Enhancing SMEs’ Competitiveness along the GMS Southern Economic Corridor

June 13, 2016

Connectivity has become a major priority in today’s economy, especially in Asia and the Pacific, because it is the foundation of regional economic cooperation and integration. MI, in collaboration with strategic partners, proposed and formulated the project on “Enhancing Competitiveness of Small and Medium-Sized Enterprises along the Southern Economic Corridor (SEC) of the ASEAN Mekong Sub-region” with an aim to enhance the competitiveness of SMEs in the conduct of cross-border trade  and  investment  and  to  help  them  integrate  into  cross-border  industrial clusters  as  well  as  regional  and  global  value  chains.  The  project  further  aims to contribute to rapid economic development and inclusive growth in targeted provinces on the borders of the SEC through the promotion of trade and investment. The Government of Japan, through the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) Component of the

Japan-ASEAN  Integration  Fund  (JAIF), has collaborated with and entrusted MI with implementing the project for a two-year period, from 2016 to 2018.

“There has been steady improvement of Mekong regional connectivity” said Mr. Noriyoshi Fukuoka, Second Secretary, Economic Division of Embassy of Japan in Thailand at the project’s Inception Workshop held on March 18th, 2016 in Bangkok. Mr. Fukuoka stated that the project is an integral part of Tokyo Strategy 2015 for Mekong–Japan Cooperation, under which the Government of Japan has committed around JPY 750 billion in the form of Official Development Assistance (ODA) to the Mekong countries over the next three years. In implementing the new strategy, the Government of Japan aims to contribute to regional stability and the quality of economic growth, he added. 

SMEs are the backbone of every economy in the Mekong countries. They typically account for more than 95% of all private enterprises and employ 75-90% of the domestic workforce. However, the relative share of SMEs’ production in total domestic output is disproportionately smaller, on average 20-40%, and the direct contribution of SMEs to merchandise export earnings is also small, at 15-25%.1  [Source : Thailand-ASEAN SME Regional Gateway. 2010. Office of SME Promotion, Thailand ]

The Southern Economic Corridor (SEC), one of the three main economic corridors in the Greater Mekong Sub-region (GMS), connects four Mekong countries, namely Cambodia, Myanmar, Thailand and Vietnam, and comprises three sub-corridors and one inter-corridor link. It connects the GMS to major markets and nodal points, and serves as a center for investment and enterprise development. The development of the SEC will provide opportunities for public and private investors to expand production and marketing to the Mekong countries and promote ASEAN economic integration, promoting growth in the region. 

A recent SMEs cluster assessment conducted by Mekong Institute (MI) revealed that the biggest challenge facing SMEs in the SEC is how to access and create effective linkages  with  regional  and  global  markets.  Most  of  the  SMEs  are  domestic-market  oriented  and  face  critical  constraints  caused  by  lack  of  both  (i)  capacity  and competitiveness at the international level, (ii) effective advocacy, and (iii) trade negotiation skills. In addition, a regional approach to SME development along the SEC to facilitate access to regional and global value chains has not been made. 

To address these issues, the project focuses on capacity development for stakeholders and beneficiaries, targeting three groups including (i) Local production groups/ associations; (ii) Provincial and Border Government Officials; and (iii) Chambers of Commerce and Industry and SME associations. Different development approaches to boost the project’s impact have been adopted to implement a series of activities under three components. Shown below are the provinces on the borders along the SEC where the project will be implemented, as well as the three components under which activities will be implemented.

The first project activity carried out was a Study on Market and Value Chain Mapping which aimed at mapping the sectorial and geographical concentration of product enterprises and related market actors under the scope of production, services and markets. The key result was the identification and mapping, through value chain analysis, of product clusters that have potential for enhancing cross-border trade as well as integration into global and regional production chains. 

The  project  team  has  now  finished  field  data  collection  which  covered  eight provinces in Cambodia, one province in Myanmar, six provinces in Thailand, and four provinces in Vietnam, and this raw data will be further analyzed as the study’s final report is prepared. 

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