Promoting SMEs for Sustainable Development

"JUST WHEN WE THINK WE HAVE THE KEY TO THE MARKET,SOMEONE CHANGES THE LOCKS."CONSTANT UPGRADITION IS ONLY WAY TO EXCEL IN TODAY'S WORLD FOR MEDIUM TRADERS TO SURVIVE WITH SELF ESTEEM IN THE CURRENT BUSINESS SENERIO..



Promoting SMEs for Sustainable Development




Poverty remains a major challenge to sustainable development, environmental security, global stability and a truly global market. The key to poverty alleviation is economic growth that is inclusive and reaches the majority of people. Improving the performance and sustainability of local entrepreneurs and small and medium enterprises (SMEs), which represent the backbone of global economic activity, can help achieve this type of growth. This Issue in Brief explains how governments can help alleviate poverty by focusing on SMEs and how larger corporations can help themselves by including SMEs in their value chains. It describes some of the comparative advantages of SMEs and the challenges they face in developing countries.

“Wealth creation, one of the core competencies of the private sector, is a vital part of the poverty alleviation process.”

In economies SMEs and micro enterprises account for over 95% of firms, 60-70% of employment, 55% of GDP and generate the lion’s share of new jobs. In developing countries, more than 90% of all firms outside the agricultural sector are SMEs and micro enterprises, generating a significant portion of GDP. For example, in Morocco, 93% of industrial firms are SMEs and account for 38% of production, 33% of investment, 30% of exports and 46% of employment. In Bangladesh, enterprises of less than 100 employees account for 99% of firms and 58 of employment. Similarly, in Ecuador, 99% of all private companies have less than 50 employees and account for55% of employment Not all these SMEs and micro enterprises are in the formal sector; some occupy the unofficial labor market, which varies in size from an estimated 4%-6% in developed countries to over 50% in developing nations.

WHY WE NEED SMEs

For governments Well-managed and healthy SMEs are a source of employment opportunities and wealth creation. They can contribute to social stability and generate tax revenues. According to the International Finance Corporation (IFC), there is a positive relationship between a country’s overall level of income and the number of SMEs per 1,000 people. The World Bank’s Doing Business reports indicate that a healthy SME sector corresponds with a reduced level of informal or “black market” activities.

For large corporations

SMEs can constitute an important source of local supply and service provision to larger corporations.They usually have extensive local knowledge of resources, supply patterns and purchasing trends.Developing countries also represent a huge, largely untapped market for large corporations. By working closely with SMEs, large corporations can develop a new customer base that may not be accessible to the traditional distribution networks of these corporations. SMEs also represent an important source of innovation.They tend to occupy specialized market “niches” and follow competitive strategies that set them apart from other companies. This might include re-engineering products or services to meet market demands, exploring innovative distribution or sales techniques, or developing new and untapped markets. This often makes them good partners for large corporations.

For local communities

SMEs often have a vested interest in community development. Being local, they draw upon the community for their workforce and rely on it to do business. For the communities, they provide goods and services tailored to local needs and at costs affordable to local people. They are an important source of employment, particularly for low-skilled workers, as well as women and young people, who usually make up the greatest proportion of the unemployed in emerging economies. Their flat management structures mean that their personnel must fulfill multiple roles, which makes them less vulnerable to unemployment during periods of economic downturn. Their small size and flexibility allow them to adjust to local market fluctuations and to weather local market shocks more comfortably.

SMEs can play a much bigger role in developing national economies,alleviating poverty, participating in the global economy and partnering with larger corporations. They do, however,need to be promoted. Such support requires commitments by and between governments, business and civil society."The concept of the welfare state implies a coalition of the Government of the people in such a way as to enable the two components to travel hand in hand each complimenting the other's efforts for the the promotion of the common objective."SHRI JAWAHAR LAL NEHRU..







THANKS A LOT.

Sajjan Raj Mehta

IPP..KARNATAKA HOSIERY & GARMENT ASSOCIATION