BOOK REVIEW

Policy Prescriptions for Small and Medium Enterprises

P M Mathew

hile orthodox growth theory simply assumes that growth will take care of distribution, it has proved otherwise in the new century. As rightly noted by reports of the International Labour Organisation, growth has become increasingly a story of growing inequality across the globe. Hence, the conceptualisation of inclusive growth. Economic theory, from time to time, has looked into the role of key agents of distribution in the economy. An equalising distribution cannot take place unless the relevant agents are
EPW

Policy Guidebook for SME Development in Asia and the Pacific by Masato Abe, Michael Troilo, J S Juneja and Sailendra Narain (Bangkok: ESCAP), 2012; pp xviii + 223, $80.

constantly at work within the economy. Thus the focus on small and medium enterprises (SMEs), whose perceived role, traditionally, has been distributive. SMEs are viewed as the best agents of decentralised growth and growth spillovers in any economy. Despite such a strategic role, the practice of SME development in most
vol xlviii no 39

countries of the world remains largely ad hoc and not integrated with the mainstream models of economic growth which continue to guide economic policy in these countries. While during normal times ad hocism holds sway, the role of SMEs comes to be actively debated during an economic crisis. Thus, after the 2008 economic crisis, most parts of the world have ushered in a plethora of ofcial SME-development strategies including tax relief, new incentives and several welfare measures for the entrepreneurs. The implicit message is that SMEs are key instruments for reducing the pain of the crisis, though the crisis-averting role of the SMEs has not been adequately recognised by policymakers. The book under review discusses the extent to which micro, small and medium enterprises (MSMEs) can be central in private sector development policy in Asian countries.
37

Economic & Political Weekly

september 28, 2013

BOOK REVIEW

While entrepreneurship promotion and promotion of start-ups are considered shortcuts for dealing with the present global crisis, it is crucial to distinguish between the two main streams of entrepreneurship: (i) necessity entrepreneurship, and (ii) opportunity entrepreneurship. The European experience today is one of necessity entrepreneurship, wherein the unemployed are increasingly drawn into the area of entrepreneurship by public promotional agencies. History tells us that the birth of such businesses does not often contribute to the development objectives of a country. One of the crucial challenges facing SMEs in Asia-Pacic countries is to create new businesses (and therefore investment) opportunities in regional and global markets. In small economies with limited domestic markets, exports play a crucial role in stimulating economic growth and rapid socio-economic transformation. SMEs supplying competitive products and services, with potential for backward and forward linkages, could contribute substantially to exports and, hence, to higher national income and overall socio-economic progress. Therefore, development of export-led SMEs should be an important part of any national economic development strategy. Market Access Key factors for successful market access, which means freedom to enter a market and sell goods or services, include but are not limited to market intelligence, the capacity to learn and adapt, low entry barriers and a solid business network. In this context, market access can generally be of two types: trade and investment. This book is primarily concerned with trade, as this is the predominant method of market access for SMEs. However, some of the policy prescriptions of the authors are applicable to both trade and investment. These include lowering barriers, communicating regulations and market conditions, holding trade fairs and other promotional events, and providing access to nance. The nine chapters of the book, running into over 200 pages, offer many insights and practical tips for practitioners.
38

Chapter 1 outlines the six key areas which strategy needs to address. They are (i) the business-enabling environment; (ii) promotion of an entrepreneurial culture; (iii) business nancing; (iv) business-development services (BDS); (v) innovation and technology development; and (vi) market access. The subsequent chapter outlines the constituency of SMEs from an operational perspective. The whole issue of the business-enabling environment is discussed in a separate chapter with the help of several internationally accepted indicators. Chapter 4 discusses at length the question of entrepreneurship development. The key factors that inuence the success of entrepreneurs have been identied and these elements have been classied under ve categories. Social enterprise, which forms a key area of interest today, is also discussed. Business Life Cycle Approach In most discussions on SME development, the primary thrust is on nance. While such discussions do not give adequate coverage to the business life cycle, this book stands out in terms of its specic focus on this particular approach. The relevant chapter also offers a number of key policy considerations: working capital, the role of equity markets, nancial services, and relationship banking have been discussed in a practical manner. BDS has been much talked about around the world but has seen limited action. The chapter on BDS deals with three core segments: operational, advisory and advocacy. The book rightly highlights the importance of advocacy and advisory services, while also highlighting the methods of improving BDS delivery. Innovation, which is a new thrust area, has been discussed at the theoretical and operational levels. It has been rightly mentioned that despite its importance being highlighted, the question of enhancing capability of the SMEs needs special treatment. The questions of technology acquisition, transfer and the use of scal instruments to help stimulate innovation have been separately discussed.
september 28, 2013

SME market access is often discussed in a limited context in much of the available literature. It has a dual character. Global data shows that SMEs are often not major exporters. The primary reason is that their outward orientation is limited. However, the term outward orientation is itself different in Europe and North America and in Asian countries. For instance, in India, the export-dominant sub-sectors have the largest presence of SMEs. In fact, the opportunities of SMEs in the export market are enormous and need to be harnessed. The nal chapter presents a policy framework that puts together the recommendations of the book. Heavy in Theory While being signicantly theory heavy, the book does not dwell deep into the practical aspects. It speaks of scientic monitoring and evaluation techniques and their applicability, but the discussion falls short of discussing issues of governance, which are crucial in developing and emerging economies. The obsession with foreign direct investment and the multiplying of politically rewarding yojanas (schemes) do not address the present-day challenges of SME development. While SMEs essentially mean private sector development, which is the order of the day, an appropriate competition regime is still a far cry in many countries including India. Had these issues also been addressed properly, the book would have served as a comprehensive backgrounder for practitioners and policymakers.
P M Mathew (director@isedonline.org) heads the Institute of Small Enterprises and Development, Kochi.

EPW Index
An author-title index for EPW has been prepared for the years from 1968 to 2012. The PDFs of the Index have been uploaded, year-wise, on the EPW website. Visitors can download the Index for all the years from the site. (The Index for a few years is yet to be prepared and will be uploaded when ready.) EPW would like to acknowledge the help of the staff of the library of the Indira Gandhi Institute for Development Research, Mumbai, in preparing the index under a project supported by the RD Tata Trust.
vol xlviii no 39
EPW Economic & Political Weekly