What does inclusive growth mean for SMEs in the Asia Pacific?

Guest post from Tenby Powell, Director of Hunter Powell Investments and New Zealand member of the APEC Business Advisory Council

“Inclusive growth” was the phrase on everybody’s lips during the first meeting of the year for the APEC Business Advisory Council (ABAC), which took place in Auckland 1-4 February.   My fellow Kiwi ABAC members Phil O’Reilly and Katherine Rich and I, supported by Stephen Jacobi and Stephanie Honey, were part of a 200-strong gathering of Asia-Pacific business leaders focused on how we could better support access for all to trade opportunities and economic benefits.   (See the ABAC statement here)

This is a big challenge: although globalisation has unquestionably raised living standards and lowered poverty in the Asia-Pacific, there are still those struggling – or even left behind – in this brave new world.  ABAC recognises that it is no longer enough to set “growth” as our target: we simply must ensure that the benefits of trade liberalisation are also accessible to small firms, to women, to vulnerable communities and to the less advanced economies.

It is no longer enough to set “growth” as our target: we simply must ensure that the benefits of trade liberalisation are also accessible to small firms, to women, to vulnerable communities and to the less advanced economies. 

One aspect has long been a particular passion of mine:  how we can help small business to succeed, both at home and internationally.   That drive to give SMEs a helping hand was behind the very successful SME LEAP Summit I organised for the day before the ABAC meetings, at which Minister for Small Business Hon Stuart Nash gave the keynote speech and Stephen Jacobi presented on how the new CPTPP could help small business (see his remarks here).   During the ABAC meeting itself, I gave a presentation on how we might go about helping SMEs to trade more.  SMEs make up 97% of business in the Asia-Pacific (and in NZ), but small firms account for less than one-third of direct exports in the region, and in some cases only a tiny fraction of that.  80% of New Zealand SMEs have never generated overseas income.  The need to turn those statistics around becomes compelling when you look at the evidence that firms which export employ more people, pay higher wages, and are more productive and innovative.

So what’s stopping SMEs?   Challenges include poor access to market intelligence and the information they need about trade requirements, and a struggle to tap into foreign distribution networks and connect to customers.  Services such as logistics and transport tend to cost relatively more for SMEs.  And even when they can get their products to market, red tape and compliance costs – the notorious “non-tariff barriers”, or NTBs –disproportionately affect small firms.

What is the answer?  As I pointed out in my presentation, modern FTAs like CPTPP enhance the conditions of trade overall by reducing tariffs, regulatory barriers and NTBs, setting region-wide trade rules, and by enhancing opportunities for global value chains, services trade and the digital economy, all of which offer huge potential for SMEs to engage globally.  The CPTPP also contains specific commitments designed to make it easier for SMEs to access the information and develop the trade capabilities they eed.  That’s one sure fire way to advance the inclusiveness agenda.

Tenby Powell
Twitter: @tenbypowell