SME
development
in ASEAN
As the 10 Association of
Southeast Asian Nations
(ASEAN) member states
move towards closer
economic integration,
this discussion paper
highlights the key
measures being developed
– and what more needs
to happen – to help
SMEs thrive in this
new environment.
September 2016
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Contents
Executive summary .4
Introduction ...6
The importance of SMEs in ASEAN ........7
The ASEAN Economic Community ......12
Supporting SMEs in the AEC .....17
European Union experience ......25
Role of professional accountants ..........28
Conclusion ..31
As the 10 Association of Southeast Asian
Nations (ASEAN) member states move
towards closer economic integration,
SMEs in the region are meetingnew
opportunities and challenges. This
discussion paper highlights the key
measures being developed – and what
more needs to happen – to help SMEs
thrive in this new environment. It gathers
insights from policymakers, economists,
industry representatives and professional
accountants, as well as drawing on
European experience.
ASEAN RECOGNISES THE VITAL
IMPORTANCE OF SMES
SMEs make up the vast majority of business
enterprises across ASEAN and they create
most of the region’s employment
opportunities. Even so, there is huge scope
to increase the contribution they make
towards ASEAN member states’ GDP and
the growth of the region as a whole.
SME participation in international trade is
also generally low. Increasing SME cross-
border activity would boost economic
growth and development in ASEAN,
while also helping to increase the
competitiveness of the SME sector.
ASEAN member states have been
cooperating to support SME development
since 1995. The ASEAN Secretariat’s
fve-year Strategic Action Plan for SME
Development 2010–2015(ASEAN
Secretariat 2010) resulted in a number of
achievements, including an ASEAN SME
Policy Index to help member states
benchmark their own SME policies and
prioritise areas for action. Initiatives for
supporting SMEs directly have also been
launched, such as a Web portal to provide
SMEs with information to help them
expand regionally and internationally, and
an e-learning platform offering a range of
business training courses.
ASEAN ECONOMIC INTEGRATION
CREATES OPPORTUNITIES AND
CHALLENGES FOR SMES
The creation of the ASEAN Economic
Community (AEC) in December 2015 was
the next step towards closer integration
across the region’s markets. It is intended to
support the free fow of goods and labour,
encourage cross-border investment fows
and reduce trading costs. It also creates a
huge potential market that ASEAN
businesses, including SMEs, can access.
On the other hand, further opening of
borders creates challenges as well as
opportunities for SMEs. There are some
concerns that larger businesses, having the
resources to invest in expansion plans and
take advantage of more mobile labour, will
beneft most from the AEC.
There is general recognition that the
less-well-developed ASEAN economies
(Cambodia, Lao PDR, Myanmar and
Vietnam) face the biggest challenges from
deeper economic integration, and
therefore so do their SMEs. For example,
SMEs may face particular diffculties in
Executive summary
As the 10 Association of
Southeast Asian Nations
(ASEAN) member states move
towards closer economic
integration, SMEs in the region
are meetingnew opportunities
and challenges.obtaining technology support or accessing
fnance. Policies to promote and provide
entrepreneurial education in these
countries also tend to lag behind those in
more advanced ASEAN economies, while
regulatory burdens on SMEs may be greater.
MEASURES ARE NEEDED TO SUPPORT
SME DEVELOPMENT
ASEAN member states appreciate that
SMEs need more targeted support to help
them develop and succeed in the context of
the AEC. The latest Strategic Action Plan for
SME Development, running from 2016 to
2025 (ASEAN Secretariat 2015a), outlines fve
strategic goals. These include promoting
productivity, increasing access to fnance,
enhancing market access, enhancing the
policy and regulatory environment, and
promoting entrepreneurship and human
capital development.
For example, a number of recommendations
have been made for improving access to
fnance. These include the establishment
and strengthening of credit risk
management systems, such as credit rating
and credit guarantee schemes. There is
also an appreciation of the need to
support bank funding with innovative and
alternative forms of fnance, such as equity
funds, venture capital fnance and internet-
based crowdfunding platforms for SMEs.
Global value chains are increasingly seen
as an important route for developing
SMEs. Some businesses may enter the
value chain as a tier-two supplier (a supplier
to a supplier to an exporter), before over
time becoming a tier-one supplier and
ultimately an exporter themselves.
Participation in global value chains brings a
variety of benefts, including higher
standards, increased competitiveness and
an increased public profle. SMEs may
need to adjust their strategies to
participate: for example, growing in size in
order to scale up production and attract
more skilled labour, or joining industrial
clusters to pool resources.
Professional support is also vital for
supporting SME development and
participation in the AEC. Professional
accountants have important roles to play as
business advisers, particularly in advising
SMEs on cost-effective accounting packages
and in raising the quality of management
reporting to support business decisions.
ACCA as a professional association can also
offer supp