ADB wants global market access for MSMEs
The first volume of ADB’s Asia Small and Medium-Sized Enterprise Monitor 2020 provides an assessment of issues facing micro, small and medium enterprises in Southeast Asia at the country and regional levels.
AFP/File
ADB wants global market access for MSMEs
Czeriza Valencia (The Philippine Star) - October 23, 2020 - 12:00am

MANILA, Philippines — Giving smaller businesses in Southeast Asia access to global markets and technological support will be a huge boost to recovery efforts in the region, according to a new report by the Asian Development Bank (ADB).

The first volume of ADB’s Asia Small and Medium-Sized Enterprise Monitor (ASM) 2020 provides an assessment of issues facing micro, small and medium enterprises (MSMEs) in Southeast Asia at the country and regional levels.

A sweep of conditions among MSMEs in ASEAN countries showed that while the use of digital solutions have been gaining traction in smaller businesses in response to the pandemic, much still has to be done in terms of innovation.

Most of these businesses also concentrate their operations in domestic markets, which are suffering from weak demand and economic activity at the moment.

“MSMEs in Southeast Asian economies mainly focus on domestic markets and their level of entrepreneurship remain suboptimal. Supporting the development of MSMEs, particularly in technology adoption and participation in global supply chains, will contribute to inclusive growth and aid in recovery efforts from COVID-19,” said ADB chief economist Yasuyuki Sawada.

Despite limitations in activity, MSMEs remain a critical driving force in Southeast Asian economies, accounting for an average of 97 percent of all businesses and employing 69 percent of the national labor force from 2010 to 2019.

These enterprises contributed an average of 41 percent of each ASEAN country’s gross domestic product over the same period.

In the country, MSMEs make up 99.5 percent of total businesses and employ 63.2 percent of the labor force. More than 80 percent of these are engaged in services, especially traditional wholesale and retail trade.

The report noted that most smaller businesses in the country concentrate on the domestic market and are not well-exposed to global markets or value chains.

Use of e-commerce has been growing rapidly especially in the IT-BPO sector but much more can be done for agribusinesses.

The report said promoting the internationalization of MSMEs through participation on global value chains would boost national productivity but would require “well-organized” government support and the provision of trade insurance to cushion the blow from external shocks.

“Enhanced MSME internationalization brings with it new risks – such as changing or volatile foreign demand – made abundantly clear by the ongoing COVID-19 crisis. MSMEs are fragile, prone to disruption from external shocks,” said the report.

“This requires a well-organized government support mechanism covering international trade.”

To cope with changing consumer demand and behavior amid the pandemic, ADB said the shift to the use of digital transactions for small businesses should focus on models that reduces physical contact.

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