6 In Indonesia, there are several definitions of SMEs, depending on which agency provides the definition. The
State Ministry of Cooperative and Small and Medium Enterprises Menegkop UKM promulgated the Law on Small Enterprises Number 9 of 1995, which defines a SE as a business unit with total initial assets of up to Rp
200 million about US 20,000 at current exchange rates, not including land and buildings, or with an annual value of sales of a maximum of Rp 1 billion US 100,000, and a ME as a business unit with an annual value of
sales of more than Rp 1 billion but less than Rp 50 billion. Although the Law does not explicitly define MIEs, Menegkop UKM data on SEs include MIEs. The National Agency for Statistics BPS, which regularly
conducted surveys of SMEs, uses the number of workers as the basis for determining the size of an enterprise. In its definition, MIEs, SEs and MEs are business units with, respectively, 1-4, 5-19, and 20-99 workers, and LEs
are units with 100 or more workers. The Ministry of Industry MoI defines enterprises by size in its sector also according to number of workers as the BPS definition.
In Vietnam, the official definition of an SME was stipulated relatively late in comparison with the time span of more-than 20 years of private sector reform. Just in November 2001, the Government Decree 902001ND-CP
provided for the first time an official definition of an SME as “a business establishment with registered capital of no more than VND 10 billion equivalent to USD 630,000 or with an workforce of no more than 300 regular
employees”. Before 1998, some provinces had stipulated their own SME criteria such as number of regular laborers of less than 500, fixed assets less than 10 billion Vietnam dong VND, mobilized capital of less than
and monthly revenue less than 20 billion VND. In June 1998, the Government stipulated Public Letter 681CP- KCN on directions of strategy and policy on developing SMEs, according to which, SMEs are establishments
with registered capital less than VND 5 billion or regular labor force less than 200 laborers. This law document had laid an initial legal ground for implementing supporting measures to SMEs’ development.
Recognizing that the SME grouping by Decree 902001ND-CP is too general to provide useful data for policy formulation, the Agency for SME Development ASMED recently in June 2005 introduced a further
size segmentation in its SME Development Plan for the period 2006-10. According to the new segmentation, SME is categorized into: MIEs less than 10 persons, SEs 10 to 49 persons and MEs 50 to 299 persons.
6
3.2 Performance
ASEAN countries have touted SMEs as the engine of economic growth and development, the backbone of national economies, the highest employment-generating sector, and a potential tool of poverty alleviation by
6
It is important noting that the current SME categorization still suffers some limitations. First, it doest not “separate” enterprise domains, which may need different amount of capital for production activities andor employ different number of workforce. For
instance, services sector does not normally need as much capital as production sector. This is a convincing reason explaining for the fact that SMEs operating in trade and repair services sector occupy a lion proportion in total number of SMEs see later. Second, the
registered capital criterion is not “effective” as at the moment of categorization, enterprise working capital may increase much more than the registered capital.
7 creating self-employment avenues. Notwithstanding various definitional issues and data problems, by combining
all sources which are available, there is an rough estimated total of some 21 million non-agricultural SME in ASEAN, or about more than 90 of all non-agriculture firms in the region Table 3. These enterprises play a
strategic role in private sector development, especially in the aftermath of the 199798 Asian Financial Crisis. In some member countries, as their economies modernise or industrialise, SME provide the much-needed inter-firm
linkages required to support LEs to ensure that they remain competitive in the world markets. SMEs generally account for between 20-40 of total domestic output and they employ an overwhelming proportion mostly in
the 75-90 cent range of the domestic workforce, especially adult persons and women.
7
On the other hand, in spite of the significance of these indicators, the SMEs’ value added VA contribution to the economy for most ASEAN countries has yet to commensurate with the sector’s size and socioeconomic
potential. Wattanapruttipaisan’s 2004 own calculation shows that SME in ASEAN contribute a disproportionately limited share of 20 to 40 to gross sales value or manufacturing VA
8
In Singapore, for instance, the VA of SME is only 34.7 of the economy’s total VA, while their productivity is half that of LEs.
