Opportunities for SMEs to play larger role in global chains

Opportunities for SMEs to play larger role in global value chains

Issued by the APEC Policy Support Unit

Qingdao, China, 11 May 2014 - Policies to increase opportunities for SMEs to play an important role in global value chains were presented at the APEC Committee on Trade and Investment Meeting by the APEC Policy Support Unit on Saturday in Qingdao, China.

Global value chains play an important role in the international trading system. Today, around 80 percent of world trade is conducted through networks of global value chains. These value chains are comprised of a multitude of small and medium-sized enterprises (SMEs) dispersed across a large geographical area.

“In recent years, we have seen the simultaneous ‘integration of trade’ and ‘disintegration of production’ as multinationals increasingly rely on a variety of SME suppliers throughout the region during their production process,” said Dr Alan Bollard, Executive Director of the APEC Secretariat.

In global value chains, SMEs are often suppliers providing intermediate inputs such as components and parts, and act as subcontractors several levels down from the ultimate buyer.

“Since the Global Financial Crisis, global value chains have been undergoing structural changes, including consolidation by multinationals into a few large suppliers as well as the rise of e-commerce enabling further expansion of global value chains,” explained John Larkin, Chair of the Committee on Trade and Investment.

These changes offer both opportunities and challenges for SMEs to increase their participation in global value chains. Under the direction of the APEC SME Working Group, the APEC Policy Support Unit conducted an analysis on the prospects for SMEs to engage in global value chains in five main sectors, including agriculture, food processing, automobiles, electronics and handicraft sectors.

“For example, the analysis shows that SMEs in developed and newly industrialized economies have a higher potential to participate more fully in global value chains in the agriculture and electronics sectors,” said Zhang Yuhua, Analyst at the APEC Policy Support Unit.

“For SMEs in developing economies, the electronics and handicraft sectors offer better opportunities for capturing a larger role in global value chains,” added Ms Zhang. In addition, she recommended that APEC member economies could conduct similar analyses on an industry or product level to identify potential opportunities to integrate domestic SMEs into global value chains.

The report offers some policy principles and best practices for APEC member economies to help SMEs in these sectors expand their presence in global value chains.

“To help SMEs meet standards and obtain certificates, APEC member economies could harmonize standards and conformance procedures, set up public certification systems to reduce the burden on SMEs to obtain certificates; and provide training and technical assistance on qualification and certification processes,” explained Dr Denis Hew, Director of the APEC Policy Support Unit.

Other policy recommendations include strengthening the financial soundness of SMEs by promoting supply chain financing and providing financial skills training as well as enhancing production capacity through fostering collaboration and clustering of SMEs.

For more information see “Integrating SMEs into Global Value Chains: Policy Principles and Best Practices Issues Paper No. 6” by the APEC Policy Support Unit.

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