Small and medium enterprises (SMEs) are the engines of growth and innovation in the APEC region. SMEs account for over 97 per cent of all enterprises and employ over half of the workforce across APEC economies. SMEs contribute significantly to economic growth, with their share of GDP ranging from 20 per cent to 50 per cent in the majority of APEC economies. However, they only account for 35 per cent or less of the direct exports. APEC’s Small and Medium Enterprises Working Group (SMEWG) therefore works to encourage the development of SMEs and to build their capacity to engage in international trade.

SMEWG works toward the achievement of APEC’s Bogor Goals by fostering an enabling business environment for SMEs to grow and develop into export-ready firms. The APEC SME Ministerial Meetings, held annually since 1994, set out the direction for the Working Group. In September 2016, the SME Ministers endorsed the SMEWG Strategic Plan for 2017-2020 which provided a roadmap to address critical issues pertaining to the growth of SMEs and micro enterprises (MEs) in the APEC region: a) entrepreneurship, innovation and the internet and digital economy; b) financing for business expansion and capability development; c) inclusive business ecosystem that supports SME growth; and d) market access for SMEs.

Peru, as this year’s hosts puts modernizing MSMEs as one of 2016’s priorities with four focused issues: a) promoting innovation and MSMEs connectivity; b) moving forward to integration and development through productive infrastructure; c) integration of green MSMEs into GVCs; and d) internationalization of MSMEs and their integration in GVCs. The 23^rd SME Ministerial Meeting was held in Lima on 9 September 2016 where a statement that promotes the theme “SMEs as engines of quality growth and prosperity” was released. Through the sponsorship by Canada, the MSME Sub-fund, under the APEC Support Fund (ASF), was established in June 2016 and aims to directly involve APEC MSMEs in project activities to support the building of inclusive economies through MSME-led poverty reduction. More information about this MSME Sub-fund can be found here.

In 2016, the SMEWG focuses on completing its Strategic Plan 2013 – 2016 and developing one for 2017 – 2020. It also implements the instructions stated in the 2015 SME Ministerial Meeting Statement and the “Iloilo Initiative: Growing Global MSMEs for Inclusive Development”, endorsed by the SME Ministers in 2015. The Group also plays an important role in realizing the “Boracay Action Agenda to Globalize MSMEs”, which was adopted by the APEC Economic Leaders at the Meeting in Manila in 2015.

1. Entrepreneurship, innovation and the internet and digital economy

Digital and Internet Economy

SMEWG members are implementing the Digital Economy Action Plan and Work Agenda (DEAP) with specific projects and activities, which was proposed by the United States and actively co-sponsored by many economies,. The Workshop on Enhancing MSMEs’ Access to the Internet Economy provided a great platform for exchanging information on challenges for MSMEs, highlight best practices for supporting MSME access, and increasing awareness of private sector efforts to integrate MSMEs into global and regional markets.

Another project funded by APEC is the “New Era of Growth for APEC SMEs through Online-to-Offline (O2O) Business Models” which includes four activities: a) SME O2O Forum 1 (Ho Chi Minh City, April 016), b) APEC SME O2O Training Workshop (Taipei City, June 2016), c) APEC O2O Summit 2016 (Taipei City, 12 – 14 Jul), and d) APEC SME O2O Forum II (Lima, 6 September). In cooperation with top e-commerce platforms such as eBay, Amazon and Alibaba, this project aims to advance and facilitate MSMEs’ access to global markets through O2O business models and best practices, and be the catalyst and facilitator paving the way for a new era of growth by making trading across borders faster, cheaper and easier for MSMEs in the APEC region.

The next-step of this O2O Initiative is the project on “Enhancing SME Digital Competitiveness and Resilience towards Quality Growth”. This capacity building project, to be implemented in 2017, will establish an APEC SME O2O Expert Network and publish a comprehensive APEC SME Digital Competitiveness and Resilience Guidebook. One Summit and two capacity building fora will be organized in Chinese Taipei, Malaysia and Viet Nam in 2017.

Innovation

As supported by the APEC SME Ministers, China is taking lead in developing the APEC Best Practices in SME Innovation and organizing the bi-annual APEC SME Technology Conferences and Fairs (SMETC). Nine (9) sessions of SMETC has been organized successfully so far. This self-funded activity aims to serve as a professional platform to facilitate matchmaking, technology landing, transformation upgrades and exchange innovative ideas of cutting-edge fields for SMEs in China and across the APEC region.

Business Ethics

The APEC Business Ethics for SMEs Initiative in strengthening ethical business practices in key sectors continues to produce successful outcomes with the 3rd APEC Business Ethics for SMEs Forum held in September 2016 in Lima, Peru. The project focuses on fostering an external business environment and internal company practices that permit SMEs to operate on a sustainable basis and serve as global suppliers. It aims to facilitate the development / alignment of codes of ethics and multi-stakeholder ethical collaborations to high standards, both within and beyond member economies where SMEs seek to conduct business. Through the rapid elaboration of multi-stakeholder ethical collaborations, formalized on an economy-by-economy basis, the project seeks to reduce the substantial resources that are lost or diverted by enterprises, especially SMEs, to unethical business practices. Till 2016 there have been 50 associations with codes or formal code commitments in biopharmaceutical sector and 24 in medical device sector against 25 and 12 respectively in 2012. The 4th APEC Business Ethics for SMEs Forum would be held in Viet Nam in 2017.

