“Doing More for the SMEs in the
ASEAN Economic Community”

Beijing, 30-31 October 2007

by H.E. Ong Keng Yong
Secretary General of ASEAN

SME Development in ASEAN

Small and Medium Enterprises (SMEs) including micro-enterprises form the backbone of the economy in ASEAN Member Countries. As such, they are not only the prime contributors to economic growth but also the largest sources of domestic employment across all economic sectors, in both rural and urban areas. The SME sector also provides opportunities for women and the young to participate in the economic development of ASEAN Member Countries.

A strong, dynamic and efficient SME sector will ensure sustainable economic development. Thus, the encouragement and promotion of competitive and innovative SMEs is necessary not only in contributing to greater economic growth of the region but importantly to the ASEAN Economic Community (AEC)

As you may all know, ASEAN has accelerated its regional integration by advancing the realisation of the AEC from 2020 to 2015. And for the AEC to be meaningful, SMEs have a pivotal role to play.

ASEAN recognises that for SMEs to take full advantage of the AEC, they have two avenues. One is to participate in a regional supply chain arrangement, i.e. they become part of ASEAN’s supporting industries.  The other is for SMEs to directly participate in the trading environment. And at the regional level, ASEAN is exerting efforts at ensuring that these two avenues are available to SMEs.

Specifically, ASEAN is espousing the creation and promotion of a conducive business environment for SME development where both government and the private sector assume synergistic and complementary roles. The government acts as a facilitator whilst the SMEs themselves are the engine of growth.

Challenges to SME Development in ASEAN

There are, however, challenges in realising government’s role as a facilitator. The SME sector in ASEAN is confronted with a wide-range of structural fiscal and non-fiscal issues and challenges, particularly limited access to finance, technology and markets.

With greater competition, rapid technological advances, more demanding market requirements, and constant changes in consumer demands require SMEs to be innovative and creative in order to face the challenges of the global market.

There is also insufficient entrepreneurial spirit and management skills among ASEAN SMEs. These problems are compounded with the lack of information, compliance to standards and certification and a conducive busines enviroment.

In addition, a new trend of conducting business utilising information communication technology (ICT), as well as outsourcing and networking strategies adopted by large enterprises and multinational companies (MNCs) require SMEs to undertake pro-active measures to ensure their business sustainability.

The ASEAN Policy Blueprint for SME Development 2004-2014

It is in this context that the ASEAN Economic Ministers approved the ASEAN Policy Blueprint on SME Development (APBSD) 2004-2014. The APBSD 2004-2014 essentially outlines the framework for SME development in the ASEAN region.

It comprises strategic work programmes, policy measures and indicative outputs, which are built on the premise that concerted actions and development programmes, undertaken by the ASEAN SME Working Group, which is composed of the SME agencies of all ASEAN Member Countries, in partnership with donor agencies and the private sector, will ensure a more progressive SME sector towards the overall economic growth of the ASEAN region.

The APBSD’s mission is to develop and sustain a culture of entrepreneurship and innovation within the SME sector in the region; to assist and enusre that ASEAN SMEs become and remain learning, dynamic and outward-looking enterprises; and to encourage collaboration and neworking among SMEs within ASEAN, as well as with business enterprises outside the region.

In order to achieve this, the APBSD has focused programmes on human resource development and capacity building; enhancing SME marketing capabilities; access to financing; access to technology; and creating a conducive policy environment.

SMEs in the ASEAN Economic Community

Whilst the application of the focused programmes under the APBSD is currently up to each ASEAN Member Country, depending on their domestic needs and level of economic development, five outputs, which are aimed at addressing SMEs’ lack of access to markets, technology and finance, are expected to be achieved by 2015 under the AEC.

The first is to establish a common curriculum for entrepreneurship in ASEAN. This will primarily ensure that ASEAN’s curriculum for entrepreneurship is in line with international standards and, thus, provide ASEAN SMEs with the latest information on standards, and market trends.

The second and third will, in particular, address the needs of the newer ASEAN Member Countries, as well as less developed regions of ASEAN, which are unable to ably assist aspiring entrepreneurs. They are to establish a comprehensive SME service centre with regional and sub-regional linkages in ASEAN Member Countries and establish an SME financial facility in each ASEAN Member Country. For the realisation of these outputs, the more developed ASEAN Member Countries, ASEAN Dialogue partners, as well as donors could help by sharing their experiences and resources.

The fourth is to establish a regional programme for the promotion of internship scheme for staff exchanges and visits for skills training. Through these exchanges, ASEAN nationals will not only learn from the experiences (including new ways of doing things and technology) of their counterparts but also greatly contribute to community building as they are able obtain an understanding of each other’s cultures.

The last but not least is to establish a regional SME development fund that would be used as a financial source for SMEs that are undertaking business in the ASEAN region. This aims to stimulate entrepreneurship at the regional level. Under this output, ASEAN would like to learn from the experience of the EU, which has successfully set up regional development funds aimed at start-ups and fledling companies,

Conclusion

Through these five outputs, ASEAN endeavours to create an innovative SME sector, which will help not only realise the ASEAN Economic Community, but importantly sustain the economic prosperity of the region.