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SMEs The Bridge for
Creating Equity in ASEAN
Dyah Purnamasari
Violen Amelia Silkana
ECONOMIX 9TH COMPETITION
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b. Towards the creation of regional economic competitive (regional
competition policy, IPRs action plan, infrastructure development, ICT,
energy cooperation, taxation, and SMEs development);
c. Towards a region of equitable economic development through SMEs
development and Initiative for ASEAN Integration (IAI) programs; and
d. Towards full integration in the global economy (coherent approach in the
external economic relations and encourage participation in the global
supply network).
In order to achieve the AEC objectives, the ASEAN Economic Ministers and
the ASEAN Secretariat then made a guideline in carrying out activities called
AEC blueprint. AEC blueprint itself contains strategic work plans that will be
done in the short term, medium term and long-term. In addition, the ASEAN
Ministers also made the ASEAN Policy Blueprint for SME Development
(APBSD). By establishing this APBSD, a question arises. Why do ASEAN
members focus in developing SMEs in ASEAN?
Being part of an organization that has established for about 44 years did not
provide a big impact enough for the member countries of ASEAN. There werestill many problems occurred in ASEAN, including problems in the economic and
social development which can be seen in the presence of a sizeable gap among
ASEAN member countries. To see how the gaps are, in this paper, we will explain
in three aspects which are income gap, human development gap, and digital gap.
1. Income Gap
Income gap includes differences in state income, calculated with a GDP per
capita. Here, the biggest income gap occurs between ASEAN-6 countries
(Indonesia, Singapore, Thailand, Philippines, Brunei Darussalam, and
Malaysia) and CLMV countries (Cambodia, Lao PDR, Myanmar, dan
Vietnam). Based on the tables and graph illustrated below, the gap is getting
bigger each year.
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Figure 1: Average GDP Per Capita for ASEAN-6 and CLMV
Beside GDP per capita, there is another indicator to see income gap, which
is poverty incidence. Based on data from Asian Development Bank in
2002, more than 30% of the population in Cambodia and Myanmar live on
less than US$ 1 per day. It is so contrast if we compare with other ASEAN
member countries like Singapura, Brunei Darussalam, Malaysia danThailand which live on more than US$ 2 per day.
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Based on datas above, we can see that there is wide in income gap between
ASEAN member countries.
2.Human Development gap
Human development gap is evaluated by HDI (Human Development Index).
HDI is an index that used to measure poverty, literacy, education, life
expectancy, standard of living and other factors. It is used to distinguish
whether the country is a developed, a developing or an under-developed
country, and also to measure the impact of economic policies on quality of
life. The categories of HDI are low human development if HDI 0,8.
HDI for ASEAN countries will be illustrated below.
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From the graph above, there is a wide gap in human development
among ASEAN member countries. Brunei Darussalam and Singapore
include high human development countries. Malaysia, Thailand and
Phillipines include upper-medium human development countries. Vietnam
dan Indonesia include lower-medium, and Lao PDR, Myanmar andCambodia include low human development countries.
Beside HDI, we can also look at life expectancy level. Based on
the illustration below, we can see that there is also a big gap among
ASEAN member countries.
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From the tables above, Singapore, Brunei Darussalam and
Malaysia have high life expectancy level, while Lao PDR and Cambodia
had a low life expectancy level.
Moreover, education also includes one of important factors used to
see how the qualifications of existing people in a country. High levels of
education can stimulate economic growth with productivity of society. To
see how the condition of education among the ASEAN countries, we use
data of the level of illiteracy shown in the table below.
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From the table, literacy rate in ASEAN increase each year, but there is still a
wide gap among ASEAN countries. Brunei is the highest literacy rate
country, while Lao PDR and Cambodia have a very low literacy rate.
3. Digital Gap
Digital gap is gap come from the differences in usage level of Information
and Communication Technology (ICT) among ASEAN countries. Digital
gap can be seen from how the level of development of ICT in ASEAN
countries.To see how much digital gap among ASEAN countries, we willsee from the ICT Penetration Level of Technology and Information, average
growth of ICT Penetration in ASEAN, and the number of telephone lines in
ASEAN countries.
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The tables above show that the usage level of ICT in ASEAN countries is
still low. Only few countries such as Singapore and Malaysia use fairly high ICT.
With the considerable gap among ASEAN member countries, the ASEANmembers then agreed to develop SMEs in order to reduce the gap, so ASEAN can
achieve the objectives of AEC to be a region with equitable economic
development. Developing SMEs is selected because SMEs are the majority
enterprises in ASEAN, both in terms of quantity and employment. In terms of
quantity, SMEs have more than 96% of the total enterprises in ASEAN. In terms
of employment, SMEs are the largest absorber of labor about 50% to 85% of the
total workforce in ASEAN countries. As majority enterprises, SMEs have
contributed significantly in the GDP of ASEAN countries by 30% to 53% and
also to exports by 19% to 31%. With fewer workers, less capital, and easy
establishing, the SMEs become an enterprise which can accommodate all the
people in the community both in developed and underdeveloped areas and also as
a medium for women and children so they can participate in the economy. In other
words, it can be concluded that SMEs are the backbone for the economy of
ASEAN countries.