Nurturing Start-ups

Led by Chinese Taipei, the APEC Start-up Accelerator Initiative is among projects that significantly support the development of start-ups in the APEC regions. Participating start-ups have succeeded in increasing their visibility and securing fund for their businesses. For instance, Gogolook was acquired at USD 18 million. ServTech, one of the six winning startups of the 2014 APEC Challenge, was invited to participate in the Intel Global Challenge in Silicon Valley and won the Innovator Award. In addition, the project created the Accelerator Network Directory, a useful reference for SMEs and start-ups when soft landing in new geographic markets. In 2015, the Initiative continued with focus on early-stage investment. Major activities include two Forums on “From Start-up to Scale-up”, and the APEC Accelerator Network Summit and the APEC Challenge 2015.

Proposed by Viet Nam, the APEC Public – Private Dialogue on Enhancing Capacities of MSMEs in Exporting Services will be organized in in 2017 in Viet Nam. The objectives of this project are three-folded: a) to provide a platform for open dialogue on the current state-of-play as well as opportunities and challenges of APEC services MSMEs; b) to discuss the ways to promote the capacities of exporting services of MSMEs through sound policies, technical assistances and skill development; and c) to provide an opportunity for networking among MSME experts from the public and the private sectors.

2. Financing for business expansion and capability development

The Financial Literacy Survey has been being conducted with the lead by Thailand, whose preliminary findings showed current understandings of financial literacy level and part of financial literacy education gaps. Full analysis of financial literacy education strategy, financial literacy education gaps, financial literacy policy gaps, examples of best practice and recommendations would be finalized and reported in later in 2017.

The Philippines, in close collaboration with ABAC and the Asia – Pacific Financial Forum (APFF), organized the SME Finance Forum at the margins of the SME Working Group Meeting in Iloilo City in 2015. Among the recommendations of the forum were the strengthening of public and private sector dialogue on addressing access to finance by MSMEs, developing credit information sharing systems, expanding access to finance for MSMEs in the supply chain, developing alternative funding mechanisms for MSMEs and start-ups, and developing best practices for strengthening SMEs’ resilience (e.g. micro-insurance and disaster risk finance).

Previous workshops on Financing for SMEs are:

Addressing Impediments for Small and Medium Sized Enterprises (SMEs) and Micro Enterprises (MEs) to Access Trade Finance

Identifying Government Policies that Promote Venture Capital Investment in APEC Economies

3. Inclusive business ecosystem that supports SME growth

Promoting Women Entrepreneurship and Green Business

The self-funded project “Supporting Women-led SMEs Access Global Markets by Implementing Gender-Responsive Trade Promotion Policies and Programs” by Australia is aimed at helping develop or improve Trade Promotion Organisations’ services to better support women-led SMEs access global markets. Phase one of the project in 2014/15 identified the barriers women exporters face and developed a set of best practices and lessons that can be adapted to the individual circumstances of APEC economies. In 2016 and 2017, in phase two of the project, Australia is providing assistance to targeted economies to address economy specific barriers. The first workshop to address an economy selected specific improvement was held in Lima in August 2016. Other workshops will be held in Vietnam, the Philippines and Papua New Guinea over the next twelve months. This work also furthers PPWE priorities.

In addition, SMEWG has implemented activities that promote women entrepreneurship, innovative and green businesses. Some reports are available as SMEWG Publications.

4. SMEs’ Market access and Internationalization

Greening MSMEs

The green economy cannot be fully achieved without the participation of MSMEs. Greening MSMES will enhance MSMEs’ competitiveness and improve their market access, while also reducing carbon emissions. However, most MSMEs in the region are not aware of this issue as many of them still, believe that green innovation and technology incurs higher costs and requires inaccessible technical expertise. With that in mind, Thailand organized the forum Greening MSMEs: A Pathway towards Sustainable Economic Growth in the APEC Region in July 2016 in Bangkok.

Taking into account the amount of work that has been done in the past by APEC in areas of sustainability, green growth, environmental goods and services and green value chains, the SME Ministers instructed the SMEWG to lead a process to develop an “APEC Strategy for Green and Sustainable MSMEs” with a view that it be adopted in November 2017, in close coordination with all APEC relevant Committees and sub-fora.

Mainstreaming MSMEs into the Global Economy

To support this APEC-wide priority, SME Working Group has conducted a series of activities that practically helps MSMEs join the global market. These efforts provide capacity building, technical assistance and cooperation, business matching, and networking for both the SMEs themselves as well as the policy makers in the APEC region. The Philippines, with support from member economies, is working on implementing the Iloilo Initiative, with focus on the establishment of the MSME Marketplace, a virtual tool that is expected to promote MSMEs participation in the Global Value Chains (GVCs) and international trade.

The SME Working Group implements a number of projects to assist MSMEs in going international between 2016 – 2017:

An APEC Workshop on Promoting SME’s Integration into Environmental Goods and Services (EGS) Global and Regional Markets, held in July 2016,  helps APEC member economies promote EGS sector, especially in facilitating SMEs’ participation in the EGS markets through identifying SMEs’ obstacles in their access to the EGS regional and global markets; exchange good practices and experiences in supporting SMEs’ integration into the EGS markets; and discussing measures to develop EGS markets for SMEs.

The APEC Workshop on Promoting SMEs’ Participation in the Food Supply Chain, held in May 2016, widely agreed that SMEs, if mobilized, harnessed and facilitated accordingly in food supply chains, would enhance remarkably their competitiveness and integration in the regional and global economics, and then significantly contributes to the economic growth and development as well as securing food security. Recommendations from the Workshop include: enhancing financial availability and access for SMEs; modernizing SMEs through enhancing their access to innovation, advanced technology, e-commerce and digital trade; encouraging mentor by big companies; establishing smart network leadership and coordination; strengthening marketing ability etc.

Some previous projects:

Supply Chain Capacity Building for SMEs: Supply Chain Management, Cold Chain Storage, and Technical Regulations

Facilitating SME Trade through Better Understanding of Non-Tariff Measures in the Asia-Pacific Region: Workshop 1 and Workshop 2.