Boracay Action Agenda to Globalize MSMEs

Fostering the Participation of APEC MSMEs in Regional and Global Markets

Background

From its inception, APEC has espoused trade as an engine of economic growth and development.  It has met with much success in this regard and continues to vigorously pursue regional economic integration and cooperation. However, despite our efforts at regional economic integration and cooperation, the issue of development remains a pressing concern, with inequity and inclusiveness remaining the biggest challenge across the region and within our economies.

In making growth equitable and inclusive, the goal of APEC has centered on the development of the region’s small and medium enterprises (SMEs). Hence, an important component of APEC’s efforts is to bolster their ability to take advantage of cross-border business. The emergence of global supply chains and the proliferation of preferential trade agreements have created opportunities for SMEs to participate in trade, lend support to APEC’s efforts to increase trade flows in the region, and strengthen economic integration.

APEC has embarked on many initiatives to encourage the participation of SMEs in regional and global trade. These various initiatives fall under two broad categories: those that address the growth of SMEs mainly through capacity building programs, and those that aim to facilitate the participation of SMEs in global value chains (GVCs).  APEC has done considerable work in both areas of SME development and internationalization.

However, a big gap remains to be addressed — the direct participation of micro and small enterprises in regional and global trade. As it stands, GVCs primarily benefit medium enterprises and only small minority of micro and small enterprises are able to join. Micro enterprises, in particular, generally lack the sophistication to participate in GVCs. Micro and small enterprises, for the most part, are also unable to participate in direct exports due to cumbersome rules and procedures.

Special consideration must be given and extra effort must be made to enable micro and small enterprises to benefit from free trade for they account for the overwhelming majority of businesses and employment in APEC. Consultations with micro and small enterprises at the early stages of policy making will help avoid disproportionate burden on micro and small enterprises. By fostering cultures of regulatory transparency in our economies, we will provide greater opportunities for MSMEs to comment on new regulations, regulatory reviews, and regulatory impact assessments, regardless of their geographic location. 

Without their full participation, growth cannot be truly inclusive and further progress in trade liberalization will be difficult if they do not benefit. APEC can emphasize and reinforce this thrust to give due importance to micro and small enterprises. From simply referring to small and medium enterprise (SME), we can begin to use the term micro, small and medium enterprise (MSME) and thereby indicate their distinctive situation and full inclusion in our agenda —front and center— to foster their participation in regional and global markets.

Current APEC initiatives on MSMEs

For the capacity building needs, the APEC SMEWG Strategic Plan for 2013-2016 provides a roadmap to address critical issues pertaining to the growth of MSMEs in the APEC region with the three priority areas for action and related objectives, namely, 1) building management capability, entrepreneurship and innovation; 2) financing; and 3) business environment, market access and internationalization.

During the joint meeting of Trade and SME Ministers in 2011, recognizing the adverse effects of the existing trade regime on SME participation, Ministers identified the top barriers facing SMEs in trading in the region and agreed on a set of specific actions that will provide direct and practical benefits to them (Annex B - Enhancing Small and Medium-Sized Enterprises Participation in Global Production Chains, APEC Leaders Declaration 2011).

In the same year, APEC Leaders also decided on areas of cooperation that could be included in the trade agreements of member economies to enhance the participation of MSMEs in global production chains.  Specifically, the Leaders agreed that APEC could promote the inclusion of language in FTAs, which set out areas in which parties will cooperate to enhance their participation in global production chains in order to foster trade and investment in the region (Annex B - Enhancing Small and Medium-Sized Enterprises Participation in Global Production Chains, APEC Leaders Declaration 2011).

In 2013, APEC Leaders agreed to take further steps to enhance the global competitiveness of SMEs by improving access to finance and markets, supporting entrepreneurship, accelerating the growth of start-ups, strengthening capacities for business continuity and empowering APEC SMEs to expand into international markets and to participate in global supply chains.

In 2014, APEC Leaders approved the APEC Strategic Blueprint for Promoting Global Value Chains Development and Cooperation, and Ministers welcomed the Capacity-building for SMEs’ Integration into Global Value Chains in Major Industries as part of the Leaders’ Statement to promote Global Value Chains Development and Cooperation (Annex B - APEC Strategic Blueprint for Promoting Global Value Chains Development and Cooperation).  It was recognized that MSMEs have often been left out of the formation of GVCs as the division of production processes and cross-border trade take place mostly within networks of transnational corporations.

Closer Cooperation

Initiatives on integrating MSMEs in GVCs are part of the APEC agenda whereby a good number of APEC activities are being undertaken to reduce the barriers MSMEs face. These should be encouraged and further complemented by an agenda for MSMEs to break into international markets as direct exporters.