The percentage of SMEs number and its workforce are illustrated below.
Table 9 : Number of SMEs and SMEs workforce in ASEAN
Year 2000 SMEs as % of all firms SME workforce as % of
total employment
Brunei 98 92
Indonesia 98 88
Malaysia 84 39/m
Philippines 99 66
Singapore 91 52
Thailand 96 76/m
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Cambodia 99 45
Myanmar 96 78
Vietnam 96 85
Source :Asasen, et al. (2003)
Note : Percentages refer to shares in national totals.
/m : manufacturing only.
Unfortunately, as a backbone of the economy in ASEAN, SMEs in
ASEAN still face several obstacles to develop further. The obstacles can come
from the SMEs itself such as financial or human resources problem, and also from
outside the SMEs such as a lack of government support or the lack of information.
Not only facing some obstacles, SMEs in ASEAN also face some challenges. One
of them is how SMEs becoming innovative SMEs so they can meet the standards
and desires of the global market.
Because of that, to maximize the potentiality and participation of SMEs so
they can be used as the tools for overcoming gaps in ASEAN, there are two
approaches that have to be done. They are inside approaches and outside
approaches. Inside approaches is ways that done to increase the quality of the
SMEs so they can struggle in the global market. Besides, outside approaches is
how outside environment can be used as tools to support further development of
SMEs potentiality and also the participation of SMEs themselves.
The first thing that we will discuss further is about inside approaches.
They include in fixing from financial side, human resources, managerial, and also
technological development. Financial problem is a classical problem faced by
almost all SMEs in ASEAN. Limitation of funds make SMEs becoming
underdevelopment, hard making innovations, limitation of products quantity,
decreasing in quality because the raw material used are cheap and also low
quality, which caused hard to get them into the global market because the goods
produced do not fulfill the qualification and standards to entrance the global
market. Because of that, this financial problem has to be overcome. In ASEAN
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Strategic Action Plan for SME Development (SPOA) which is made by ASEAN
Economic Minister (AEM), there are some steps taken to overcome financial
problems that faced by SMEs in ASEAN. Those steps include build financial
institution in ASEAN countries, build ASEAN credit biro, ASEAN money market
for SMEs, determine credit policy for SMEs that will be valid in ASEAN
countries, facilitate SMEs to get loan from bank and cooperate with ADB or
World Bank to make it easy.
Next steps in the inside approaches is about how to increase the ability of
human resources and the managerial ability. SMEs are majority works in ASEAN
countries, but most SMEs are handled simply and personally. The limitation ofgood human resources becomes one of big problems in developing the SMEs
themselves. With inability in the managerial things, they become worst. These
things cause SMEs becoming not innovative, stagnant in the same place, less
coordination in managing the SMEs, and not separate individual wealth and SMEs
wealth. In order to overcome this problem, the ministries have planned to hold
regional training for SMEs in ASEAN as written in SMEs Blueprint. This plan is
good since it can help the SMEs entrepreneurs to get deeper knowledge in
managing the SMEs themselves. The knowledge include in quality control, supply
chain, how to develop ideas and creativity, how to create and look at market
chances, good bookkeeping, and also recruit employees. Before holding this
regional training, it would be better if ASEAN holds sharing experiences about
SMEs in ASEAN in order to find the best way to develop the human resources in
SMEs. After that, every ASEAN members formulate their own ways that relate
with the condition of SMEs in their countries so the training can work well. This
regional cooperation ASEAN can also facilitate SMEs entrepreneurs in each
ASEAN members to do exchange to other ASEAN countries to share their
experience and knowledge. Besides, control from each government in ASEAN
countries and delegations from ASEAN are also needed to make sure that all
SMEs entrepreneurs have the same chance to get into this training.
Then, inside approaches also concern about how to develop friendly
technology that will be used by the entrepreneurs and also give benefits to them.
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These include the availability of information, effective and also efficient
information. Nowadays, technology is tools created and used by human to make
their work easier. SMEs also use this. Unfortunately, only Singapore and
Malaysia have used high technology. The rest of ASEAN members still less in
using technology since their access of technology are still low. In SMEs,
technology is highly needed in order to increase the efficient and effective work.
With technology, SMEs entrepreneurs can increase the productivity not only in
qualities, but also in quantities. The process of buying raw materials, producing,
saving, packaging, promoting, and distributing will also be easier if SMEs use
technology. Because of that, technology transfer is needed between ASEAN
members or from outside ASEAN to ASEAN member to get the best way in
technology that can be used by ASEAN countries and to upgrade the ability of
technology in ASEAN countries. Besides, the governments also have to cooperate
in providing technological facility that can be used by SMEs entrepreneurs in all
ASEAN countries. This cooperation can also be done with others outside ASEAN
like investment in technology. Providing technology also has to be related with
the availability of human resources that can use the technology. So, training about
SMEs technology has to be done in order reach the benefits of doing this.
Last in the inside approaches is how to increase marketing ways for SMEs
in ASEAN. As we know, marketing holds important roles for companies include
SMEs. Good products will not develop if it is not supported with good marketing.
