SMEs form the backbone of the global economy: they represent 95% of all companies in the world; contribute to over 50% of the global GDP and the world’s employment. SMEs play a crucial role in economic growth, contribute to local communities and advance inclusion and international development through domestic commerce as well as international trade. However, it is widely recognised that most SMEs across all countries often face a series of challenges, especially in international trade.
Attempts to address these issues through policy, the actions of international institutions, small business alliances or other organisations are partly successful, yet existential difficulties persist and are amplified when an SME aspires to expand into foreign markets, partly because public and international sector support does not reach a critical mass of SMEs globally, and partly because the underlying approach treats SMEs as the core of the problem.
Many questions emerge when SMEs try to overcome these challenges:
- How do I access to trade finance?
- Where can I find clients and partners in a foreign country?
- How do I form a competent team for the task?
- What regulations, rules, trade agreements and standards should I look for and who to ask?
- Which logistics broker should I choose?
- What are the elements that can potentially benefit my business in trade but I am unaware of?
The World Trade Board proposes to shift the definition of the problem on its axis, by introducing the concept of “The Empowered SME”.
The idea is to put the SME at the heart of the problem or challenge-solving process, instead of somehow having the SME be the passive recipient of help, which, though well-intentioned, has not been transformatively effective.
Introducing the Empowered SME will shift the dynamic between SMEs and the Public sector by introducing proactive, complementary problem-solving approaches for both sides. We believe it is imperative that in order to increase the success of SMEs and thereby extract maximum value for local and international communities and economies, the Empowered SME must become a core part of the solution.
The World Trade Board advances the concept of the Empowered SME, starting with four themes:
1. Capacity and Competencies
Identifying the key competencies required for SME success domestically and internationally is often the initial challenge. Bringing the Empowered SME into this process will assure that the priority gaps are identified, and that the engagement necessary to close those capacity and competency gaps comes directly from the SMEs. An Empowered SME that works to become literate in finance (learning to “speak finance”) is one concrete example of proactive effort to solve a priority challenge for SMEs.
2. Access to Finance and Trade Finance
The Ability to access suitable financing, including trade finance is often a matter of survival for cash-poor SMEs. The Empowered SME can articulate the urgency of that need, both in terms of affordability and timeliness of access to financing, and can contribute actively to advocacy efforts aimed at narrowing the SME Finance Gap and the global Trade Finance Gap – both areas of priority and interest to the World Trade Board in our own advocacy and awareness-raising efforts.
3. Access to Market/Global Value Chains
Shifting from domestic to international oriented businesses is not a simple task for any business, and the complexity is amplified for SMEs. Analysis and recommendations related to market access and engagement in global value chains should look through the lens of the Empowered SME. This could include better leveraging digital trade and enabling technologies, exploring indirect exporting through local aggregators, or advocating in support of a more robust global policy environment to support the international aspirations of the Empowered SME.
4. Navigating Trade Agreements, Standards, Regulatory and Compliance Requirements
Complex trade agreements, standards, regulatory and compliance requirements are a daunting part of business and international commerce for inexperienced SMEs. The Empowered SME can contribute to the demystification of these elements through direct self-education, but also through proactively putting these issues on the advocacy agendas of SME and industry bodies and associations. Large companies understand the importance of and invest in lobbying activity to shape the business environment; the Empowered SME can seek ways to amplify its voice through channels like the International Chamber of Commerce and others. The World Trade Board can increase awareness of this set of challenges faced by SMEs and add to the discourse already working to reduce these barriers to SME engagement in trade.
The concept of the “Empowered SME” could, over time, be complemented by the introduction of practical tools, techniques and processes devised specifically for use by and with the Empowered SME. The World Trade Board believes that a shift in perspective among policymakers and other stakeholders is beneficial so that the perception of empowerment among SMEs takes hold.
Progress in this dimension will have direct implications for the way policy is developed, and the way SME-friendly policy interventions are deployed in-market.
The Empowered SME could be developed initially in the context of digital trade, with an inclusion angle, and in line with the core vision of the World Trade Board: for multilateral, inclusive, sustainable, rules-based global trade.
Alexander R. Malaket
President, OPUS Advisory Services International Inc.