Moreover, APEC should encourage clarity in focus on important MSMEs issues to address the barriers of a regional or global nature in key committee and sub-fora requiring cooperation among economies. Cross-fora collaboration in initiatives particularly links between APEC and ABAC, between SOM and SFOM, and under SOM (CTI, SMEWG and other relevant fora) to address the challenges MSMEs face will ensure that APEC’s cooperation efforts for MSMEs are effective. Information sharing and stronger coordination across aforementioned fora will enhance complementation of projects and initiatives and promote efficient use of resources. Further, cooperation with international organizations and forums, especially those that are giving MSMEs greater emphasis, will link APEC’s work to global efforts (e.g. UNCITRAL, G20, OECD, ERIA).

The Boracay Action Agenda

MSMEs are significant contributors of economic growth, trade, employment poverty alleviation and innovation, and their internationalization is key to realizing inclusive growth and development. The Boracay Action Agenda to Globalize MSMEs bids us to strengthen our actions in order to harness the opportunities presented by open and increasingly integrated markets and to take advantage of new opportunities that allow these enterprises to more significantly participate in global trade. The Action Agenda will build on APEC’s extensive work on regional economic integration and ensure that efforts are relevant and responsive to MSMEs’ needs.

To promote the internationalization of MSMEs and integrate them into global value chains, we will address barriers to trade and investment that disproportionately impact MSMEs in comparison to larger businesses.  Our efforts to reduce and eliminate tariffs and non-tariff barriers in the region will produce significant benefits to MSMEs. Indeed, one of the best ways APEC can help MSMEs enjoy a more trade facilitating environment is to support implementation of the WTO Trade Facilitation Agreement.

Whether as a participant in global value chains, or a direct exporter of goods and services, or as a start-up, APEC would be an enabler of global MSMEs through specific actions to address barriers to their internationalization as identified by APEC MRT and SME Ministers in 2011. Trade facilitation, trade finance, e-commerce, and institutional support are priority areas of cooperation where APEC actions are needed to foster MSMEs’ participation in global and regional markets. Thus, APEC agrees to the following actions, as follows: 

1. Facilitate the access of MSMEs to FTAs/RTAs by simplifying and streamlining rules of origin (ROO) procedural and documentary requirements and harnessing IT to ease documentation and procedures. 

a. APEC will encourage the following policy options:

  • For certificate of origin (CO)-based systems, where relevant, APEC economies when reviewing or negotiating their RTAs/FTAs may consider a commercially-significant threshold value for the waiver of COs
  • Encourage the adoption of the self-certification system for ROO as a best practice in trade facilitation and participation in the APEC Pathfinder for Self-certification of Origin
b. APEC will promote greater use of IT and automated systems to increase the efficiency of complying with RTA/FTA-related requirements, including encouraging more active participation of member economies in the implementation of the Electronic Certificate of Origin (eCO) Project led by the Electronic Commerce Steering Group (ECSG).

2. Streamline customs-related rules and regulations and assist in the compliance of MSMEs

a. APEC will encourage the establishment of commercially useful de minimis values that will exempt low-value express and postal shipments from customs duties and from certain entry documentation requirements, in accordance with economies’ legislation.

b. APEC will encourage the removal of the requirement for the Certificate of Non Manipulation (CNM) for transshipped goods and consider the use of other existing commercial documents as evidence of non-manipulation, or making the issuance of CNMs more expeditious.

3. Provide timely and accurate information on export and import procedures and requirements.

a. APEC will enhance information sharing and transparency, through the development of guidebooks on doing business in sectors where MSMEs are most concentrated, as well as strengthen and promote the usage of trade information portals on goods and services trade, e.g., APEC Trade Repository proposal, APEC STAR Database.

b. APEC will encourage the review of import licensing requirements and administration, with a view to increasing their transparency and predictability acknowledging that such import licensing requirements are particularly burdensome for MSMEs.

c. APEC will intensify information exchange on food packaging and labeling requirements, and undertake regular stocktake initiatives and capacity building for the compliance of MSMEs.

4. Widen the base of Authorized Economic Operators (AEO) and trusted trader programs (TTP) to include SMEs in order for them to contribute to security, integrity and resiliency in supply chains.

a. APEC will further advance the formulation of best practice guidelines for the development and enhancement of AEO and TTP programs, and work towards forming an APEC-wide network of AEOs/TTPs.

b. APEC will continue to carry out capacity building on AEO and TTP, including increasing SMEs awareness and understanding of and compliance with AEO/TTP requirements.