As the vision of ASEAN is to make SMEs in ASEAN can enter the global market,
marketing is really needed for them. But, mostly SMEs in ASEAN still market
their products in regional only whereas abroad products enter ASEAN markets.
This must not be good for ASEANs SMEs. Because of that, as the technology
developed, Entrepreneurs of SMEs can use internet in order to help in marketing
process and promoting since E-commerce develop faster. Strategic Action Plan
made by AEM also stated that government of ASEAN member can hold routines
SMEs exhibition and facilitate the best SMEs from each regional to participate in
that exhibition. They also can choose one thousands best SMEs in ASEAN that
will be promoted through virtual SMEs exhibition portal. This portal can promote
SMEs to international market. ASEAN also can participate in SMEs international
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exhibition that will help them in develop their wings wider and to learn more from
international SMEs.
Second approaches that will be explained further is outside approaches.
Outside approaches are specifically talk about how outside environment can be
used so it can help in supporting potency and participation of SMEs in order to
narrowing development gaps. Outside environment that explained here are
government policies from each ASEAN countries that protect and support SMEs
in the country and also policies from ASEAN delegation to increase the
performance of ASEAN SMEs.
From the side of government policies in each country, governments have
to determine policies that can protect the availability of SMEs in their countries.
Since the rivals of the SMEs not only from outside the countries, but also from
inside the countries like bigger companies, the chances of SMEs to struggle is low
if they cannot provide efficient products and unable to promote their products
well. The policies form can be used like determining regulations or laws that
manage work competition happening in their countries. Besides, it will be better if
in each country, there is a special institution that responsible in coordinate all
activities related with the growth of SMEs in that country and also help in solving
internal and also external problems of SMEs in ASEAN like UKM Center (SMEs
Center). This SMEs Center will also act as supervisor and teacher helping in
developing SMEs in ASEAN
From the side of policies from ASEAN delegation to increase the
performance of SMEs in ASEAN, ASEAN member have to erase the non-tariffobstacles for products that come from other ASEAN members like obstacles in
licensing for the products to enter the country and obstacles in regulations and
specification. Besides, erase this obstacles, SMEs entrepreneurs also can decrease
their tax expense because they do not have to pay tax for import license and
transaction of foreign currency. This ease will motivate them to still develop their
SMEs so SMEs in ASEAN will develop faster and can help in narrowing
development gaps.
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Other things that can be done is integrating SMEs Center that provide
place for ASEAN SMEs. By doing this integration, SMEs Center can help and
work together in solving internal and external problems that faced by ASEAN
SMEs.
Besides, ASEAN countries also have to integrate in order to give award to
one hundred top SMEs in ASEAN. These activities that written in ASEAN
Strategic Action Plan for SME is a good tool in developing and motivating SMEs
in ASEAN to go further. This award also can motivate the SMEs entrepreneurs in
developing their work to be better and better and can help ASEAN in narrowing
those gaps.
As explained before, SMEs have big contribution for ASEAN economics
since SMEs have majority percentage of companies (about 90%) in ASEAN. If
SMEs can develop well, it will have impact to other sectors to develop too. These,
of course, can help a country becoming better, underdevelopment country will try
to chase their fact of having fallen behind, and gaps between ASEAN countries
will be decreasing. If SMEs can be more productive, innovative, effective,
efficient, and entrance the global market, SMEs will earn much benefits to
ASEAN and can contribute higher GDP to the country. The increase of Gross
Domestic Product makes country with low GDP can chase country with high
GDP. Besides, the development of SMEs will create more job for society that
make them earning more income and increase their standard of living.
This high GDP will also give direct impacts to government and also
society. Impacts felt by the government is increasing in income tax caused byincreasing in GDP. Higher income tax can be used to build education tools,
healthy, and good environment for society, and also programs that can create the
society more health and clever. Meanwhile, the society will be ease in accessing
education and health facility. By doing that, poverty, literacy, education, life
expectancy, and standard of living of the society can be increased and human
development gaps happened in ASEAN can be decreased.
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The development of SMEs which needed technology like internet and
telephone will increase the use of ICT in a country. Higher in the societys
awareness of education, higher in needed of information that cause the needed of
ICT will increase too. By increasing GDP along with desire with SMEs that basis
technology and awareness of greater education, therefore, government have to
provide more access to ICT. Moreover, increasing in income of society causes an
ease in accessing the needed of ICT and then, digital gaps in ASEAN will be
narrow.
Based on the explanation on previous points, here we come to the
conclusion. SMEs as the majority sectors in ASEAN have high contribution toreach the vision of ASEAN and also to develop ASEAN to go further to
international. Because of that, as the policy maker and as the supervisor, ASEAN
governments and delegates have to give focus in developing SMEs in ASEAN
especially in their own country in order to reach ASEAN vision to narrowing
development gaps between ASEAN members. Besides, they also have to provide
some tools for SMEs like in regulations sector, financing, technology, and human
resources sectors. By providing tools in those sectors that related and needed by
the SMEs, SMEs in ASEAN can be grown well. Therefore, gaps between ASEAN
countries can be narrowed and vision of ASEAN can be reached.
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