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Place MSMEs at heart of Asean’s economic recovery

Tuan Vu and Maria Aurora Geotina-Garcia / Share:
(Photo by Osman Orsal/Xinhua)

There’s no doubt that COVID-19 has hit Asean’s economies and ways of life hard. With the pandemic continuing to escalate around the world, the predictions of economic losses keep mounting – the economies of East Asia and Pacific excluding China are forecast to contract by 1.2 percent in 2020. Singapore, Thailand, Malaysia, and the Philippines could be hit particularly hard with contractions of 7 , 7.7, 3.8, and 3.6. percent, according to the International Monetary Fund or government sources. Resulting job losses and reduced income will affect 41 million people in East Asia and the Pacific, including Asean, according to the World Bank.

Micro, small and medium enterprises (MSMEs) are among the worst affected. They have been at the heart of Asean’s prosperity – accounting from 88.8 to almost 100 percent of enterprises in the member states. 51.7 to 97.2 percent of the nations’ total employment is provided by MSME’s, and they account for 42.2 percent of the gross value added to the Asean economy.

MSMEs are among the worst affected by the pandemic – both economically and socially. The negative effects are borne by most vulnerable groups such as migrant workers, women and people living in remote or less developed areas. They often rely on smaller businesses for employment and product- and service-delivery because bigger businesses are unlikely to reach them.

The Asean Business Advisory Council (ABAC) has called for the inclusion of MSMEs – “the backbone of the Asean economy” – in Asean and member states’ recovery plans through the provision of social safety nets for most vulnerable businesses and their workers and advancement of MSME interests as we define a new and transformative normal. ABAC, established “to provide private sector feedback and guidance to boost Asean’s efforts towards economic integration,” made these calls in response to Asean leaders’ declarations.  While Asean members states have already put stimuli packages in place with social protection for people and inputs to businesses, much stronger and more focused inputs are needed to reach the most vulnerable – especially MSMEs and communities that rely on them. With MSME’s being interdependent with people often underserved by big businesses, these inputs will go a long way in cushioning socio-economic blows upon the women and men of a region who need help the most.

Despite gloomy circumstances, we believe that MSMEs have what it takes to quickly recover from COVID-19 because of their flexibility and adaptability to changing environments. And because MSMEs participate in various levels of supply chains and enable a healthy market competition, they – along with bigger businesses – can provide a strong foundation for the recovery of national economies.

To harness the full potential of MSMEs in supporting national economies to recover, a more conducive environment that will enable MSMEs to quickly adapt their business operations to a “new normal” is required. “A Better Normal for Business,” an Oxfam in Asia report, details this and other recommendations on how Asean’s MSMEs can recover and thrive during and beyond the pandemic.

A seamless flow of trade in domestic and regional markets and appropriate operating guidelines and facilitation for safe reopening of business operations are essential pieces of a new normal – along with support for adaptation for smaller businesses in need. Direct and specific financing flows for MSMEs are critical for insulating them from being crowded out and dominated by the big companies and their interests.

MSME’s capacities require upscaling, and opportunities must be created for growth. This can be achieved within a context of a cohesive Asean common market to be promoted as a safe investment destination for global value chains disrupted by the pandemic. Support for business digitalisation to adjust to consumer and market changes and a transition to e-commerce too will be useful. MSMEs should be enabled to shift to more resilient business development models.

Finally, maximum possible support must be invested in current and future wellbeing of both formal and informal MSME workers. Adequate healthcare and unemployment insurance coverage should be expanded where these are still not universally available. Informal businesses must be supported to become formal and legitimate enterprises. Workers need enhanced skills to adapt to change and maximise new opportunities. Targeted programmes to reach women workers and other disadvantaged groups are vital, particularly for those on daily wages and in remote and less-developed areas.

As the voice of the private sector in Asean, ABAC can build upon its calls and amplify recommendations to the Asean leaders on enabling MSMEs to be included in Asean’s Regional Economic Recovery Plan and follow up action.

In building a fairer and more sustainable economy, MSMEs that adapt to a “new normal” transforming into businesses with more innovative, resilient and responsible ways of working can contribute to a stronger and healthier Asean


Tuan Vu is Oxfam’s private sector adviser for Asia. Maria Aurora Geotina-Garcia is chairperson of the Philippine Women’s Economic Network and Philippine Focal Point of the Asean Women Entrepreneurs’ Network.

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