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Enabling Environment for the Successful Integration of Small and Medium-sized Enterprises in Global Value Chains

Country Studies of Bangladesh, Nepal and Sri Lanka

image of Enabling Environment for the Successful Integration of Small and Medium-sized Enterprises in Global Value Chains
Small and medium enterprises (SMEs) in South Asia and are effective job creators and income generators. In addition, SMEs play a key role in poverty reduction and inclusive economic growth. However, SMEs in the subregion often face considerable resource constraints and have limited capabilities to compete effectively in global and regional markets. Recent experience from a wide range of the Asia-Pacific countries, particularly from South-East Asia and China, indicates that domestic SMEs can access international markets through global (and regional) value chains (GVCs). This publication aims to propose practical policy interventions for improving business environments by targeting three South Asian countries — Bangladesh, Nepal and Sri Lanka, to facilitate SMEs’ access to global and regional markets through GVCs. Sector based value chain approach was adapted to focus on a few product groups with high export potentials: plastic goods from Bangladesh; coffee and ginger for Nepal and rubber and electronic products in Sri Lanka. National action plans and a subregional programme, together with operational strategies including needed institutional framework among stakeholders, for those products were developed and presented.

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Introduction

Over the past two decades trade and investment have been the driving forces in accelerating economic growth in South Asia. In the recent decade South Asian countries have increased export competitiveness and foreign direct investment inflows. As a result, new business opportunities have opened up for domestic enterprises. Despite their tremendous potential, SMEs1 in South Asia are still at a disadvantage due to a lack of essential business factors such as capital, profitability, managerial skills, trained labour, brands and networking. Although SMEs account for more than 90 per cent of all private enterprises and employ roughly 60 per cent of the domestic workforce in South Asia, relative share of SMEs production in total domestic output is much smaller, approximately 35 per cent, as is the direct contribution of SMEs to merchandise export earnings, which is around 25 per cent (AAMO 2007).

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