MSMEs likely to succeed within APEC zone

CEBU, Philippines - If given the right tools and employ proper operational standards, the micro-small and medium enterprises (MSMEs) are seen to follow a success trail, initially within the Asia Pacific Economic Cooperation (APEC) zone.

“Many factors contribute to the long-term success of large-small enterprises relationships,” said Bernadine Zhang, co-author of an APEC study on integrating MSMEs into global value chains.

The research showed that following the global financial crisis, big corporations consolidated their supply chains and secured components from fewer suppliers.

The authors also observed a trend of relocating businesses, especially in component manufacturing. This is due to increasing costs of business in developing Asian economies, which alters commercial advantage.

Aside from challenges, the research also identified the broader opportunities for MSMEs. According to Zhang, these include the rise of consumer markets in developing economies, growth in cross-border e-commerce trade, and a rise in trade of services.

“Some economies have an intrinsically strong small businesses sector. For example, this sector provides over 80 per cent of employment in Canada, Chile, Indonesia, Republic of Korea and Thailand,” said Zhang.

 APEC's policy agenda in the past couple of years is to support SMEs' engagement with international trade.

 Ninety-seven percent of all business in the region is classified as “micro, small to medium enterprises” or MSMEs, with shares of GDP ranging from 20 percent to 50 percent in the majority of APEC economies. There is, however, a gap: less than 35 percent of direct exports in the region is sourced from these small businesses.

 “APEC has been very successful at stimulating cross-border investment by big corporations,” says the Director of APEC’s Policy Support Unit, Denis Hew.

 However, there isn’t enough sourcing of services or materials from local companies and this is partly because these small businesses do not possess the relevant expertise. The inability of small enterprises to tap easily into global value chains is a constraint on intra-APEC trade, added Hew.

 “APEC’s objective is inclusive growth,” said Hew mentioning that  at the global trade level, MSMEs "don’t have much of a voice so APEC is committed to examining what keeps them out of global supply chains.”

Last year, the Philippines highlighted the needs of MSMEs and included them in the APEC agenda. Now, APEC leaders have signaled their desire to enhance global companies’ ability to source goods, services, and expertise from local enterprises.  (FREEMAN)