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SMEs are the backbone of the ASEAN economies. They account for more than 96 per cent of all enterprises and for between 50 and 97 per cent of employment in many AMSs. In addition, the contribution of SMEs to GDP is generally significant, about 30-60 per cent, and the contribution of SMEs to exports is between 19-31 per cent. They are also the largest source of domestic employment across all economic sectors and in both rural and urban areas. The SME sector also provides opportunities for women and youth to participate in the economic development of the country.
A strong, dynamic and efficient SME sector will ensure the sustainable, inclusive and broad-based economic and social development. A vibrant SME sector is critical in supporting closer regional integration through the establishment of the ASEAN Economic Community (AEC). Thus, the encouragement and promotion of competitive and innovative SMEs is necessary in contributing to greater economic growth and social development towards more inclusive and broad-based integration of the ASEAN region.
The SME sector in ASEAN, however, is confronted with a wide-range of structural, financial and other challenges, among which are limited access to finance, technologies and markets. There is also the question of entrepreneurial spirit and management skills among ASEAN SMEs. These problems are compounded by the lack of information, inadequate capacity for compliance with standards and certification, and the absence of a more conducive business and policy environment.
In addition, there are the new trends of conducting business utilizing information and communications technology (ICT) with on-line linkages across the value chain as well as the outsourcing and networking strategies adopted by large enterprises and multinational companies (MNCs) which lack participation by SMEs. All these require SMEs and governments to undertake proactive capacity building and other measures to ensure and sustain SME participation in supply networks and to sharpen SME competitiveness, flexibility and hence business sustainability.
Greater competition, rapid technological advances, more demanding and constant changes in market and consumer requirements mean that SMEs have to be innovative and forward looking in order to manage with success the challenges of the global, regional and domestic markets. The formation of SME-based clusters, and inter-firm networks and linkages within ASEAN will help leverage collaboration and collective efficiency, including scale economies across the value chain, thus creating further opportunities for business development and supply linkages for SMEs and their entrepreneurs in the region.
There is additionally a need to create and promote a more conducive business and policy environment for SME development where both Government and the private sector assume synergistic and complementary roles. The Government acts as a facilitator, while SMEs themselves are the engine of growth. Indeed, collaborative SME development programmes within a public-private partnership framework will ensure the continued economic growth and social development in the region. These programs can be achieved through structured and organized action plans and development initiatives, including though the introduction of wide-ranging capacity building and fiscal and financial incentive programs, with SMEs and their entrepreneurs as the main target beneficiaries.