Enhancing SMEs’ competitiveness, access to export markets critical to economic growth

MANILA, Philippines - Philippine government support is crucial for small and medium-sized enterprises (SMEs) to strengthen their competitiveness in their local territory while gaining access to foreign markets and global supply chains.

SMEs in developing countries such as the Philippines can compete both domestically and globally if national measures arm them to participate fully in domestic and international value chains, according to the International Trade Centre (ITC).

In a recent speech, ITC executive director Arancha Gonzalez said an effective national regulatory framework has a twofold goal: create a local business environment that attracts foreign investors even as national enterprises, especially SMEs, are encouraged to be more competitive locally and to venture abroad.

She added that SMEs, the backbone of developing economies, “need assistance to recognize, address and meet requirements imposed by the web of trade and investment regulations, increasingly in the area of non-tariff barriers such as in trade facilitation.”

Promoting cross-border investments and creating a benign environment for trade and investment are strong incentives for SMEs to improve their productivity and efficiency, she continued.

“Growing international economic and business integration is not and does not have to be exclusive to large transnational corporations,” she noted. “An effective regulatory framework is one that facilitates the participation of SMEs in international production chains.”

Gonzalez also spoke of the emerging “great convergence” of and “inherent complementarity” between trade and investment, and the need for government to find the right balance between protecting investment and regulating investments at home.

The key to enhancing SMEs’ ability to “positively exploit” global economic interconnectedness is by facilitating their access to foreign markets, resources, technology, and knowhow. Stable institutional and business links will also improve competitiveness.

UNCTAD’s “World Investment Report 2013” recognizes the connection between a country’s participation in global value chains and its GDP-per-capita growth rate, said Gonzalez.

Emerging economies and middle-income countries have in the past 15 years played a major role in shaping foreign direct investment (FDI) flows.

The executive director noted that developing and emerging economies are becoming a significant source of FDI as well as an FDI destination. In 2013, they accounted for around 60 percent of total inward FDI flows and around 30 percent of outward FDI flows.