SMEs are integral to the economic growth of Myanmar

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Women making clothes at a cottage industry in South Dagon Township, Yangon.  Photo: Phoe Khwar

Over 90 per cent of all business in Myanmar is classified as Small and Medium Sized Enterprises, and the government has recognized that SMEs are main driver for the country’s future national economic development.
The topic SME stakeholders cover farmers, growers, producers, wholesalers, retailers, those who transport these produce and products and the ones who give services concerning these, for the goods to reach consumers in their respective sectors along with “Supply Chain.”
Until now, the lack of international cooperation and insufficient private sector investments are the main obstacles for Myanmar SMEs.
To get better technology, productive and innovation, Myanmar SMEs need to increase access to finance, to enhance the policy and regulatory environment, and promote entrepreneurship and human capital development.

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Employees pack sauce bottles at a SME in Hlinethaya Township, Yangon. Photo: Phoe Khwar

However, some Myanmar entrepreneurs who can afford sufficient investment are not very interested to put their capital in SME sectors, as they seemingly do not see immediate profit from this business. Instead, they are more willing to invest in export, import and general trading.
As a result, Myanmar has failed to produce value added products, making the lower income for the country, while increasing import volumes has caused the country suffer budget deficits every year.
The Department of Industrial Supervision and Inspection under the Ministry of Industry has categorized into 13 sectors—foodstuff, textile, lodging, house-hold utensils, literature and artistic industry, raw material industry, mineral process and production, agricultural and farming equipment, vehicular manufacturing, electrical equipment production, general industrial workshops. Among them, foodstuff industry has got highest registration.
These local entrepreneurs complained about better financial support with almost zero interest rate, and strong markets for their potential products from SMEs. In production of consumer goods, Myanmar local products still need to give guarantees on hygiene and tastes in comparing with some neighbouring countries.
Myanmar has now opened up and is persuading international investments. As a host country, Myanmar need more investments to be able to produce safe and hygienic items more and more, with attractive packaging designs. If it fails to do so, the country will continue requiring high-priced foreign import items.

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Workers making pots in Twantay.  
Photo: Phoe Khwar

In this regard, local SME entrepreneurs need to seek advice and assistance from relevant departments and government and non-government association without delay as the neighbouring countries are getting momentum in producing global consumer products.
Myanmar has developed Small and Medium Enterprises Development Law 2015. The law with 14 chapters carries the provisions that clarify business and the role of business association to human resource development and technology. Every law needs enforcement and should be monitored for practical implementation to address issues in the real situations.
In fact, sophisticated technology tools or fully digital production process are not serious necessity for SMEs innovation. New business models, creating new lines of products, better efficiency in production processes, as well as in intensifying their promotion efforts are the driving force for promotion of SME sector.
Semi-state bodies or authorities will be needed to implement Government initiatives based on an SME development strategy. SME bodies should develop more capacities to be able to work freely without excess interference of government. A broad range of stakeholders should be invited for SME development. While the assistance of government departments is fundamental support to SMEs, a cooperative society of private business community, educational and technological institution play pivotal role.
In ASEAN, cooperation on SME development began way back in 1995, when fostering SME development became one of the priority areas in respect of policy focus and resources.
Thailand has set the target to increase contribution by SMEs to national GDP up to 50 per cent by 2021 by supporting innovation-driven SMEs that aim to offer high-valued products and services through the 5-year SME Promotion Plan of the Office of SME Promotion (OSMEP).
The current SME’s contribution to the kingdom’s GDP as of 2017 is 42.2 per cent. It can also be traced that the percentage of SME employment to total employment in Thailand grew steadily from 76.0% in 2007 to 83.9% in 2011.
Myanmar still needs more efforts to replace outdated technologies and to investment in research and development to keep up with that of neighbouring countries.
The government should attract investors and the participation of international suppliers in local trade fairs and exhibitions to get wider scope for SME sector. Competition and inter-company cooperation are also required to promote innovation and skill levels of SMEs.
For developing regionally competitive SMEs, it is crucial to ensure realistic access to finance not to encounter inefficiency and low productivity. Organizing seminars, workshops and exhibition at home and abroad will help interact between Myanmar SMEs and their regional counterparts, suppliers and potential counterparts.

By Aung Khin

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