SMEs in a Digital Age: Still a long way to go?

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SMEs in a Digital Age: Still a long way to go?

By Izzah Haziqah Binte Harisfadillah and Shubhalaxmi (Kankon) Sen

The Asia Business Trade Association (ABTA) and Asia Pacific MSME Trade Coalition (AMTC) hosted two SME-focused events from 6th-8th June – the SME Summit and the 4th Digital Champions Workshop. This blog will summarise some of our key findings and observations from both events.

 

Introducing the SME Summit, ABTA President Steve Okun asserted that we live in a growing era of globalism, where trade and technology are crucial for SMEs to thrive. Nonetheless, SMEs still have a long way to go in terms of developing tools for growth – not just absorbing knowledge of resources available, but effectively putting these resources to use.

 

SMEs constitute 96% of Asia Pacific’s businesses and employ 62% of its labour force – thus it is paramount for them to recognize the challenges brought about by trade agreements and digitalisation[1], and learn how to maximise the opportunities that come along with them.

 

Foremost, SMEs must recognise the importance of understanding and keeping abreast of the regional trade landscape. According to founder and director of the Asian Trade Centre, Dr. Deborah Elms, Asia boasts strong growth in its number of Free Trade Agreements (FTAs), but these agreements have yet to be maximised due to their limited utility. Convoluted language and the targeting of irrelevant goods (e.g. snow boots in tropical Asia) prevent FTAs from being SME-friendly, creating a divide between businesses and governments and discouraging SMEs from fully using FTAs.

 

Nonetheless, the new generation of trade agreements, like CPTPP and RCEP, promises to better serve their member countries’ SMEs with deeper tariff cuts, broader coverage of goods and simpler rules across member countries.

 

On a global scale, digitally-enabled SMEs are able to harness one of the most prominent resources available to most SMEs. Leveraging upon the right technological tools, SMEs can access new markets and compete internationally. For instance, SMEs like Bizzi, a Singapore-based microconsulting firm, incorporated technology into their business model after co-founder Miriam Feiler realised it was unfeasible to consult countless businesses around the world on a one-to-one basis. They were successful in scaling their business globally, and reached out to nearly 0.5 million SMEs following a promotional video on their Instagram page.

 

During his SME Summit opening keynote speech, Singapore’s Senior Parliamentary Secretary, Dr. Tan Wu Meng also added that Southeast Asia has the world’s fastest internet penetration rate, and we can expect the regional internet economy to expand by 6.5 times by 2025 (equivalent to $197 billion)[2]. Thus, if utilized effectively, digitalisation can enable smaller businesses to save both time and money (key areas of concern for smaller businesses), improve productivity and visibility, and expand beyond borders.

 

Despite its countless opportunities, digitalisation may also pose obstacles within areas like e-commerce, social media and data privacy. As the Managing Director of Asia Internet Coalition, Jeff Paine, pointed out – national policy can often contradict or hinder digital practices.

 

For instance, while e-payment improves productivity and cash flow, a mandatory national payment gateway may increase the risk of e-commerce being hacked, and limit consumers’ payment options. Another key issue shared by several Indonesian and Filipino SMEs was capital dumping from Chinese e-commerce firms, driving them out of business. Therefore, the lack of protectionist measures for infant industries poses a significant problem for SMEs.

 

Rising trends like social media can also occasionally be problematic, as media laws can inhibit SMEs’ social media usage. In fact, several participants of the Digital Champions Workshop asserted that national bans on popular social media websites deprive them of significant marketing opportunities to promote their businesses.

 

Lastly, growing concerns regarding data privacy are forcing countries to impose data localisation (i.e. retaining data servers physically within a country). This creates valid concerns for SMEs like technology startups, which require low-cost data movement for operations. So while the policies cannot be overruled, it is worthwhile for SMEs to account for them while forecasting growth and adapting their business’ digital strategy to policy requirements.

 

An effective problem-solving tool (and good practice in general) is for SMEs to proactively communicate their concerns to relevant policymakers. According to the founder of an Indonesian firm, SMEs often lack representation in key policy decisions – an issue primarily caused by the inability of individual enterprises to congregate and present their issues cohesively to policymakers.

 

What SMEs ought to realise is the importance of their individual and collective voices. The Associate Researcher from the Confederation of Indian Industry, Jhanvi Tripathi, recognises that SMEs may struggle with the “correct” ministry to approach first. Nonetheless, she also stresses that businesses have to understand that policy is long-lasting, both in terms of duration of implementation and impact. If possible, businesses should approach multiple ministries, or the Chambers of Commerce first, to address their concerns.

 

Another issue raised by SMEs was the lack of access to customer data to better serve rising customer expectations in Asia. As asserted by the Vice President of UPS Asia Pacific, Shiumei Lin, Asian customers have the highest dissatisfaction rates with online retail (57%)[3], with demands for increased variety, shipping options, and more.

 

An excellent solution suggested by the Group CMO of Agility, Mariam Al-Foudery, is to capitalise on free online resources. Examples include Google’s new market research tool, Market Finder, and Facebook’s advertising courses, Blueprint. SMEs can also access 12 free and customizable legal documents by VanillaLaw. Ultimately, there are plenty of technological solutions for SMEs to tap into: be it e-payment methods, team productivity software, or logistics management systems.

 

Despite the issues they face, it is the SMEs equipped with sufficient knowledge on how to best utilise their resources, that are capable of augmenting their growth. ABTA and AMTC hope that the SME Summit and Digital Champions Workshop have contributed to this objective in the region, and we urge more SMEs to be a part of the larger conversation with us.

 

 

 

 

 

 

 

 

 

 

 

 

 

[1] Asian Development Bank, “Unlocking SME Finance and Making It Work in Central Asia.” Asian Development Bank, Asian Development Bank, 27 Feb. 2018, www.adb.org/news/events/unlocking-sme-finance-and-making-it-work-central-asia.

[2] Cher, Benjamin. “SEA Internet Economy Set to Boom: Google-Temasek Report.” Digital News Asia, 24 May 2016, www.digitalnewsasia.com/digital-economy/sea-internet-economy-set-boom-google-temasek-report.

[3] n.a. “Asian Consumers Least Satisfied with Their e-Commerce Experience.” Digital News Asia, 11 Apr. 2018, www.digitalnewsasia.com/digital-economy/asia-consumers-are-least-satisfied-their-e-commerce-experienCe