Look east

The attractive picture of Asia is formed by interlocking pieces of vastly distinct dynamics of individual countries; Japan is large, China is rising, Korea is developed and India has an immeasurable amount of potential.

In most Asian countries, small- and medium-sized enterprises (SMEs) are of overwhelming importance. According to Dr Lorna Wright, Schulich School of Business, York University, Canada, "In all economies, the vast majority of business establishments are SMEs.

In every case, they make up over 90% of all business, and for nine economies (Australia, Chile, Indonesia, Japan, Korea, Philippines, Thailand, USA and Vietnam) over 99%. In Indonesia, the figure actually represents micro and small only. Medium-sized enterprises are included with large."

According to Thitapha Wattanapruttipaisan, Senior Officer, Industrial Services Unit, ASEAN Secretariat, Jakarta, Indonesia, "SME is also the biggest source of employment - providing livelihood for over three-quarters of the region's workforce, especially women and the young."

Therefore, the SME sector will remain the backbone of every economy of the Asian region and elsewhere. Providing support to SME growth and competitiveness is no longer an option for the developing nations. With basic evolution of pace, process and patterns of production, Asian SMEs have to manage growth and change with the changing environment.

To promote SME development, overall perceptions and practices need to be modified. Also, there’s a need to develop a new or different mindset. Some of the opportunities, challenges, policy issues and suggestions having pertinence to SME development worldwide must be discussed.

Trade liberalisation at international levels has created rich opportunities and unavoidable challenges worldwide. "Most wealth-making assets such as finance and technologies can now be packaged and exported.

Furthermore, there are now greater scope and more opportunities for inter-firm linkages for enhanced collective efficiency, technological and innovation capabilities, and hence competitiveness.

In particular, the proliferation of complex networks of international production and cross-border supply chains has widened and deepened the potential and avenues for Asian SME involvement," says Mr Wattanapruttipaisan. New information and communication technologies (ICTs), e-commerce and e-business are the other development trends.

According to Dr Wright, “The percentage of the general population with computers has increased considerably in the past few years in all APEC economies. However, the 2002 statistics from ITU indicate that only two economies, Singapore and USA approached the two-thirds mark (62.2% and 65.9%, respectively).

The number of secure servers is increasing, although some economies, Viet Nam, Brunei and PNG specifically, still have few (10, 5 and 1, respectively). The number of secure servers should help with some of the security concerns that SMEs have voiced as a barrier to doing e-business.”

Government policies and implications matter even more in this context. The research conducted by Enterplan UK, under The Department for International Development's (DFID) recent study into SME development in Asia provided clear evidence that the key to success of the Asian Tiger economies (China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand) was a clear understanding of their respective endowment benefits and the implementation of policies that favoured these.

Many other evidences also suggest that the governments created an environment where entrepreneurship could flourish. Raising Taiwan’s example, a recent United Nations Conference on Trade and Development (UNCTAD) report on the role of government policy on industrial competitiveness points out that Taiwan's industrial policy includes import protection, financing, the option of overseas direct investment, support for the development of domestic techniques and technology, and the expansion of exports.

The report points out that Taiwan did not promote the development of large private industrial conglomerates and did not emphasise the development of heavy industry.

In China, Japan, Taiwan, Thailand, Indonesia, Malaysia and Vietnam SMEs play a major role. In Singapore, SMEs are not that significant in numbers; however, they are important in attracting FDI. Contributions of SMEs to exports are greatest in Taiwan. In China, Korea, Malaysia and Taiwan SMEs are relatively more export orientated than in Indonesia, Malaysia, Singapore and Thailand.

All APEC economies have adopted policies and programmes that are designed to support SMEs, and aimed at making SMEs more globally competitive. Further, Anil Sinha, GM, SouthAsia Enterprise Development Facility believes there are some major differences in the approaches used to actually do this.

Mr Singh supports his belief by providing the following example: "About half of the APEC economies have adopted an 'SME Basic Law' or the 'SME Magna Carta' and half have not. About 40% now adopt a non-discriminatory approach and about 60% adopt policies that intentionally target and discriminate in favour of SMEs.

In addition, there are large differences in budget allocations for SMEs between economies." Despite the differences, most of the Asian Tiger economies and APEC economies strongly focus on three areas: finance, technology and human resource development (HRD).

On concluding simplistically, what appears to differentiate the programmes and policies implemented in the Tiger nations from the far less successful ones is the entrepreneurial, market-friendly nature of their governments.

In terms of SME development, the Asian Tigers have encountered their own difficulties; their economic transformations suggest that their economic and industrial policies are in good order. The strong SME sectors are a reflection of successful economies and a realistic assessment of the country's endowments.

"In this sense the experience of some Asian Tigers, rather than suggesting that the SME sector drives growth, might depict SMEs, particularly the small ones, as crisis shock absorbers that not only help provide employment during difficult times, but also prepare new entrepreneurs for graduating to run a larger firm when the economy recovers," says Mr Sinha.