Regional Integration in Asia and the Contribution of SMEs – a Review of the Key Issues and Policy Imperatives

Over the past decade the economies of East Asia and APEC more generally have been increasingly opening up their markets, and in the process have achieved significant gains in exports and economic growth. In conjunction with this increased economic integration, there has been increased recognition by regional governments of the potential for a substantial increase in the participation by small businesses in the generation of regional income, employment, exports, investment and expanded economic growth. Advances in information and communications technology add credence to this potential. In addition, developing economies are especially seeing small businesses as potential instruments for the alleviation of poverty and regional development. While in developed economies the formation of horizontal and vertical clusters of small businesses can form the basis for internationally competitive regions, and this can be further enhanced through the construct of networks with similar small businesses locally or internationally. This viewpoint was given further stimulus after the financial and economic crisis of 1997-98, arising from which there has been a growing recognition of the need for the East Asian economies to engage in comprehensive restructuring of their corporate sectors, with the objective of achieving transparency, improving corporate governance and developing globally competitive enterprises. Small and medium enterprises (SME) can play a key role in the attainment of such objectives. This paper reviews the contribution of the SME sector to the growth and development of the East Asian economies, and their important contribution to economic growth, employment, trade and investment and the development of globally competitive economies. In doing so identification of the potentially important role of SMEs in facilitating and bringing about the practical benefits of closer economic integration are also emphasized. To enable this to occur it is important to identify within the East Asian region: barriers to their development; key factors essential for their capacity building; strategies to enhance their competitiveness in the global marketplace; key components relating to their export success; and their role and importance in facilitating regional economic development, reducing income inequality, and empowering regional involvement in the global economy.