Facilitating landlocked and least developed country SMEs participation in trade

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1 Facilitating landlcked and least develped cuntry SMEs participatin in trade by the Hn. Mr. Ousavanh Thiengthepvngsa President f the Yung Entrepreneurs Assciatin f La PDR usavanh@skcrpratin.cm

2 Intrductin Landlcked develping cuntries (LLDCs) are widely dispersed arund the glbe 15 in Africa 12 in Asia 2 in Suth America 2 in Eurpe All share cmmn prblems Gegraphical remteness Dependence n trade and transprt systems in neighburing and castal cuntries Mst are far frm reaching the Millennium Develpment Gals (MDGs) Prmting SME develpment in LLDCs means Finding ways t make dmestic enterprises mre cmpetitive Facilitating develpment and grwth in a glbalizing wrld.

3 La Peple s Demcratic Republic (La PDR) Landlcked cuntry with an area: 236,800 km 2 (Water 2%) Estimated ppulatin f 5,800,000 (2007) & density f 24/km 2 75% f peple live in rural areas Religin: Buddhism Ecnmy dminated by agriculture Labur frce f 2,900,000 Emplys ver 70% f the ppulatin Manufacturing emplys apprximately 11% Mstly small business dminated manufacturing sectr Prduces 56% f industrial utput Wealth f natural resurces Mineral reserves: Gld, cpper, bauxite and tin Enrmus water reserves: The battery f sutheast Asia

4 Landlcked t Landlinked Cannt be blamed fr all ecnmic, scial and plitical develpment prblems Imprtant t get basic macrecnmic and trade plicies right Careful balancing f envirnmental cncerns with traffic and transprt requirements Need t build efficient trade and transprt infrastructure and services t reduce transactin csts Landlcked status is clsely linked with a cmplex set f challenges and prblems Cannt be tackled as islated prblems althugh generic slutins can be applied Develped cuntries can supprt SMEs in LLDCs participatin in trade by Reductins in tariffs and ther barriers t trade

5 Rle f SME s in Ecnmic Develpment and their Situatin in La PDR Strng and vibrant SME sectr cntributes t ecnmic develpment in LLDCs in a number f ways SMEs tend t emply mre labur-intensive technlgies than larger enterprises generating a large share f any develping cuntry s prductive emplyment Many SMEs are lcated utside f urban areas and emply a large prprtin f wmen Mre equitable distributin f incmes (in rural areas and fr wmen) SME develpment leads t lwer reginal disparities Reducing urban drift SMEs in develping cuntries frm a large part f the private sectr, which frms the basis fr private sectr-lead grwth GL has emphasized the imprtance f Private sectr develpment in the ecnmy t facilitate SME develpment Attractin f FDI t prmte sustainable develpment f the natural resurce base GL recgnizes SMEs high ptential t create jbs and reduce pverty FDIs high ptential t mbilize investment, imprve human resurce skills develpment, and access technlgy and exprt markets

6 Facilitating LLDCs SMEs participatin in trade by enhancing FDI/SME Linkages Freign Direct Investment (FDI) accelerates ecnmic grwth and incme beynd available dmestic resurces Linking FDI and the dmestic ecnmy thrugh strengthening business linkages between FDI and SMEs is ne f the mst effective ways f upgrading dmestic enterprises facilitating the transfer f technlgy, knwledge and skills imprving business and management practices facilitating access t finance and markets Plicies t prmte business linkages can be cnsidered an essential part f industrial plicies The type f plicy depends n the verall ecnmic and plitical bjectives and the general level f ecnmic develpment f the cuntry

7 Fur majr plicy areas can be distinguished that are especially relevant fr building linkages between FDI and SMEs On the FDI side 1. Imprving the investment climate 2. Attracting FDI strategically On the SME side 3. Strengthening the lcal absrptive capacity 4. Develping dmestic SME suppliers The prmtin f business linkages is likely t be successful nly if a systematic plicy apprach is adpted where all factrs influencing the linkages are targeted. Framewrk fr Plicy fr SME FDI Linkage Building Surce: UNCTAD (2006)

8 Enterprise-external prblems and cnstrains Surce: Enterprise Survey 2007, La-German Resurce Develpment fr Market Ecnmy Prgramme

9 Enterprises with cmpetitin prblems, by size Surce: Enterprise Survey 2007, La-German Resurce Develpment fr Market Ecnmy Prgramme

10 Awareness f AFTA amngst La enterprises Surce: Enterprise Survey 2007, La-German Resurce Develpment fr Market Ecnmy Prgramme

11 Further challenges fr La businesses: The lagging perfrmance f SMEs cmpared t large enterprises As well as inadequate innvatin (imprvement f the quality, increase in the level f utput and prductivity in rder t lwer unit csts f their prducts r services) cmpared t reginal and internatinal market dynamics and fr the Gvernment, the reductin f transactin csts and risks psed by t cumbersme administrative prcedures and discriminatry practices in applying existing laws, rules and regulatins.

12 The future f LLDCs SMEs participatin in trade The prblems f SME s participatin in trade in LLDCs can be vercme in the lng run, with the right mix f many, ften rather cuntry r regin-specific, prgrammes and plicies Greater Mekng Subregin (GMS), launched in 1992 has fcused n transprt and trade facilitatin initiatives GMS Crss-Brder Transprt Agreement (GMS Agreement) is a multilateral instrument fr the facilitatin f crss-brder transprt f gds and peple Cmpact and cmprehensive multilateral instrument in ne dcument cvering single-stp/single-windw custms inspectin crss-brder mvement f persns (i.e., visas fr persns engaged in transprt peratins) transit traffic regimes, including exemptins frm physical custms inspectin, bnd depsit, escrt, and phytsanitary and veterinary inspectin requirements that rad vehicles will have t meet t be eligible fr crss-brder traffic exchange f cmmercial traffic rights infrastructure, including rad and bridge design standards, rad signs and signals Banking System Bank access needs t be imprved (interest rates 20-25%)

13 Cnclusins Trade facilitatin can use very simple, basic measures t make a huge impact n the way trade and transprt functin fr SMEs in LLDCs, including Adequate pening hurs at brder statins Jint custms psts with neighburing cuntries Publishing f applicable rules, laws, prcedures r security measures SME supprt, prmtin and develpment Trade facilitatin measures require realistic timeframes Estimated ptential benefits resulting frm trade facilitatin measures can range frm between 2 t 3 % f the ttal trade value Lng-term effects n grwth can nly be achieved when an pen and liberal trade plicy is cmbined with trade and transprt facilitatin measures

14 An integrated, hlistic apprach t the prblems f SMEs in LLDCs is recmmended fr tangible results. An integrated strategy shuld encmpass refrms in the areas f trade facilitatin with a realistic, cmprehensive and targeted agenda transprt and transit facilitatin including the physical infrastructure, ecnmic implicatins and capacity building an enabling envirnment with institutinal refrms and institutin building, legal and regulatry refrms as well as their implementatin and enfrcement, as the quality f institutins and the lack f a cnducive grwth-prmting and investment climate have a decisive impact n the ecnmic situatin f a cuntry a reginal apprach with a cherent reginal cperatin framewrk t negtiate slutins and linkages between all related issues. In additin, given the clse dependency between landlcked and castal cuntries, particular attentin shuld als be given t the psitive impact f reginal cperatin n gd neighburly relatins develpment f banking services An integrated trade facilitatin framewrk that includes all these different aspects and adapts them t each cuntry's r regin's particular situatin can have the ptential t reduce the ecnmic distance that separates SMEs in LLDCs frm their markets.

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