Malaysian SME contributed only about 26 to manufacturing VA. In Thailand, commonly cited as a successful model for SME development in ASEAN, its SME contribution is only 47 of total VA. Comparatively, SMEs in
the developed nations contribute about 50 of total VA in the European Union EU, or, individually, for instance, SMEs in Germany are responsible for approximately 57 of the country’s Gross National Product
GNP; between 40 and 50 of manufacturing output in Japan, Republic of Korea and Taipei, China; and in the United States US it is about 30 to total sales value.
Table 3: Non-agricultural SMEs in ASEAN and selected countries in East Asia
SMEs as a of Country
No. of non-agricultural SME in 2002 or later or
best quess ‘000 Percentage of GDP, or
VA or output value All Firms
Workforce Brunei Darussalam
Cambodia Indonesia
Lao PDR Malaysia
Myanmar Singapore
Thailand Philippines
Viet Nam East Asia
1
China 30
2
26 21,895.996
3
22
4
205 34
4
60-72
5
1,640 68
6
2,700
7
8,000 -
- 57 total VA
- 15 total gross output
47.3 total VA 26 manufacturing VA
- 41 manufacturing output
34.7 total VA 47 total VA
32 total VA 42 total VA
60 industrial output 98
99 99.9
- 99.2
96 97.8
99.8 99.6
96 99
92 45
99.6 -
65.1 32.5
8
78 58
76
8
99 85
78.8
7
. A study conducted by the Asia-Pacific Economic Cooperation APEC shows that women entrepreneurs own and operate up to 30 of SMEs in such as Indonesia, Philippines and the Republic of Korea APEC 1999.
8
For further details, see, among others, Hall 2002, Harvie and Lee 2002a,b, 2005, Lee and Tan 2002, Richards et al. 2002, Tecson 2001, Régnier 2000 and Tambunan 2000, 2006.
8
6,140 2,700
52 manufacturing output 55.3 total VA
47.5 total gross output 50 total VA
99.8 78.4
86.7 Notes: 1: best guess for 2000; 2: est. active 2004; 3: includes MIEs 2006; 4: 19989; 5: estimated active; 6: excludes 744,000 MIEs
2001; 7: excludes 10 million MIEs; 8: manufacturing industry only. Sources: APEC 2002, RAM Consultancy Services 2005, UNCTAD 2003, Hall 2002, Myint 2000, Regnier 2000, Ministry of
Industry, Mines and Energy of the Kingdom of Cambodia, BPS Indonesia, Census 2005 Malaysia, JASME Annual Report 2004- 2005 Japan; SMEA White Paper on SMEs in Taiwan 2005, OSMEP White Paper on SMEs in Thailand, 2002, National SME
Development Agenda 20002001 Philippines.
With respect to export, it reveals from Table 4 that in general ASEAN SMEs are not yet so strong in export as their counterparts in such as China, India, Chinese Taipei or South Korea; although the export intensity of
ASEAN SMEs is different by country. For instance, in Indonesia the SMEs’ contribution to the country’s total export of non-oil and gas by the end of 1990s was only 11, compared to Vietnam at 20, or almost 27 in
Thailand in 2003. Featuring prominently in SME exports from Indonesia, Philippines, Thailand and Viet Nam are food products, textiles and garments, leather and plastic goods including toys, furniture items, handicrafts,
jewelry and, to a less extent, mature-technology automotive and consumer electronics parts.
9
Wattanapruttipaisan 2005 argues, however, that direct export of ASEAN SMEs might be low, but, if indirect contributions are taken
into account, then their overall share in export earnings is certainly much larger because SMEs feature prominently as subcontractors to export-oriented local LEs and multinational companies MNCs
10
.
Table 4: Share of SME exports in selected Asian countries, 1990s
Country Share China
India Chinese Taipei
South Korea Vietnam
Singapore Malaysia
Indonesia Thailand
40-60
1
38
1
56 40
1
20
1
16
1
15
1
11
1
10
1
38.22
2
26.5
3
Sources: 1 UNCTAD 2003; 2 Mephokee 2004: 38.22 in 2002 and 45.5 in 2003 of the country’s total export for industrial products; 3 White Paper on SMEs 2004 Government of Thailand, website
4. Indonesia 4.1 Economic Contribution
