'Inclusive Growth' for SMEs

A key part of an 'Inclusive Growth' strategy is improving the performance and sustainability of local entrepreneurs and SMEs. In many APEC economies, SMEs account for the majority of businesses and employment, and contribute significantly to output. Hence, APEC economies need to revitalise their SMEs to make them more resilient and adaptable.

Being small and with limited resources, SMEs face many challenges even in normal times. They tend to be hit harder by recession and lag behind large corporations during expansionary phases as they lack economies of scale and bargaining power. Nevertheless, SMEs are - and will continue to be - a key source of growth for APEC economies. They should, therefore, be encouraged to participate vigorously in growth strategies as well as be providers of job opportunities.

Strategic Plan Priorities consistent with 'Inclusive Growth'

The four-year Strategic Plan (2009-2012) that the APEC SME Working Group has developed guides APEC economies in their SME development under six priority areas. The priorities and actions outlined in the plan are consistent with the concept of 'Inclusive Growth' as they seek to broaden opportunities for, and created by, SMEs.

Priority 1: Business Environment

Actions in this area are focused on facilitating the ease of doing business by improving the legal and regulatory framework and by promoting cost efficiency and uncomplicated and transparent administrative procedures. These efforts would help foster a more conducive environment for businesses, particularly SMEs, to thrive and grow.

Best practice seminars targeted at SMEs have been conducted, covering areas like starting a business, licensing, taxation and trading across borders. These are part of a capacity building series that will also cover other indicators used by the World Bank to measure the Ease of Doing Business in various economies.

Priority 2: Management Capability and Entrepreneurship

This priority aims to improve the information and guidance available to business owners. It also seeks to increase opportunities for entrepreneurs to learn new skills and to start-up new businesses. A key feature of 'Inclusive Growth' is the emphasis placed on employment. Gainful employment is a more productive option than providing support as it leads to more income and demand and helps to build up human capital. As SMEs are a major source of employment, development of management and entrepreneurial talents will contribute to job creation and sustainable growth.

Priority 3: Market Access and Internationalisation

APEC has long been promoting liberalisation in trade and investment. But more can be done to increase access to information on market opportunities both within and outside the APEC region, and to enhance skills in market access and development. Members can also work together to identify and address trade barriers that curb SMEs' access to global markets.

Towards this end, two projects are being undertaken to help SMEs which are looking to expand overseas but face difficulties in understanding their target markets and export requirements. The first project is the APEC Business Fellowship, which will provide the framework for in-market executive training programmes to expose APEC SMEs to business practices and networking opportunities in target markets.

The second project is a

Study on Export Technical Assistance Models

, which will be undertaken by the Committee for Trade and Investment's Sub-Committee on Standards and Conformance. It will provide insights into best practices among APEC economies in providing advisory services in export technical regulations and assistance to companies.

The rapid pace of globalisation in recent years has given rise to a high degree of connectivity and inter-dependence among economies. As economies recover, new opportunities will emerge. SMEs will need to enhance their capabilities to tap these new business opportunities. While individual economies have their own initiatives to help their SMEs access global markets, a coordinated and integrated approach would benefit SMEs APEC-wide. A study is therefore being done to look into the feasibility of setting up an APEC SME market research and capability development centre.

Priority 4: Innovation

Innovation and technology are key enablers of development, yielding significant productivity increases that drive growth. For SMEs, innovation and adoption of new technologies give them a leg-up and help to level the playing field with large competitors. Often, SMEs themselves are also sources of innovation.

In APEC, much has been achieved under various initiatives driven by several economies over the past years. These include the SME Innovation Centre set up to facilitate innovation among SMEs, and seminars on Technology Innovation and Technology Entrepreneurs to educate and promote innovation and adoption of emerging tools like Information and Communication Technologies (ICT) as a key competitive advantage for SMEs.

Priority 5: Financing

As with all businesses, SMEs need financing to fuel their growth. Increasing awareness and availability of financing to SMEs is, therefore, critical. APEC seminars such as the Ease of Doing Business Seminar on Access to Credit have helped by highlighting best practices for developing government policies and programmes that encourage financial institutions to provide credit to SMEs, and by building SMEs' capacity to access financing.

Priority 6: Sustainable Business Practices

Any discussion of 'Inclusive Growth' will focus on ensuring the sustainability of growth. Often, the pursuit of economic development impacts both environmental and social sustainability. Therefore, for sustainable growth, economic development needs to be balanced with environmental and social sustainability. For example, to address the impact of industry on the environment, enterprises could adopt business practices that will limit, or even reduce, the amount of greenhouse gases.

A more pressing issue is rising inequalities, leading to increasing concerns that the benefits of growth have not been equally shared. Persisting inequalities - both income and non-income, such as access to healthcare and education - could lead to social and political tensions. This could undermine social cohesiveness and stall reforms, resulting in lower growth and higher inequalities. For the growth process itself to be sustainable, policies and practices will, therefore, have to address not only reducing poverty but also improving the living standards of a much larger group.

Including SMEs: A Virtuous Circle

In response to the global financial crisis, many economies, including those in the APEC region, have reviewed their economic models and introduced structural reforms as well as reinforced their social safety nets. The aim is to strengthen both economic and social resilience that would see them out of the crisis and back on track for accelerated growth.

At the same time, there is growing consensus among APEC economies that an inclusive growth agenda will not only mitigate the adverse impact of the economic crisis on individuals and businesses, but will also shorten the downturn, strengthen recovery and put the global economy on a more sustainable growth path in the longer term.

A key pillar of such an 'Inclusive Growth' strategy would be the revitalisation and expansion of the productive capacity of APEC SMEs. By helping SMEs access economic opportunities, these efforts would, in turn, broaden access to opportunities for other parts of society and enable them to participate and contribute to the growth and enjoy the benefits.