Forget pyramid-shaped growth. The dream of the APEC Business Advisory Council (ABAC) is to build a more equitable ecosystem where small people thrive, akin to a vibrant forest of micro, small and medium enterprises.
Promoting micro, small and medium-sized enterprises (MSMEs) is among the five priorities of this year’s APEC Business Advisory Council 2022. The other four missions are: regional economic integration, digital, sustainability, as well as on finance and economics.
“It is because the group is [the] most vulnerable, having borne the brunt of the Covid-19 pandemic, international conflict and rising inflation,” said Kriengkrai Thiennukul, the chair of ABAC 2022 and also chairman of the Federation of Thai Industries.
Even though MSME is a group of small businesses in the economic ecosystem. However, the group makes up 99.5% of all enterprises in the country and employs over ¾ of its labour force. At the global level, MSMEs also play a major role in job creation and economic and social development. In emerging markets, most formal jobs are generated by SMEs, accounting for seven out of every 10 jobs, according to the World Bank.
(Mr. Kriengkrai Thiennukul, the chair of ABAC 2022 and also chairman of the Federation of Thai Industries.)
For Mr. Kriengkrai, the mission is not just about getting the vulnerable groups back in the game, but it is also a matter of “help us, help them.”
“MSMEs are a significant part of the supply chain. When they run into trouble, the impact is felt across the entire chain — among major corporations and all consumers in the end,” Mr. Kriengkrai said. “In a transition time like this, opportunities belong to those who are willing to adapt”, he added.
(Dato’ Rohana Tan Sri Mahmood, chair of the ABAC MSME & Inclusiveness Working Group)
Dato’ Rohana Tan Sri Mahmood, chair of the ABAC MSME & Inclusiveness Working Group, said that the importance of supporting MSMEs cannot be overstated.
“Across the 21 APEC economies 97% of businesses are MSMEs. In the case of Malaysia, ’MSMEs account for 97.4% of all business establishments as of 2021,” she said. “And for each APEC economy, a large number of MSMEs are composed of micro-enterprises, such as those led by women, youth, and Indigenous peoples.”
Dato’ Rohana opined that, “When MSMEs stand at the very heart of APEC, at the heart of every single one of our economies, how can they not be considered important?”
For the APEC Business Advisory Council 2022, which will be held under the theme of “Embrace, Engage and Enable”, the ABAC MSME & Inclusiveness Working Group has focused on four key priority areas. First, and perhaps foremost, is to promote the digital transformation of MSMEs.
Although the Covid-19 pandemic has eased, a new lifestyle where people depend on commerce and online services has become the “next normal”, Mr. Kriengkrai said.
He acknowledged that some entrepreneurs were able to ride on the digital wave — successfully adapting online business models, reducing cost, and profiting in the process — they are exceptional cases that remain few and far between, in Thailand at least.
“The challenge is not just to educate MSMEs about digitalisation, but how to make the most out of the new business model. What are the tricks of digital trade? What are the rules and laws, or things they should avoid, in case they need to engage in international business,” Mr. Kriengkrai said.
He said that ABAC plans to recommend to APEC Leaders that MSMEs need new digital infrastructure — a new platform or marketplace — that can accommodate a majority of enterprises who are not able to access existing online channels.
Dato’ Rohana said the key issue was that “You have to make it much easier for MSMEs to get onto online platforms. You cannot expect them to fill out complex forms, read through extensive literature, or even take precious time away from their business to attend lengthy, and sometimes costly, capacity building courses. As such, we need to be asking important questions such as, how can we better facilitate the onboarding of MSMEs onto online platforms?”
More work is also needed to help small companies adapt to an increasingly technologically-driven, interconnected global economy. “How can we get MSMEs to work with bigger companies so they can become part of the value chain. They have to understand how much the business environment has changed for companies. And the fact that if they are not digitalised, they will be left behind. Whatever they do, they must ensure that they remain relevant and part of the ever-changing business landscape. As such, it is imperative that we enhance the resiliency of MSMEs to better prepare them for the post-pandemic business environment. Among other things, we have to give them access to finance. We have to give them access to suitable and effective digitalisation resources. We have to help them start looking at selling online. And We have to think about how to make their businesses operations more agile and resilient.” Dato Rohana said.
The ABAC MSME & Inclusiveness Working Group’s second key priority area is to promote sustainable practices.
Mr. Kriengkrai compared MSMEs to bean sprouts, which can grow fast on seemingly minimal resources. “Many of them are not long-lasting, however. Some existed just for certain purposes only. They don’t have roots that will allow them to grow on a sustainable basis”
Although survivability is still the name of the game in most parts of the world, care for the environment and issues of global concern such as climate change or fair use of labour must be taken into account if MSMEs are to survive in the future.
