Context, connection, and creation keys to SMEs survival and growth
In Southeast Asia, micro, small, and medium enterprises (MSMEs) contribute anywhere between 32% to 77% of total domestic output in their respective economies, account for more than 90% of all enterprises, and employ 50-99% of the workforce. With MSMEs contributing to job creation in the region, these enterprises are in a unique opportunity to create inclusive growth and reduce poverty.
Creating inclusive growth requires MSMEs to take a bigger role in driving the economy. In his opening remarks, Asian Institute of Management president Dr. Steven J. DeKrey talked about the importance of MSMEs in creating inclusive growth in their respective economies.
“Sustaining industrialization requires entrepreneurs from smaller and medium scale firms to develop new products and services,” said DeKrey. “This act of “cost discovery” ultimately fuels a more sustained growth process. When coupled with a competitive economic landscape, and underpinned by the rule of law and a business-friendly environment, these together form the impetus for sustained growth in the long run.”
The opening plenary tackled the need to create a supportive business environment, to network with firms in providing training, knowledge, and support, and to invest in innovation to help MSMEs survive and grow.
“Policies can sustain MSME development through improving access to finance, providing support for technology, marketing, and training, and addressing constraints in broad growth,” explained Asian Development Bank Deputy Chief Economist Dr. Juzhong Zhuang. “A constant dialogue between public and private sectors is also important to give adequate support to enterprises.”
“Very few small firms grow. High-impact SMEs are able to withstand the pressure of knowledge-based activities such as networking activities and research and development spending,” said University of Essex – Essex Business School professor Jay Mitra. “They are resilient, flexible, and innovative. These firms are small but global—they maximize economies of scope.”
Mitra also shared the example of Canadian firm Nexia, whose biotechnicians inserted a silk-producing gene in spiders into a herd of goats. The goats would later on produce milk containing the essence of spider webs, which were spun into silk-life threads and were stronger than steel. The silk-like threads were then used for a myriad of applications, such as air bags, fishing lines, ophthalmic sutures, and artificial tendons.
For Asian Institute of Management Policy Center Executive Director Ronald U. Mendoza, governments will need to develop MSME policies that take inspiration from context-specific evidence, while also taking into consideration key developments that can affect these enterprises, such as the upcoming ASEAN Economic Community in 2015.
“For SMEs in Asia to live up to their potential, our policymakers need to draw from context-specific evidence,” said Asian Institute of Management Policy Center Executive Director Ronald U. Mendoza. “In Malaysia, foreign direct investments in the high-technology sector create spillovers that benefit both large and small firms. Policy makers can help MSMEs by authoring laws that would establish these connections, which would allow MSMEs to take advantage of relevant technologies and improve their productivity.”
Added Mendoza, “Policies should support the emergence of competitive firms, while recognizing that not all firms will be able to survive in the long run. Developing nuanced policies that address MSME obstacles will require a balance between supportive and pro-competition policies..”
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