Integrating SMEs into Global Value Chains: challenges and policy actions in Asia
This study (PDF) by the Asian Development Bank and the Asian Development Bank Institute examines ways of encouraging SME participation in value chains, and explores policy solutions to address the financial and nonfinancial barriers faced by SMEs in global value chains. The authors highlight that two main factors require attention: 1) enterprise competitiveness and 2) enterprise connectivity. A survey of enterprises in four countries (Kazakhstan, Papua New Guinea, the Philippines, and Sri Lanka) was carried out as part of this study project (Chapter 2 and Chapter 3). Enterprises were asked to indicate the five most critical success factors for integrating into value chains. Their responses focused on both competitiveness and connectivity. Enterprises felt that the quality of their products or services was the most critical success factor. The second factor for success in value chains was skilled labor, a key ingredient for product quality and crucial to achieving high productivity and efficiency. The third factor nominated was strength of customer relations. The fourth most critical factor was specified as the ambition of the owner. The fifth factor was the education, experience, and international exposure of the owner. Besides these nonfinancial issues, access to finance is also a key success factor for SMEs to participate in global value chains. Public policies that can support SMEs should closely link to the dual objectives of enterprise competitiveness and connectivity.