Dato’ Rohana said, while sustainability is critical for long-term development of MSMEs, business survival should be the more pressing issue post-pandemic.
“We all agree that MSMEs play a key role in all our economies. We also agree that while sustainability is important, and that we want to ensure that companies are sustainable, in the sense of environmental, social, and corporate governance standards … But the question here is, whether it is sustainability that we should be focusing on now, or is it survivability?”
Small companies simply lack the resources and capacity to adapt what larger national or multinational companies already possess.
“Big companies can do a lot of things. They can adopt practices given their size, their access to capital. But when you look at MSMEs, the most important thing to do now is to ensure that they are aware that in order to survive, they must be aware of all the sustainability issues. We cannot impose what we impose on big companies on [MSMEs].” Dato’ Rohana added.
Dato’ Rohana opined that policymakers should adopt a multidimensional approach to helping MSMEs adapt, such as through the provision of suitable capacity building programs, access to capital, and education resources.
Financing support, for instance, could be tied together with the condition that businesses must meet certain sustainability targets to be eligible to receive funds. This can act as an incentive for change.
“Hypothetically, if I was a MSME and already worried about my cash flow, do you also expect me to worry about the environment? Do you want me to worry about climate change? I have cash flow issues. We have to get policymakers as well as [MSMEs] to be aware of this. Is this the role of government? Absolutely”
She said small companies actually understand the importance of sustainability, and that long-term growth goes hand in hand with awareness of environmental, social, and corporate governance issues.
The third key priority are for the ABAC MSME & Inclusiveness Working Group is the need to ensure that MSMEs have adequate financial capacity. One way to achieve this would be to build the digital market infrastructure to facilitate MSME supply chain finance.
The inability to access capital is a common constraint faced by MSMEs across the world.
Mr. Kriengkrai proposed that banks or financial institutions use business performance, real-life transactions, or procurement history as alternative methods to help MSMEs gain access to credit. Dato’ Rohana said, while many APEC members have implemented financial assistance programs for MSMEs, funding remained a critical issue.
“Suddenly, because of Covid, you have countless MSMEs dying off. They are fighting for survival. And that’s why we are saying we have to reset our buttons, we have to make sure that MSMEs have access to funding,” she said.
The fourth key priority area for the ABAC MSME & Inclusiveness Working Group is to foster greater economic inclusion, especially for underrepresented groups including women, youth, and Indigenous peoples.
Mr. Kriengkrai insisted that equality lies at the heart of inclusiveness. Although Thailand has done a remarkable job in terms of women participation in business — the proportion of female CEOs in the country is among the highest in the world — challenges remain in other countries where discrimination remains based on gender, ethnicity, or age.
Dato’ Rohana noted that over the course of the pandemic, women, youths, and Indigenous peoples had suffered the worst.
She quoted a report from consulting firm McKinsey and Co that, while women accounted for 39% of global employment, they accounted for 54% of Covid-related job losses.
The report also noted that women’s jobs were 1.8 times more vulnerable during the pandemic than men’s jobs.
“These are the [micro-enterprises]. In Thailand, in Malaysia, most of the micros are women. And 70% of the world’s Indigenous population reside within the Asia-Pacific region. What is important is that we have to do more to unlock the potential of women and the underserved.” Dato’ Rohana added.
Further information, please visit www.abac2022.org
APEC Member Economies: Australia; Brunei Darussalam; Canada; Chile; China; Hong Kong, China; Indonesia; Japan; Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; Philippines; Russia; Singapore; Chinese Taipei; Thailand; United States of America; and Viet Nam.
ABAC was created by APEC Leaders in 1995 to be the primary voice of business in APEC. Each economy has three members who are appointed by their respective Leaders. They meet four times a year in preparation for the presentation of their recommendations to the Leaders in a dialogue that is a key event in the annual Leaders Meeting.
Under Thailand’s leadership, ABAC is pursuing a work program under the theme “Embrace. Engage. Enable” to respond to the challenge of maintaining the economic vitality of the Asia-Pacific Region and ensure it benefits all.
*Mr. KriengKrai Thiennukul is the ABAC 2022 Chair, with Rachel Taulelei from New Zealand and Dominic Ng from the USA as Co-chairs. 5 work groups comprise of Lam Yi Young, Chair of Regional Economic Integration Working Group (REIWG); Janet De Silva, Chair of Digital Working Group (DWG); Dato Rohana Mahmood, Chair of MSME and Inclusiveness Working Group (MSMEWG); Ning Gaoning, Chair of Sustainability Working Group (SWG); and Hiroshi Nakaso, Chair of Finance and Economics Working Group (FEWG).
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