SMEs Industry

SMEs Industry

Stephen M. Mutula (University of Botswana, Botswana)
Copyright: © 2010 |Pages: 15
DOI: 10.4018/978-1-60566-420-0.ch004
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Abstract

There is a growing impetus internationally for the development of strong SME sectors as engines of economic growth and development. This impetus is driven by the recognition of SMEs as the backbone of most economies. For instance, there are about 30 million enterprises in Europe providing employment to around 122 million people, with the vast majority (99.8%) of these enterprises being SMEs (Riegebauer, 2004). These SMEs therefore generate a large share of the GDP (Gross Domestic Product) in most of the region’s countries. Asian countries are also investing significantly in SMEs. For example, during the 1980s and 1990s, China’s economy was largely driven by SMEs, while the Philippines invested heavily in the same (Gungen, 2003).
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Introduction

There is a growing impetus internationally for the development of strong SME sectors as engines of economic growth and development. This impetus is driven by the recognition of SMEs as the backbone of most economies. For instance, there are about 30 million enterprises in Europe providing employment to around 122 million people, with the vast majority (99.8%) of these enterprises being SMEs (Riegebauer, 2004). These SMEs therefore generate a large share of the GDP (Gross Domestic Product) in most of the region’s countries. Asian countries are also investing significantly in SMEs. For example, during the 1980s and 1990s, China’s economy was largely driven by SMEs, while the Philippines invested heavily in the same (Gungen, 2003). Moreover, the thriving economies of Asian countries such as Taiwan, Singapore, Thailand, and Malaysia have, for a long time, largely been driven by SMEs (Southern African Entrepreneurship and Small Business Association, 2002). In Malaysia, for example, SMEs are recognized as central to the country’s economy and form a significant portion of the manufacturing and services sector. In December 2003, 89.8% of the more than 20,000 companies recorded in the manufacturing sector were SMEs, and the overall number of SMEs comprised 98.8% of the close to 193,000 enterprises in the services sector (Ramayah et al., 2003).

The economic potential of SMEs was reaffirmed at the World Summit on the Information Society in Geneva in 2003. The Summit’s Declaration of Principles and the Plan of Action recognised SMEs as a special target group for broad-based economic growth (WSIS, 2003). SMEs are also vital for employment and a breeding ground for entrepreneurship. The diversity and impact of SMEs in any nation’s economy is appreciated when its proportion in relation to a country’s economy, employment capacity, exports, etc; are examined. Table 1 below presents the status of the SME industry in leading economies in Asia. Other regions of the world, such as Europe, North America and Africa, are discussed in subsequent sections.

Table 1.
Contribution of SMEs to national economies (Source: UNCTAD, 1998)
CountryShare in the economy
Japan99% of all establishments
52% of output
72% of employment
13% of exports
Taiwan97% of all establishments
81% of output
79% of employment
48% of exports
Singapore97% of all establishments
32% of output
58% of employment
16% of exports
Republic of Korea90% of all establishments
33% of output
51% of employment
40% of exports
Malaysia92% of all establishments
13% of output
17% of employment
15% of exports
India95% of all industrial establishments
40% of industrial output
45% of industrial employment
35% of exports

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