Small businesses crucial to attain inclusive growth

CEBU, Philippines - If economies in the world like the Philippines aim to achieve inclusive growth, survival and growth of  the micro, small and medium enterprises (MSMEs) should be taken into close consideration as they account a significant contribution in employment generation and poverty reduction of a country.

The need to create a supportive business environment to help the MSME sector survive and grow was raised during the Enterprise Performance in Asia Conference held last week at the Radisson Blu Hotel in Cebu City.

Asian Institute of Management (AIM) president Dr. Steven DeKrey said that creating inclusive growth requires MSMEs take a bigger role in driving the economy.

He added that entrepreneurs from smaller and medium scale firms should be able to develop new products and services in order to sustain industrialization.

“This act of ‘cost discovery’ ultimately fuels a more sustained growth process. When coupled with a competitive economic landscape, and under pinned by the rule of law and a business-friendly environment, these together form the impetus for sustained growth in the long run,” he said.

Asian Development Bank (ADB) Deputy Chief Economist Dr. Juzhong Zhuang also emphasized the need for MSMEs to network with firms in providing training, knowledge, and support, and to invest in innovation.

“Policies can sustain MSME development through improving access to finance, providing support for technology, marketing, and training, and addressing constraints in broad growth,” he said.

He said that it is also important that both public and private sectors should share a constant dialogue to give adequate support to these enterprises.

University of  Essex – Essex Business School professor Jay Mitra, on the other hand, described MSMEs as small firms but are considered global since “they maximize economies of  scope.”

He added that lauded the flexibility, resiliency and innovativeness of these enterprises.

“Very few small firms grow. High-impact SMEs are able to withstand the pressure of knowledge-based activities such as networking activities and research and development spending,” he said.

In the Southeast Asian region, MSMEs account a contribution of between 32 to 77 percent of the total domestic output in their respective economies. The sector which comprises more than 90 percent of  all enterprises is said to employ 50 to 99 percent of the total work force.

AIM Policy Center Executive Director Ronald Mendoza urged governments to develop policies from context-specific evidence and venture into key developments that can affect MSMEs such as the upcoming ASEAN Economic Community in 2015.

He cited that in Malaysia, both large and small firms benefit from the spillovers created by foreign direct investments in the high-technology sector.

He said that policymakers could author laws that would allow these enterprises to take advantage of relevant technologies and improve their productivity.

“Policies should support the emergence of competitive firms, while recognizing that not all firms will be able to survive in the long run. Developing nuanced policies that address MSME obstacles will require a balance between supportive and pro-competition policies,” Mendoza continued.

Dubbed with the theme "Small Enterprises, Good Government, and Competition: Keys to Growth with Equity in Emerging Asia," the three-day conference was organized by AIM and International Development Research Centre (IDRC). —/JMD (FREEMAN)