smes’ participation in regional production networks and access...
TRANSCRIPT
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2013/FMP/WKSP4/006 Session: III
SMEs’ Participation in Regional Production Networks and Access to Finance: ASEAN
Perspectives
Submitted by: ERIA
Workshop on Trade FinanceLombok, Indonesia
1 July 2013
Sothea Oum
Economic Research Institute for ASEAN and East Asia (ERIA)
“APEC Workshop on Trade Finance”
1 July 2013, Lombok, Indonesia
SMEs’ Participation in Regional Production Networks
and Access to Finance: ASEAN Perspectives
1
Outline of the Presentation
1. ASEAN Economic Community and Firms’
Perception
2. SMEs’ Participation in Production Networks
3. SMEs Access to Finance
4. Some Policy Implications
2
Pillar 1: Single Market and Production Base
Free flow of goods, services, investment & skilled labor; Freer flowof capital. Focus on PIS
Pillar 2: Highly Competitive Economic Region
Transport facilitation, infrastructure, ICT and connectivity; IPR,taxation, competition policy
Pillar 3: Region of Equitable Economic Development
SME development; Initiative for ASEAN Integration
Pillar 4: Region Fully Integrated into the GlobalEconomy
Coherent approach to external economic relations
1. ASEAN Economic Community:
Vision and Blueprint
33
What does AEC look like in 2015?
FreeTrade Area
Customs Union
Common Market(range of nuance)
Economic & Monetary Union
AEC 2015 is more than FTA. It aims for
a common market but not quite a
single market. It is not a customs union
and does not aim for economic and
monetary union.
NOTE: Common Market range of
nuance: from free movement of goods
and freer flow of services, capital and
labor on one end, and on the other end,
a single market.
4
Firms’ Knowledge of ASEAN Policy Initiatives
5 Source: Wong and Wirjo: ASEAN – BAC Survey (2011-2012)
Use of Preferential Provisions in ASEAN
Agreements
6 Source: Wong and Wirjo: ASEAN – BAC Survey (2011-2012)
Types of Intra-ASEAN Trade and Investment Links
7
Source: Wong and Wirjo: ASEAN – BAC Survey (2011-2012)
Trade Facilitation in ASEAN
Documents preparationPrepared by Traders:
Commercial Invoice
Packing List
Prepared by Logistics Providers:
Bill of Lading
Prepared by Governments:
Certificates
Permits
Licenses
Prepared by Banks:
Letter of Credit
Other transactions: documentary
collection, trade credit insurance, export
factoring, and forfeiting
Customs clearance
Customs Declaration
Supporting documents
National Single Windows
All ten National Single Windows should befully functional and operational
All government agencies should beintegrated through one system
Customs procedures should be simplifiedto reduce the number of documents requiredto export and import
ASEAN Single Window
An open environment should enable alldocuments to be exchanged between therelevant parties:
Business-to-Business (B2B)Business-to-Government (B2G)Government-to-Government (G2G)
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Evolution of Single Windows
Business
value
chain
Integration scope
Regional /
Global SW
National SW with
all OGAsCustoms
Single
WindowTrade
EDI / VANTradepoint
PortalsCustoms
System
Customs
Automation Era
Start of
Trade Information
Start of
Trade
Information
Exchanges
Limited
B2G
Nationwide
Single Window
B2G / G2G
ASEAN Single Window
National Single Windows
N2N
Source: UNECE –Ten Years of Single Window Implementation (Jonathan KohTat Tsen)
Lao PDR
Vietnam
Indonesia, Malaysia, Philippines, Singapore, Thailand
Brunei Darussalam
Cambodia
Myanmar
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2. SMEs’ Participation in Production Networks
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Quality-Intensity nexus in Production
Networks
Quality
I IV High
Intermediate Most desirable
II III
Low
Least desirable Intermediate
Low High Intensity
Notes:
Quadrant I – Low intensity-high quality production network participation (tier 1 and 2)
Quadrant II – Low intensity-low quality production network participation (tier 3 and 4)
Quadrant III – High intensity-low quality production network participation (tier 3 and 4)
Quadrant IV – High intensity-high quality production network participation (tier 1 and 2) 11
Two critical issues:
1. How to participate in a production network (intensity)
2. How to participate in higher value adding activities in a production network (tier 1 and 2) (quality)
Providing answers to these questions is of importance
SMEs and Regional Production
networks
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Key Results
Moving in…. Moving up….. 1. Labour productivity Labour productivity
2. Foreign ownership share Foreign ownership share
3. Financial stability and
cost of credit
4. Meeting international
standards
5. Introduced ICT Introduced ICT
6. Established a new
division
7. Acquired new machinery
8. Improved existing
machinery
9. Acquired production
knowledge
Acquired production
knowledge
10. Introduced new
products
11. Positive attitude
towards risk
12. Willingness to adopt a
new business strategy
Size
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3. SMEs’ Access to Finance
SMEs in general face a number of obstacles in accessing
finance; mainly related to their limited resources and
perceived risks by lenders.
Classic issue: credit rationing for SMEs, because of
greater opaqueness and risks.
Access to finance seems to be the biggest problem.
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SMEs’ Access to Finance (cont.)
Key findings from ERIA study:
Start-up and expansion mainly from internal finance.
External finance becomes more important for domestically-owned, smaller, making lower profit SMEs in less-developedeconomies.
There are evidences of credit rationing, or risk premiumexercised by financial institution on SMEs Larger SMEs in more developed economies tend to get bigger loans,
with longer terms and at a lower interest rate than otherwise
Net worth, collateral, business plan, and cash flow are necessary to getfavorable terms of financing.
Financial access significantly affect innovative and exportcapability of SMEs.
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The Importance of Government Initiatives to Promote
SME Development and Internationalization
16 Source: Wong and Wirjo: ASEAN – BAC Survey (2011-2012)
Promoting SME development is a very difficult task -
complex; depends not only on policy or external condition,
but also on SME’s characteristics and how SME
perform/behave
Trade and investment liberalization and facilitation
Taking measures to facilitate financial access and enhancing
technology and innovative capability
ASEAN has its mechanism, ie. Strategic Action Plan - the
plan is not without weaknesses; but the process in ASEAN
allows for continuous refinement.
One way to accelerate SME development in ASEAN: improving
monitoring mechanism for the implementation of the SME
policy
4. Some Policy Implications
17
ASEAN is now adopting the similar (monitoring) process
taken by Western Balkan countries through their (OECD)
SME Policy Index
Having SME policy index in ASEAN facilitates and harmonize
policies, strengthens coordination of policy and programs, and
serves as instrument for capacity building
Guard the policy implementation within a robust policy
framework
The process (self- plus independent evaluation) ensures policy
makers to realize their weaknesses
The process (involves public consultation and discussion of the
evaluation results at regional level) allows countries to always
learn one from the other.
4. Some Policy Implications (cont.)
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