5. Support measures to widen options on financing for MSMEs and further develop the infrastructure to facilitate lending to them.

a. APEC to promote inclusive finance mechanisms with focus on broad-based financial products and services such as equity finance, venture capital mechanisms, trade and supply chain finance and business risk protection, including resilience against crises such as financial crises, natural disasters and, economic instability.

b. APEC to cooperate in developing efficient and effective infrastructure for credit information and secured transactions/movable collateral systems to realize the seamless MSME financing environment throughout the APEC economies to strengthen global value chain.

c. APEC will promote innovative and diversified financing options to meet the needs of MSME at different stages of growth, particularly financing early-stage investment, including through taking into account not only financial data but their own business model strategies - e.g. growth potential, anticipated earnings - to assess individual companies’ creditworthiness.

d. APEC will enhance cooperation among financial institutions, and promote designated loans for MSMEs in supporting mutual investment across member economies.

e. APEC will support open and transparent business environments through discussions on possible codes of ethics in sectors of export interest to MSMEs.

6. Expand internationalization opportunities for micro and small enterprises providing goods and services through ICT and e-commerce.

a. APEC will cooperate with ABAC in identifying and promoting strategic e-commerce platforms and innovative business models for micro and small enterprises to support buying and selling activities (B2C), business matching opportunities (B2B), and online-to-offline commerce (O2O).

b. APEC will implement capacity building in order to promote international networking and to increase cross-border business opportunities for MSMEs by localizing/customizing ABAC’s Cross-Border E-Commerce Training (CBET) Programme and other similar platforms.

c. APEC will encourage the availability of next-generation high-speed broadband/internet and promote its widespread uptake and effective use by MSMEs.

d. APEC will identify and promote policies and regulatory frameworks for creating  conducive environment for e-commerce and address unnecessary regulations that constrain the ability of MSMEs to participate in e-commerce.

7. Strengthen institutional support for MSMEs

a. APEC will foster clustering of MSMEs, including through cooperatives, to gain economies of scale in both product and export markets.

b. APEC will exchange best practices in data collection on MSME statistics and build economies’ capacity to identify their contribution to growth, trade and employment.

c. APEC will build a regional network of MSME innovators and accelerators (e.g. internship consortium, APEC SME Service Alliance [ASSA], innovation centers, supply chain institutes, women and youth networks) as part of an ecosystem which supports enterprise creation and increases the innovation capabilities of MSMEs.

d. APEC will promote wider linkage between small and large enterprises in pursuing greater MSME participation in regional and global value chains.

e. APEC will foster MSME Business Continuity Planning (BCP) and implementation to build sustainable and resilient businesses and communities.

f. APEC will support the establishment of the APEC SME database on innovative best practices, such as those best practices published at the APEC Small and Medium Enterprise Technology Conference and Fair (SMETC).

8. Strengthen focus on MSMEs led by women

a. APEC will foster the use of gender-disaggregated data in measuring the economic and social impacts on MSMEs.

b. APEC will promote an understanding of the divergent constraints faced by male and female-led MSMEs

c. APEC will encourage exchange of best practices on women-friendly interfaces with customs and other border authorities.

As a common goal towards 2020, APEC will grow dynamic, global MSMEs by widening and deepening their involvement in international markets and global value chains, thus harnessing their full potential to innovate and drive economic growth and prosperity. To this end, APEC will identify indicators in order to track the region’s progress and the progress of individual members and seek future actions to enable MSMEs in the region to “go global”.

Time Plan

  • By SOM I: 
    • Agree on the priority actions and areas of cooperation.
    • Hold discussions on a common goal for APEC on MSMEs. 
    • With assistance from the APEC Secretariat, agree to conduct an APEC-wide stocktake and assessment of plans, initiatives and projects implemented/conducted/planned since 2011 APEC MRT and SME Ministers issued the statement to address barriers to trade confronting small business owners and exporters in the region (Annex A).
  • Inter-sessionally:
    • All APEC Committees, Sub-Fora and Working Groups to review the priority actions and report initiatives, plans and timelines to support these actions. The APEC Secretariat and leads of Committees, Sub-Fora and Working Groups will assist in the reporting and review of these initiatives and provide recommendations for synergies.
    • Invite ABAC to participate in the discussions of the cooperation and action agenda.
  • By SOM II/MRT:
    • Review the outcome of the stocktake and assessment.
    • Economies to share experiences on goal-setting. 
    • Agree on a common goal.
    • SOM to endorse the Boracay Action Agenda to Globalize MSMEs.
    • Ministers to adopt the Boracay Action Agenda to Globalize MSMEs.
  • By SOM III: 
    • Task committees, sub-fora and working groups to propose projects and initiatives to carry out the agreed actions, including cooperation activities with ABAC and international organizations.
    • SMEWG to collect statistics and provide to PSU to build the baseline data in measuring progress.
  • By AMM 2015:
    • Leaders to welcome the Boracay Action Agenda to Globalize MSMEs.
  • By 2016 - 2020
    • Update the 2010 OECD-PSU study to identify future challenges and as a basis for discussion of additional work.
    • By 2018, stocktake and mid-term review of progress.
    • By 2020, final review and reporting of progress.