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Micro, small, medium firms vital but need support: Report

Sok Chan / Khmer Times Share:
Workers at Leang Leng Fish Sauce Enterprise in Phnom Penh’s Chroy Changva commune. KT/Siv Channa

Strengthening the dynamics of micro, small, and medium enterprises (MSMEs) with innovation and internationalisation will be key to revitalising Southeast Asian economies devastated by Coronavirus, according to a new report from the Asian Development Bank (ADB).

The report, dubbed Asia Small and Medium-Sized Enterprise Monitor 2020, reveals that MSMEs are a critical driving force in Southeast Asian economies, accounting for an average of 97 percent of all businesses and 69 percent of the national labour force from 2010 to 2019. They contributed an average of 41 percent of each country’s gross domestic product over the same period.

MSMEs in Southeast Asian economies mainly focus on domestic markets and their level of entrepreneurship is suboptimal, according to the ADB. 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.

“We’re confident that this new report, Asia Small and Medium-Sized Enterprise Monitor (ASM) 2020, which provides a rich set of data and analyses on MSME development in Southeast Asia’s pre-COVID-19 pandemic, would become a benchmark in helping design feasible government assistance for MSMEs amid a new normal in the region.”

Sunniya Durrani-Jamal, ADB country director for Cambodia, said as with other countries in the region, MSMEs are the backbone of the Kingdom’s economy. They stimulate domestic demand, create jobs, innovate and compete nationally and, potentially, regionally. Access to finance and expanded markets remain at the core of MSME growth.

“The main challenges for continued MSME development are access to finance, development of human capital and skills, market access and adoption of the latest technology,” Durrani-Jamal said.

Asia’s economic transformation and pandemic recovery offer the chance to accelerate business opportunities for MSMEs to learn how to digitise and embrace digital financial services and e-commerce, without abandoning the traditional MSME strengths in wholesale and retail trade, agribusiness, food processing, accommodation and other service-related business. A recovery in demand, trade and investment is needed and MSMEs should be at its heart, the report noted.

MSME development remains key to promoting inclusive growth in developing Asia. The design of MSME policies has become more challenging because of the complexity of the MSME business climate and the rapidly changing external environment.

The Ministry of Industry, Science, Technology and Innovation’s SMEs’ Department Director Chhea Layhy said MSMEs are playing an important role in Cambodia’s economy, contributing 70 percent of the total workforce. In total, 99.8 percent of the number of Cambodian business establishments are MSMEs.

He said the current challenges faced by MSMEs are access to finance, access to information, access to market, law and regulation support, unfair competition, low productivity, labour and human resources, raw material, packaging and standard compliance.

“At present the government has issued the mechanism and measures to support MSMEs, such as the SME Development Policy, and SME Law, which will be ready by the end of the year or early next year,” Layhy added.

He said the ministry is drafting the sub-decree for SME cluster zones, an entrepreneurship fund, national SME information portal and centre and an IT platform of SME registration.

“The other challenges are the perception of consumers of local products. Some SMEs are family-based businesses that are not using high technology for their industry – and are  reluctant to the move to digital and technology as well as packaging. We have projects to nurture them, but the education is limited. We need more time,” he added.

According to Durrani-Jamal, in the long run, the Ministry of Economy and Finance (MEF) envisions a skill development committee that would span multiple agencies, departments and stakeholders. The committee would plan strategy and coordinate efforts to build workforce skills.

In addition, an entrepreneurship promotion centre, Khmer Enterprise, will assist startups with capacity building in areas such as tax compliance, accounting and book-keeping and financial reporting.

 

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