New report says Southeast Asia makes headway in SME development

New report says Southeast Asia makes headway in SME development

Source:  ASEAN Secretariat News

SINGAPORE, 1 September 2018 – The newly launched ASEAN Small and Medium Enterprises (SME) Policy Index 2018 [PDF, 8.9 MB] shows that Southeast Asia has been making considerable progress in advancing policy frameworks for SME development.

Released today by the Organisation for Economic Co-operation and Development (OECD), the Economic Research Institute for ASEAN and East Asia (ERIA), and the ASEAN Secretariat, the report maps and benchmarks SME development policies across ASEAN Member States (AMS).

It further elaborates that the region as a whole is a powerhouse for global trade, and has demonstrated remarkable success at integrating into global value chains. Many SMEs across the region, however, remain concentrated in low value-added activities. Since SMEs constitute the majority of firms across Southeast Asia, bolstering policies to facilitate their development as well as entry and exit may have a positive impact on aggregate productivity growth, which is a growing priority for policy makers across ASEAN.

The ASEAN SME Policy Index 2018’s  assessment cuts across eight different policy areas related to SME development, namely: productivity, technology, and innovation; environmental policies and SMEs;  access to finance; access to market and internationalisation; institutional framework; legislation, regulation, and tax;  entrepreneurial education and skills; and social and inclusive entrepreneurship.

The assessment was completed with support from the ASEAN Coordinating Committee on Micro, Small and Medium Enterprises (ACCMSME) and received inputs from over 300 policy makers. It took place during the second and third quarters of 2017 and was based on over 600 indicators. It made the following broad findings:

• MSMEs operate mainly in wholesale and retail trade, with high levels of informality. While there are no exact figures on enterprise informality in the region, data on informal employment, both in formal and informal enterprises, suggest that informal practices are widespread across most AMS.

• SME development is an increasing priority for policy makers across ASEAN as they seek to establish a broader base for growth while ensuring that it is resilient and inclusive. The creation of the ASEAN Economic Community in 2015 has increased this drive to find ways to narrow considerable income gaps between and within AMS.

• Most ASEAN countries are active in the area of SME policy and apply a mix of horizontal and targeted approaches. On the horizontal side, they tend to prioritise measures to cut red tape and streamline business registration. On the targeted side, they tend to focus on measures to enhance productivity and increase access to finance.

• Some AMS regard SME policy as a core tool to enhance welfare. SME policy takes on a distinctly social approach in the majority of AMS, and in a few countries, especially Indonesia and the Philippines – as well as historically in Malaysia – it has been used as a core tool to advance social policy objectives.

• Significant improvement can be observed since the last assessment. Although methodological changes limit the comparability of scores, significant progress since 2014 is observable. Notable advances have taken place in the areas of business development services, access to e-commerce and global value chain (GVC) integration.The report builds on a similar assessment conducted in 2014, ASEAN SME Policy Index 2014, as well as SME Policy Index assessments conducted in other OECD-partner regions.

It was made possible thanks to the financial contribution of the Government of Canada.

(Click here for the brochure)

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