APEC Small and Medium Enterprise (SME)
Second Ministerial Meeting

Adelaide, Australia

14-15 September 1995

JOINT STATEMENT

Introduction

1. The second APEC SME Ministerial Meeting was held on 14-15 September 1995 in Adelaide, Australia. SME Ministers agreed on measures to foster the objectives of the Bogor Declaration of free and open trade and investment in the Asia Pacific Region by no later than 2010 for industrialised economies and 2020 for developing economies, as well as economic and technical cooperation towards achieving sustainable growth in the region.

2. Ministers welcomed the very active participation of the business sector in the associated business activity, the APEC Opportunity, which was convened by the Asia Pacific Business Network (APB-Net) and the formal input of business into the Ministerial Meeting through their various representatives. Ministers noted the reports by the Pacific Business Forum and APB-Net.

3. The meeting adopted a vision and a set of guiding principles for work among APEC SME policy makers. Building on the priority areas identified at their first meeting, Ministers were successful in setting clear and achievable programs for SMEs in the areas of human resources development, information access, technology and technology sharing, financing and market access. An Action Program to achieve these objectives was endorsed by Ministers and will be presented to meetings of APEC Ministers and Economic Leaders in Osaka in November as the SME input into the APEC Action Agenda.

Role and Importance of Small and Medium Enterprises

4. The Asia Pacific region is increasing its share of world trade - growing from 37 per cent in l983 to 44 per cent in 1993. To a large extent, this reflects the rapid growth in intra-APEC trade. Between 1989 and 1993, the value of trade by APEC economies rose by about $US1 trillion, and almost 80 per cent of this increase was due to greater levels of trade between APEC members.

5. This rapid growth in trade has been attributed to the increased mobility of capital, a shift to internationally oriented policies and advances in transport, communications and information technology. Firms now have a greater capacity to source various inputs to their production processes from different economies.

6. SMEs are significant contributors to this level of growth. They make up 90 per cent of all enterprises, responsible for between 32 per cent and 84 per cent of employment in respective APEC economies, contributing between 30-60 percent of GDP and are the source of around 35 per cent of the region's exports.

7. In the right conditions, SMEs are also making substantial contributions to technological innovations in industries which are subject to rapid technological change.

8. The growing importance of SMEs in economic growth can be attributed to their greater flexibility in adapting to market conditions. The last decade has seen changes in consumer preferences giving rise to the need for more specialised and customised products. The resulting niche markets have provided the opportunity for small firms which are more flexible and able to make the quick adjustments necessary to meet consumer preferences and needs.

9. The reduction in the optimum size of production units, especially in capital intensive industries, has also contributed to the successful growth of SMEs. Changes in technology, including communication technology, are reducing the importance of economies of scale and have made it possible for SMEs to compete successfully with larger firms.

SMEs in a Free Trade Environment

10. Market processes and the multilateral trading system have been the foundation for the economic growth of many APEC members. In addition, the level of economic interdependence between APEC economies has increased markedly in recent years. With the right policies in place, these factors have the potential to create more dynamic SMEs in APEC, generating growth, wealth and creating employment opportunities and raising the incomes and standards of living of its members.

11. APEC economies have been unilaterally liberalising their trade and investment policies in recent years in recognition of the benefits of doing so and have further committed themselves through the Uruguay Round. The Bogor Declaration set the goal of achieving free and open trade and investment in the APEC region by 2020.

12. An open and free trade environment in the APEC region will create opportunities for increased international investment and trade resulting in new opportunities and challenges for SMEs. Opportunities will manifest themselves in a bigger market for inputs to production as well as outputs, greater choice for consumers, more efficient production systems, and opportunities for technology transfer. Experience of member economies which are already a part of a sub-regional trade agreement has shown that there may also be a need for structural adjustment to accommodate the effects of open competition. This will ensure the greatest benefit flows from the new opportunities.

