topics Malaysian Progress after Independence The New Economic Policy (NEP) The National Development Plan (NDP) The National Vision Policy (NVP) The New Economic Model (NEM) Entrepreneurship in Higher Education Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Introduction An understanding of the historical perspectives and the rationale of the various government policies on the development of entrepreneurship in Malaysia is a necessary requisite for Malaysians to understand the country’s economic history and challenges, so as to enable them to contribute towards building the nation. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Malaysian Progress after Independence Malaysia achieved independence from the British in 1957. After independence, Malaysia made impressive progress in social and economic development, but the benefits of this progress were not evenly distributed among the different ethnic groups in Malaysian society. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Malaysian Progress after Independence (cont.) The Bumiputeras (literally sons of the soil) which refer to the indigenous people of Malaysia and mainly include Malays, Kadazans, Ibans and a few others, have been left far behind in terms of their economic fortunes and their participation in the modern sector of the economy, particularly in commerce and industry, compared to the Chinese and Indians. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Malaysian Progress after Independence (cont.) The subservient nature of the Bumiputera economic position, despite the country’s independence, has created dissatisfaction among the Bumiputera and sowed the seeds of distrust and discontentment in their relationship with the non-Bumiputera, in particular the Chinese. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Malaysian Progress after Independence (cont.) Not long after Malaysia’s general election in 1969, a racial clash erupted between the Malays and the Chinese, killing at least 196 people with over 400 injured. The racial riot of 13 May 1969 served as an eye-opener for many regarding the fragility of Malaysia’s pluralistic society. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Malaysian Progress after Independence (cont.) Recognizing the severity of the problems and the urgent need to address them, the government through the National Operations Council (NOC) introduced the far reaching reforms of the New Economic Policy (NEP). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Policy (NEP) The New Economic Policy (NEP) started in 1971 as an ambitious national blueprint for Malaysia’s socio-economic development. The government realized that poverty and racial economic imbalances were the root causes of the unhappiness that had precipitated the 1969 racial riots. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Policy (NEP) [cont.] To redress this and engender unity, the national ideology or Rukunegara was introduced in 1970 by the newly established Department of National Unity, which called for a rejuvenated Malaysian society with a common value system that would transcend existing ethnic, cultural and socio-economic differences. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Policy (NEP) [cont.] Guided by the Rukunegara principles, the NEP was formulated with the objective of achieving national unity through the two-pronged strategy of: Eradicating poverty by raising income levels and increasing employment opportunities for all Malaysians, irrespective of race. Accelerating the process of restructuring Malaysian society to correct economic imbalances, so as to reduce and eventually eliminate the identification of race with economic function. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Policy (NEP) [cont.] In order to achieve the objectives of the second prong, the three important aspects to accelerate the process of restructuring the Malaysian society are: Restructuring of racial composition in employment. Restructuring of wealth ownership. Creation of a Malay Commercial and Industrial Community, later known as Bumiputera Commercial and Industrial Community (BCIC). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Policy (NEP) [cont.] It must be said that the NEP has done much to restore Malay confidence in the government and also in reducing Malay-Chinese tensions. The non-Malays, though, see the policy as discriminatory against their economic welfare. However, this cannot be true because by 1990, the non-Malay equity ownership of the corporate sector had increased to 46.2%—exceeding the 40% target set for them. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Policy (NEP) [cont.] The non-Malays, particularly the Chinese, had also benefited from the poverty eradication programme as evidenced by their mean monthly household income, increasing from RM394 in 1970 to RM1,582 in 1990 (OPP2, 1991). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The National Development Plan (NDP) [cont.] The National Development Plan (NDP) was introduced in 1991, covering a ten-year period from 1991 to 2000 (OPP2, 1991). NDP also introduced several new strategic dimensions, which included shifting the focus on the poverty eradication strategy to addressing hard-core poverty; emphasizing employment opportunities and rapid development of an active Bumiputera Commercial and Industrial Community (BCIC). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The National Development Plan (NDP) [cont.] Despite the increase in the number of Bumiputera businesses in the mainstream economy of the country, they remained small and proportionately fewer than non-Bumiputera businesses. At the end of the NDP period, the incidence of poverty among Malaysians was further reduced from 16.5% in 1990 to 7.5% in 1999, with the incidence of hard-core poverty also reduced from 3.9% in 1990 to 1.4% in 1999. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The National Development Plan (NDP) [cont.] Under the NDP, a significant progress has also been achieved in terms of employment restructuring of which the proportion of Bumiputera in the professional and technical employment categories has increased from 60.5% in 1990 to 63.8% in 2000. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The National Vision Policy (NVP) The National Vision Policy (NVP) was introduced in 2001 with the aim of establishing a progressive and prosperous Malaysian Race, where different ethnic groups live in harmony and engage in full and fair participation in the economy, so as to ensure national unity (OPP3, 2001). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The National Vision Policy (NVP) [cont.] The NVP (OPP3, 2001) had also introduced new policy directions aimed at: developing Malaysia into a knowledge-based society eliminating poverty in remote areas and among aborigines and Bumiputera minorities in Sabah and Sarawak, as well as increasing the income and raising the quality of life of those in the lowest 30% income category Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The National Vision Policy (NVP) [cont.] achieving effective Bumiputera participation as well as equity ownership of at least 30% by 2010 increasing the participation of Bumiputeras in the leading sectors of the economy. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Model (NEM) The New Economic Model (NEM) is formulated by the country’s National Economic Advisory Council (NEAC). The core principles of NEM are high income, inclusiveness and sustainability. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Model (NEM) [cont.] Its aims are for Malaysia to be a developed nation by the year 2020, whose population enjoys a high quality of life with a high level of income resulting from economic growth that is both inclusive and sustainable (NEAC, March, 2010). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Model (NEM) [cont.] The NEM further envisions for the economy of Malaysia to be market-led, well-governed, regionally integrated, entrepreneurial and innovative. One of the key elements considered crucial to attain these objectives is for the country to have a conducive environment for entrepreneurship development of its people. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  The New Economic Model (NEM) [cont.] As such, the Malaysian government, through its various ministries and agencies, has stepped up efforts and initiatives to encourage and support the growth of Malaysia’s business community and innovative start-ups, including dedicated funding for Small and Medium Enterprises (SMEs); provision of support facilities such as incubators, advisory services and training; as well as special programmes and funding for young entrepreneurs. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Entrepreneurship in Higher Education Malaysian government is committed to foster and facilitate an environment that is conducive in stimulating the entrepreneurial mindset of the country’s young generation. Ministry of Higher Education (MOHE) recognizes the need to encourage a more entrepreneurial culture, as well as to develop graduates who are entrepreneurial in their thinking, possessing a range of essential skills and attributes to make a meaningful and productive contribution to the real world, whether in employment or being entrepreneurs. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Entrepreneurship in Higher Education (cont.) This is outlined in Shift 1 of the Malaysia Education Blueprint 2015–2025 (Higher Education), which is to produce holistic, entrepreneurial and balanced graduates (MOE, 2015). The Ministry has also introduced the entrepreneurship Action Plan of Higher Education Institutions 2016–2020 as an effort to enhance and strengthen the implementation of entrepreneurship education and to shift the mindset of Malaysia’s younger generation from “Job Seekers” to “Job Creators” (MOHE, 2016). Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0  Summary The journey of incorporating the entrepreneurship element into Malaysian development policy is unique and is using many avenues—education, technology, science, media, shaping society’s attitude towards business, competition and creativity, besides the financing and creating business space and channels. In facing economic uncertainties and volatility, Malaysia must turn to entrepreneurship as the key to move forward, speed up economic growth, drive job creation and pursue new sources of economic and social development. Introduction to Entrepreneurship All Rights Reserved © Oxford Fajar Sdn. Bhd. (008974-T), 2017 2– 0