Improved business environment, targeted policies can help spur SME growth
Improved business environment, targeted policies can help spur SME growth
With competitiveness declining in the non-resource sectors, it is now crucial to promote macroeconomic stability and improve the business climate for the private sector, especially SMEs.
But despite the government's significant efforts in recent years to improve the business climate, Laos remains near the bottom in the World Bank's global ranking in Ease of Doing Business, according to the Organisation for Economic Cooperation and Development (OECD).
It is important to tackle the internal and external constraints faced by SMEs for these enterprises to increase their competitiveness and productivity. As noted, constraints include limited access to finance, low levels of technology, competition, electricity prices and excessively high taxes and duties.
Obtaining a business licence is still a time-consuming process in Laos, despite regulations, and so far there is no one-stop window for business start-ups, according to the OECD report on the Economic Outlook for Southeast Asia, China and India 2016 that was delivered at the recent Asean-BIS meeting in Vientiane.
Laos needs to implement guidelines to support the laws and regulations enacted to date, and possibly to develop new decrees, the report noted.
Despite the government's efforts to facilitate access to finance, this remains a major problem for SMEs. It is important to inject money into funds for the promotion and development of SMEs to meet the demand for funding.
The application and documentation processes should be simplified, as most owners of SMEs do not have a high level of education. It is also important to conduct more qualified assessments of loan requests that focus on the viability of business ideas rather than on collateral.
Finally, information gaps remain. SMEs face the problem of low management skills; they need government support to address this issue. It is important to increase funding for information and support services, and to increase the capacity building of service providers.
The low level of technology is a major obstacle for SMEs. The need for training is quite high, but there is a limited supply on offer from private firms, the government, international organisations and non-governmental organisations.
To overcome technology limitations, funding for research, innovation and technology development activities should be increased. In addition, the private sector, universities and the government should strengthen their cooperation on innovation and technology development.
Improvement of market access for SMEs is important. Although Laos has a trade portal to support SME exports in the international market, there are still issues of asymmetric information. Indeed, most SMEs seem unaware of the information available on the trade port al.
To overcome this problem, it is important for the government to raise awareness about the importance of the trade portal and to provide information on the market for SMEs.
The Trade and Private Sector Development Programme is helping to address trade-related concerns among SMEs and other firms by developing a more conducive trade and investment environment, improving competitiveness for agribusiness, manufacturing and services, and improving the aid-for-trade governance framework for mainstreaming trade and private sector development.
In addition, improvement of information technology skills for SME owners and managers is a top priority in promoting market access for SMEs.