Recommendations for Action

A Vision for APEC SMEs

13. APEC SME Ministers at the Adelaide Meeting have agreed on a joint vision for SMEs in the APEC region. This vision recognises the important role that SMEs are playing and will continue to play in the region's continued growth and development. This vision of a dynamic and prosperous Asia-Pacific region is built on:

an SME sector that is recognised by member economies, both individually and collectively, as a key driving force in contributing to economic prosperity in the APEC region, and as central to the APEC Action Agenda;

SMEs that are dynamic, innovative, flexible, strong employment and wealth creators, responsive to the demands of the international marketplace, globally focused, and interactive across regions, to the mutual understanding and benefit of all member economies;

member economies that understand the opportunities and constraints facing SMEs in the regional economy; that work cooperatively to remove impediments to the development and growth of the sector, and share their knowledge and experience in regard to SME policies; and

progress against milestones in the five priority areas (as identified in the SME Action Program) where SMEs face greatest difficulties, resulting in a sector that has the management skills, access to information, technology, capital, and access to markets it needs to promote wealth and employment creation shared amongst all member economies.

General Principles for SME Policy Implementation

14. SMEs are engaging dynamically in cross-border economic activity and playing an increasingly important role in heightening economic complementarities in the regional economy. It is therefore important for member economies to develop a set of basic principles on desirable SME policies. Ministers endorsed the following set of principles which will guide the development of policies and actions aimed at developing SMEs in APEC:

Members will take account of the different needs of APEC economies arising from differing levels of economic development.

Activities undertaken as part of the SME Action Program will be transparent, cooperative and of mutual benefit to member economies.

Members will work to ensure the availability and transparency of information on their respective SME policies to help improve SME policies of other members.

Members recognise the importance for policy development of listening to SMEs and understanding their needs, to ensure that policy remains responsive and relevant, and will involve the business sector in activities under the SME Action Program.

Members will develop and implement non-discriminatory market-oriented SME policies to maximise SMEs' responses to market mechanisms, and so provide the most favourable environment for SME development, growth and economic activity.

Members recognise the importance of working with other APEC Working Groups and Committees, official APEC observers, and other international organisations, in the interests of SMEs in the region.

15. Recognising the need for information systems to inform SMEs about international markets, Ministers expressed their support for the work undertaken by the Telecommunications Working Group to facilitate SME access to information and electronic commerce. In addition, Ministers directed officials of the Ad Hoc Policy Level Group (PLG) on SMEs to access, with the Telecommunications Working Group, the feasibility of creating a "Ministers' home page" on Internet to exchange information relevant to SMEs.

16. Ministers endorsed the detailed Action Program developed by the Ad Hoc Policy Level Group at its first and second meetings and noted the progress in each of the five priority areas. Ministers also recognise that policies should focus not only on individual enterprises but also on groups of enterprises and cooperatives.

17. Ministers endorsed the report on the industrial outlook, noting that the study, which includes cross-sectoral analysis on economic interdependence and sectoral analysis, enables better understanding of the steps needed to promote SME development. Ministers agreed that this kind of work needs to be continued, focusing on various cross-sectoral and sectoral aspects of the economic environment surrounding SMEs.

18. Ministers endorsed a range of initiatives under each of the five priority areas. These include an APEC SME Leaders Workshop; an APEC franchising study: a Symposium on SME Research Institute Network; a Directory on SME Agencies: a Study on Best Practices Policies: a Best Practice Study on Building Strategic Alliances between SMEs and Large Firms; a Review of Existing SME Networks for Information Flows, Business Matching and Business Facilitation; the development of an APEC Center for Technology Exchange and Training; the conducting of a Venture Capital Workshop/Study of the Efficiency of Financial Markets; the development of initiatives that will facilitate the use of existing electronic systems such as the Internet, EDI and other electronic tools; and a review of the use of diagnostic tools to assess SME technology capabilities.

19. Ministers agreed to hold a further meeting in the Philippines in September 1996 to monitor progress under the SME Action Program. Ministers urged the business sector to consider hosting a networking event in conjunction with the meeting of Ministers.